Reading time: 2 minutes

If you own a business with other shareholders, where multiple parties are involved, it is best to be prepared for a situation where one or more shareholders want to leave the business. This is a 3 part series on what to consider when a shareholder leaves. Article 2 will discuss the sale of shares agreement. Article 3 will consider protecting confidential information, intellectual property and imposing a non-compete clause.

Will the company cease to operate?

For proprietary (private) companies, business members are shareholders. As a company is a separate legal entity, if a shareholder wants to leave the business, the company can still continue operations, as long as the company has at least one shareholder and one Australian director.

What are the administrative and company secretarial requirements when a shareholder wants to leave?

There are certain administrative requirements involved if a shareholder would like to leave. These include:

  • The company must approve the sale in accordance with the relevant document. This may be a Shareholders Agreement if the company has one, or a Constitution if the company has one, or the Corporations Act replaceable rules;
  • The shareholder must sell their shares in accordance with the relevant document. This may include offering their shares to all other shareholders, pro-rata in accordance with their shareholdings;
  • If the existing shareholders do not wish to purchase the shares, the shareholder may be able to sell to a third party. This may require approval of the company or the other shareholders;
  • The company must update the company share register;
  • The company must cancel the previous share certificate; and
  • The company must notify the Australian Securities and Investment Commission (ASIC) of any changes to the shareholder composition of the company.

Conclusion

At LegalVision we have specialist commercial lawyers who can assist you to draft a sale and purchase of shares agreement to negotiate the terms to protect your business, and to look after the administrative and company secretarial requirements to comply with the law.

LegalVision has high-quality experienced business lawyers. Please call our office on 1300 544 755. We will happily provide you with a fixed-fee quote and an obligation-free consultation.

Webinars

How to Recover Unpaid Invoices

Thursday 13 May | 11:00 - 11:45am

Online
What do you do if your customers don't pay your invoices? Attend this webinar to learn about how to recover unpaid invoices.
Register Now

Trade Marks 101

Thursday 17 June | 11:00 - 11:45am

Online
Your trade mark is one of the most valuable assets of your business. It is therefore crucial to understand how to protect your trade mark, avoid disputes, and prevent competitors from infringing on your rights.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer