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What is a shareholders agreement and why have one?

By November 5, 2020August 9th, 2021No Comments

What is a shareholders agreement and why have one? – By Murray Pegg

A shareholders agreement is a legally binding contract entered between all of the shareholders (owners) of a company. It regulates how the owners of the company conduct their relationship with each other. It sets out their rights, responsibilities and obligations.

Subject to the company’s constitution, a comprehensive shareholders agreement will deal with and regulate such matters as the conduct of shareholder meetings, company management, the procedure with regard to the transfer of shares both voluntarily and compulsory, pre-emptive rights, third party interests in shares, the determination of the value of the shares, competition restraint, dispute resolution and confidentiality but to name a few.

The shareholders are responsible for the appointment of the company’s directors. The board of directors is an important and powerful group within the company and is responsible for the operational functions of the company. A shareholders agreement can contain provisions which regulate the manner in which directors are to run the company. Directors also must comply with regulatory constraints contained in the Corporations Act 2001.

More often than not, disputes that arise within a company can be resolved by the contractual obligations stemming from a well thought out and detailed shareholders agreement.

A shareholders agreement is an essential component of a well-run and properly organised company.

Should you require assistance with a shareholders agreement please contact us on 5221 8777 or at .

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Wightons Lawyers is one of the longest serving legal practices in Geelong, established in the 1890’s when James Wighton first started practising law in the area.