Shareholder Agreement Lawyers in Melbourne

Sign the agreement while you still agree

You are going into business with someone you trust. That is precisely the moment to write down what happens when the trust runs out. Every shareholder dispute we run in Melbourne started the same way yours is starting: two or three people who got along, a company that grew, and a falling-out nobody planned for. The files that settle in a few weeks are the ones with a signed shareholder agreement. The ones that grind on for years usually started with a handshake and good intentions.

If you are forming a company, buying into one, or already trading without an agreement, call MK Law on 1800 130 120. The first call is free.

What happens if you never sign one

Without a shareholder agreement, the Corporations Act fills the gap with its default rules. They were written for the general case, and the general case is not your company:

• Dividends are whatever the directors decide. The directors of a private company may pay dividends as they see fit, which means a majority in the boardroom can pay themselves salaries and pay you nothing.
• A director can be removed by a simple majority of shareholders. If you hold 40 per cent and your co-owner holds 60, your board seat exists at their pleasure.
• There is no exit, because no default rule requires anyone to buy your shares at any price. A minority shareholder who wants out of a private company with no agreement is, in practice, locked in.

Your fallback in that position is an oppression claim, where the Supreme Court of Victoria can order a buy-out of your shares at fair value. It works, and we run those claims, but it is a slow and expensive way to get what one signed document would have given you on day one.

The clauses that stop disputes

A shareholder agreement earns its keep by answering the hard questions in advance:

• Pre-emptive rights stop a co-owner selling to a stranger before offering the shares to you.
• Drag-along and tag-along clauses let a majority deliver a whole-of-company sale, and let a minority join it on the same terms rather than being left behind with a new controller.
• Good leaver and bad leaver provisions, backed by a valuation mechanism, fix the price of a departing founder’s shares, so the exit becomes a calculation rather than a fight.
• Reserved matters give every owner a veto over the decisions that matter: new share issues, borrowing, director appointments, selling the business.
• A dividend policy puts profit distribution in the contract instead of leaving it to the directors’ discretion.
• A deadlock clause gives a 50/50 company a way out of a stand-off, whether a casting vote, mediation or a shotgun buy-sell.
• A restraint of trade stops a departing owner opening up across the road with your client list. Victorian courts enforce a restraint only as far as it is reasonable, so it has to be drafted with care rather than copied at maximum width.

The same questions decide partnership disputes when a business runs as a firm rather than a company, and the default position there is harsher again, because any partner can end the whole thing by notice.

Drafted around how your company is actually set up

We draft shareholder agreements from the dispute end of the practice. Every clause we recommend exists because we have run a fight that clause would have prevented: the founder who left and competed, the 50/50 deadlock that froze the BAS, the majority that turned off dividends. Tell us your structure on a free call and a draft usually follows within two weeks.

Scope your agreement today

Reviewing an agreement before you sign

If you are buying into an existing company or taking investment, someone else’s lawyer wrote the document in front of you, and it favours their client. Before you sign, we review the draft against your position: whether the leaver provisions could strip your shares at a discount, whether drag-along thresholds let others sell your stake without you, whether reserved matters actually protect a holder of your percentage, and how the valuation mechanism behaves if you are the one leaving. We read it the way we read commercial contracts, clause by clause, against what each one does to you on the day the relationship goes wrong. Reviewing it now is a great deal easier than unwinding a bad signature through the courts later. If a fight has already started, start instead at our shareholder disputes page or, where the other side is a co-director, director disputes.

Talk to a Melbourne shareholder agreement lawyer

Getting an agreement signed is straightforward while everyone still agrees, and close to impossible once they do not. Call 1800 130 120 or use the form on this page, and a commercial lawyer will call you back to scope what your company needs. Contract fights that have nothing to do with who owns the company go to our contract lawyers instead.