Shareholders Agreement Template Australia | Awelle

Reviewed by Lisa M ·

A constitution says how the company runs. A shareholders agreement says what happens between the people who own it when they stop agreeing. Without one, a…

Corporate · Australia

A constitution says how the company runs. A shareholders agreement says what happens between the people who own it when they stop agreeing. Without one, a falling-out ends in an oppression claim rather than a mechanism.

What this document does

The document nobody reads until it matters

A shareholders agreement is bought in optimism and used in conflict. Its value sits entirely in the provisions the founders least want to discuss at the outset: what a share is worth, what happens when someone leaves, and who decides when the board splits evenly.

What’s included

Clauses in this template

The law that applies

Corporations Act, constitution and the oppression fallback

Order of precedence. The replaceable rules apply unless displaced by a constitution. A shareholders agreement sits alongside the constitution as a contract between the shareholders — it does not automatically override it. Where the two conflict, the position is messier than clients expect, which is why the agreement should say expressly which prevails and the constitution should be amended to match.

The alternative to having one. Without an agreement, a minority shareholder’s practical remedy is an oppression claim under sections 232 and 233 of the Corporations Act. That is a discretionary, expensive and slow court process with an uncertain outcome. The strongest argument for a shareholders agreement is not what it contains — it is what replaces it if you do not have one.

Valuation. Nothing in the Act supplies a price. If the agreement does not set a valuation method, every exit becomes a negotiation from zero at precisely the moment the parties are least able to negotiate.

What goes wrong

Pitfalls we see in practice

A fifty-fifty company with no deadlock mechanism

This is the single most common failure and the most predictable. Two equal shareholders who cannot agree have no path through the constitution, no casting vote, and no mechanism to force a resolution. What remains is an oppression claim or a winding-up application — both of which destroy more value than any deadlock clause would have cost to draft.

No valuation method, only an agreement to agree

An obligation to negotiate a fair price in good faith is not a valuation mechanism. When a shareholder exits acrimoniously, the parties have opposite interests in the number and no formula to constrain them. A stated method — earnings multiple, independent expert, or a defined process — converts a fight into an arithmetic exercise.

Drag-along and tag-along missing

Without a drag-along, a single minority holder can block a sale of the whole company. Without a tag-along, a majority can sell out and leave the minority holding shares in a company controlled by a stranger. Buyers notice both in diligence, and the gap is usually fixed under time pressure on terms nobody would have accepted calmly.

An agreement that contradicts the constitution

Where the two documents say different things about share transfers or board appointments, the resulting position is uncertain and the argument is expensive. The agreement and the constitution should be drafted together, or at least read against each other before signing.

Questions

Frequently asked

Do we need a shareholders agreement if we already have a constitution?

They do different jobs. A constitution governs the company’s internal management and binds the company and its members in a statutory way. A shareholders agreement is a contract between the shareholders about their relationship — valuation, exit, deadlock, restraint — and can bind them to things a constitution cannot practically address.

What happens if shareholders fall out and there is no agreement?

The practical remedy is an oppression claim under sections 232 and 233 of the Corporations Act, or in the worst case a winding-up application. Both are court processes, both are discretionary, and both cost far more than the agreement would have.

How are shares valued when a shareholder exits?

However the agreement says. Common approaches are a multiple of earnings, net asset value, or determination by an independent expert on a defined basis. What matters is that the method is fixed in advance, because the parties will never agree one at the point of exit.

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