Should you have a Shareholder or Partnership Agreement? The answer is probably yes. A partnership is an association of persons carrying on a business in common with a view of profit. A shareholder is a person who owns shares in a company, and a unit holder is a person holding units in a unit trust. Whilst the Partnership Act governs partnerships and the Corporations Act and a company’s constitution govern companies, Partnership and Shareholder Agreements set out the ground rules for how the partnership or company will operate a business, and what will happen in certain situations such as the sale of shares in the company or interest in the partnership.
Whilst it is best to make a Shareholder or Partnership Agreement at the start of a business, an agreement can be made at any time. The existence of an agreement will prevent or reduce the likelihood of disputes occurring later on and could save legal costs in the long run.
The following are matters that are often included in a Shareholders or Partnership Agreement:
- Directors/partners/shareholders – how can persons join or leave a partnership, company or trust.
- Decisions that require unanimous resolutions as opposed to day to day decision making.
- Capital contributions – who should contribute and when.
- Transfer of shares/interest – how can shares or interests be transferred to other members, or third parties.
- Consequences of death or permanent disability of directors/partners/shareholders, eg should shares be bought by other shareholders.
- Determining sale price of shares or interests upon transfer in different circumstances including death.
- Remuneration of shareholders/partners including payment of dividends or drawings and treatment of loan accounts.
- Roles/duties and responsibilities and productivity level of individual shareholders/partners and leave entitlements.
- Restraint of trade upon transfer of shares or interests.
- Meetings – frequency and timing.
- Sale of the business.
- Dispute resolution.
To discuss your business situation in detail, please contact our friendly and professional team at Peter Speakman & Co on 9822 8611.