So, what is a Shareholder / Partnership agreement, I hear you asking yourself.
A Shareholder / Partnership agreement is a written agreement between the shareholders or partners of a business and is best prepared at the start of a business when all parties are enthusiastic and there have been no disputes or disagreements over the running of the business.
At a minimum it should outline the responsibilities and obligations of the business owners and cover items such as the funding, structure, management and direction of the business. It is designed to deal with the issues that may arise during the life of a business, by determining in advance, how such issues should be dealt with. The process of developing a Shareholder / Partnership agreement and the content included will differ between each entity after discussion and input involving all the relevant partners/shareholders and relevant advisors.
Some common features include:
- Admitting or terminating partners/directors/shareholders – it is important to clarify how persons can join or leave a partnership or company and whether such decisions are to be unanimous or by majority or special resolution
- Decisions requiring unanimous resolution – it may provide that some decisions, such as mergers and acquisitions, require special rules whereas day-to-day decisions may be determined by a majority vote
- Frequency and timing of partners/directors meetings - the schedule of such meetings should be set out and level of attendance should be expressed clearly
- Dividend and director loan accounts within an entity – it is desirable for agreements to include a policy about the timing and method used to calculate dividends, as well as repayment of any director loans within the entity
- Consequences in the event of death or permanent/temporary disability of partners/directors – agreements should expressly address both the amount and the timing of payments to a deceased partner’s/shareholder’s estate
- Compulsory retirement age – a clause can be included to outline this however due care needs to be taken to ensure the provisions within the agreement comply with all relevant Commonwealth, State and Territory anti-discrimination legislation
Shareholder / Partnership agreements are complex by nature and the above list is just scratches the surface of possible items to include.
Whilst we can assist you in the drafting an agreement specific to your business and circumstances, we do recommend a trusted legal advisor be engaged to prepare the final agreement.
If you would like discuss Shareholder / Partnership agreements further, or would like details of one of our trusted advisors to help you draft one for your business, please don’t hesitate to contact our office.