Shareholder/partnership

 We provide a wide-range of legal services, advice and agreements for shareholders, directors, companies, trusts and partnerships.  See below for more details regarding the services we provide in this area.

Shareholder/partnership services:

• Shareholder Agreements

  What is a shareholder agreement and why do we need one?

  The purpose of a Shareholder Agreement is to define the rights and responsibilities of the shareholders in a private company and to deal with future disputes and uncertainties.  

   Every company with two or more shareholders should have a Shareholder Agreement in place.  Why?

  • Unlike most other legal relationships, a shareholder relationship is usually something that does not have a specified end date.  Things can change over time and the parties' goals can change and lead to dispute - even where your business partner is a close friend or family.
  • The parties may not be able to agree at a particular time about issues such as putting additional funding into the business, leaving the company unable to make important decisions (ie, "deadlocked")
  • A Shareholder Agreement can also protect the business if one shareholder decides to leave, by including restraint of trade or non-compete clauses preventing the exiting shareholder from immediately starting a directly competing business. 

  Without a Shareholder Agreement to assist the parties in resolving matters, the parties are often forced into to the legal expense of having to place the matter before the court or even wind the company up. 

  Case studies: what happens where there is no shareholder agreement?

  Three of the four shareholders in XYZ Pty Ltd, who together own 90% of their shares want to sell their shares to a separate buyer.  The potential buyer particularly wants to purchase the shares in the company to utilise carry forward losses and only want to purchase 100% of the shares in the company.  The fourth shareholder, Jenny, refuses to sell her shares unless she is offered more money by the other shareholders, thus threatening the deal.   Without a Shareholder Agreement that includes a "drag along" clause requiring minority shareholders to sell, Jenny cannot be forced to sell her shares along with the majority shareholders.

  Equal shareholders Ben and Rob start their own construction business in a company, TwoBuild Pty Ltd.  Each puts in $50,000 for initial working capital.  After two years, Ben decides that he no longer wants to be involved and ceases working in the business.      The parties don't have a Shareholder Agreement with a clause requiring Ben to sell his shares to Rob if he ceases to devote his time during normal business hours and therefore Ben continues to receive 50% of the profits of the company even though Rob is left working in the business by himself.

• Partnership Agreements and Unitholder Agreements

  We can also assist with preparation or advice in relation to Partnership Agreements and Unitholder Agreements.

  Shareholder agreements relate only to private companies, but similar documents can be put in place between the partners in a partnership (Partnership Agreements) and the holders of unit in a unit trust (Unitholder Agreements).

• Buy-Sell Agreements

  A Buy–Sell Agreement is an agreement between partners or shareholders of a business that governs the situation if a co-owner dies or is otherwise forced to leave the business, or chooses to leave the business.  They are typically used with life insurance policies to allow for the buyout of a shareholder's interest in the event of their death, thus enhancing the company's chances of survival during a difficult time and ensuring that the shareholder's family receives fair value from the shares.

• Disputes between shareholders

  We are adept at handling disputes between shareholders, including the following:

  • Settlement negotiations, appointment of independent valuers and share buyouts
  • Claims for director's breaches of fiduciary duty;
  • Statutory derivative actions;
  • Shareholder oppression actions;
  • Appointment of liquidators and winding up on "just and equitable grounds".

• Company law and Corporations Act compliance

  As experienced company and business lawyers, we provide advice in relation to a range of issues involving compliance with the Corporations Act:

  • share issues and share restructures
  • product disclosure statements and prospectuses
  • changes to company constitutions
  • company incorporation
  • share transfers

• Employee Share Schemes and Bonus Incentive Plans

  Looking to retain and motivate key employees?  Chilli Law is able to provide a range of solutions, from the implementation of the traditional employee share scheme to profit sharing arrangements that do not involve employee ownership of an interest in the business.  Working with your accountant, we take into account the tax consequences of any share transfers or payments to come up with a scheme that meets the specific goals of you and your business.