A shareholders agreement covers the conversations business owners tend to put off: what happens when one of you wants out, can’t work, dies, or simply stops agreeing with the others. Those conversations are far easier to have now, while everyone still gets along.
If you need a shareholders agreement lawyer in Melbourne, we draft and review these agreements for the owners of private and family companies. Businesses run through a unit trust need the same thing, and there it’s called a unitholders agreement. It’s part of what our business lawyers do for owner-run businesses across Victoria. Our principal, David Henderson, has over 30 years of experience.
It suits founders setting up a company with a co-owner, families bringing the next generation into the business, and owners who have run for years on an old template or a verbal understanding.
Four questions your agreement should answer
Most owners start on a handshake. A handshake says nothing about the hard days, which is exactly when you need the rules to be clear.
What if one of us wants out?
The agreement can set out how an owner leaves: who gets first chance to buy their shares (a pre-emptive right), how the price is worked out (a formula, an independent valuer, or a figure you agree and review each year) and how it’s paid. It can limit sales to outsiders. It can also put restraints on an owner who leaves, such as not competing, not approaching clients or staff, and keeping the company’s information confidential.
If you’ve seen the news about a federal ban on non-compete clauses: Treasury’s September 2026 exposure draft is aimed at employees, and on its current wording restraints in shareholder agreements are not caught. It’s a draft and could change, so we check the position when we prepare your agreement.
What if one of us dies or can’t work?
Death, permanent disability and bankruptcy can each be set as a trigger that starts a buy-out. The agreement says who can or must buy, who must sell, and on what terms. Some owners fund this with insurance so there’s cash on hand when it’s needed. We draft the legal terms. Whether insurance suits you, and how it’s taxed, are questions for your financial adviser and accountant.
What if we can’t agree?
Two owners with half each can reach a point where nothing can be decided. A deadlock clause sets out what happens next: usually discussion, then mediation, then a buy-out or sale process if those fail. The agreement can also list reserved matters, meaning decisions such as selling the business, borrowing large sums or changing what the business does, that need every owner’s approval or an agreed percentage.
What if someone new comes in?
When new shares are issued, existing owners can be given the right to take up their share first so their percentage isn’t diluted. If a buyer wants the whole company, a drag-along clause lets an agreed majority require the others to sell on the same terms, and a tag-along clause lets the minority join a sale on the same terms. Between them, the buyer gets a clean sale and nobody is left behind with a stranger as a co-owner. If a sale of the whole business is on the cards, our selling a business page explains what comes next.
How the agreement fits with your constitution
A company is governed by its constitution, by the replaceable rules in the Corporations Act 2001 (Cth) (see s 135), or by a mix of the two. The constitution is the company’s rulebook. Once the company is registered, changing it takes a special resolution, which needs at least 75% of the votes cast by members entitled to vote.
A shareholders agreement is a private contract between the owners, and we can draft it so that it only changes if everyone who signed it agrees. For a minority owner, that difference matters a lot. It also means the two documents have to line up. If the constitution says one thing and the agreement another, you’ve built an argument into the business, so we review both together.
Unitholders agreements for unit trusts
In a unit trust, the owners hold units rather than shares, and a trustee (a person or a company) holds the business for them. The trust deed sets the rules for the trust. If the trustee is a company, its constitution or the replaceable rules govern the company itself, not the trust. A unitholders agreement sits beside the deed and covers the same ground as a shareholders agreement. We read the deed first, because it may already deal with some of these points, or may need updating to match.
Check it against your will
What happens to an owner’s shares when they die can depend on three documents: their will, the constitution or trust deed, and the shareholders agreement. When those documents disagree, families and co-owners can end up arguing over which one wins. When we prepare an agreement, we suggest each owner checks their will against it, and we can help with will drafting and powers of attorney. We don’t give tax advice, so ask your accountant what a transfer on death means for tax.
When to call a shareholders agreement lawyer
The best time is at the start, when you set up a company or unit trust with someone else. The next best time is now, if a new investor, manager or family member is about to become an owner, if you’re relying on a template from years ago (or nothing at all), or if someone wants to retire or sell. If the owners have already fallen out, our shareholder disputes page explains how we can help, and the earlier you get advice, the more options you tend to have.
This page is general information, not legal advice. Every business is different, so get in touch about yours.
Common questions about shareholders agreements
Do we need a shareholders agreement if we already have a constitution?
They do different jobs. The constitution is the company’s rulebook and can be changed by special resolution, which needs at least 75% of the votes cast by members entitled to vote. A shareholders agreement is a private contract between the owners and can go into far more detail on exits, valuation and death. If your company has more than one owner, having both is usually worthwhile.
What’s the difference between a shareholders agreement and a unitholders agreement?
They do the same job for different structures. A shareholders agreement is between the owners of a company. A unitholders agreement is between the owners of a unit trust, who hold units. A unit trust runs under its trust deed, so we read the deed first and make sure the two documents fit together.
What are drag-along and tag-along rights?
A drag-along right lets owners holding an agreed majority require the others to sell on the same terms when a buyer wants the whole business. A tag-along right lets the other owners join a sale by the majority on the same terms.
What happens if the owners are deadlocked?
That depends on what your documents say. Without a deadlock clause, an evenly split company can be left with no clear way forward. An agreement can set steps such as discussion, mediation and, if those fail, a buy-out or sale process. If a dispute has already started, see our shareholder disputes page.
What happens to an owner’s shares when they die?
It depends on the owner’s will, the company’s constitution or trust deed, and any shareholders agreement. An agreement can say whether the remaining owners can or must buy the shares, how the price is worked out and how it’s paid.
Can we sign an agreement after the business has started trading?
Yes, at any time all the owners agree. It’s easier before a disagreement starts, while no one knows who the rules will favour.
How much does a shareholders agreement cost?
It depends on how many owners there are, how complex the structure is and how much has to be negotiated. We confirm the scope and our fees in writing before we start, and where possible we offer a fixed fee.
How it works
- Call (03) 9629 2211 or fill in our online enquiry form. Tell us who the owners are, whether you hold shares or units, and what you want the agreement to deal with.
- We clarify your instructions and read your constitution, trust deed or existing agreement, if you have one.
- We send a costs agreement and disclosure statement setting out the scope and our fees.
- Once you accept, we prepare the agreement and talk you through each part of it.
Put the hard conversations in writing
Whether this is your first agreement or a check of an old one, we can help you work out what it should say. Call (03) 9629 2211 or fill in our online enquiry form.
