A shareholders agreement is a contract between the shareholders of a company that addresses the management of the company and governs the relationship of the shareholders and key persons associated with them.  However, it’s not a one size fits all document.  A shareholders agreement should be tailored to the specific needs of the company, its business, the key persons involved and the shareholders.

The process involving a proper shareholders agreement should not be underestimated. If it is seen as a template filling exercise you are missing the point and potentially wasting your money on an inadequate process and document.

Here are 8 clauses we often see missing from ‘template’ shareholders’ agreements:

  1. A trigger of a sale event when a shareholder or their related key person leaves their expected involvement with the company (often starts with the discussion of a ‘working owner’ clause).
  2. Buy/Sell provisions including insurance for funding the death or disablement of a key person (and vendor finance provisions if insurance is not in place or adequate). 
  3. The key person/s associated with a shareholder should normally be a party to the agreement including to enforce restraints against them.
  4. Not contemplating a capital raise or employee share scheme and having to go through a usual pre-emptive rights procedure with all shareholders when that might be troublesome.
  5. Drag/tag along provisions. Allowing a majority to sell if there is a great offer and a minority to be involved in any exit event.
  6. Family law trigger. If a family court decision involving a shareholder or key person was to hamper the company or its business, a sale event can be triggered.
  7. Removal of a delinquent director. Most agreements tend to give a shareholder an absolute right to appoint someone at a Board level, even if they are acting to the detriment of the company.
  8. Allowing a valuer to take into account any loss caused by a delinquent shareholder when undertaking an independent valuation. Often an independent valuation is included where there is a shareholder leaving a company because of a breach of the agreement. Having this option is often wise if they have caused a loss of value.


If you wish to discuss preparing or reviewing a shareholders agreement, please contact Peter Rouse or Matthew Rouse of our office.