Shareholders Agreements: Protecting Your Business and Its Owners

Shareholders Agreements & Unitholder Agreements

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In business with others? Bringing in a new co-owner? Get an appropriate contract in place to protect the business and its owners. Otherwise, you may regret gambling on your ability to predict the future.

The future is inherently unpredictable. Businesses evolve. People’s interests, ambitions and circumstances change. Unexpected events occur. The best way of protecting a business against the unexpected is by putting in place a carefully tailored co-ownership agreement which provides a ‘rule book’ to manage difficult and unexpected situations.

Common elements of a co-ownership agreement include:

  • forced exit – in what situations can a co-owner be forced to sell their equity (e.g. upon insolvency, breaching their obligations, ceasing to be actively involved in the business or failing to hold required qualifications)?
  • death and incapacity – what happens upon the death or incapacity of an owner? Do the other owners have an ability to force a buyout of their equity for fair market value?
  • restraints of trade – what restraints should be put in place to ensure that the co-owners do not undermine the business, either now or on the exit of a co-owner?
  • sale to third parties – what process should apply if an opportunity to sell the business or equity in the business arises?
  • decision making – what decision making thresholds apply? Will different thresholds apply to day-to-day operational decisions versus more significant strategic decisions?
  • passive ownership – are owners required to work in the business? If so, what expectations do they need to meet?
  • dispute resolution – how are disputes managed, and what process should be adopted to reduce damage to the business if a dispute arises?
  • working capital requirements – who is to provide what funding and how will it be repaid (if at all)?
  • unique pressure points – are there any unique pressure points for the business?  

A co-ownership agreement, or 'business pre-nup’, is a foundation document on which all co-owned business arrangements should be based.

Too often we see disputes between co-owners where the relevant co-ownership agreement is deficient, stock standard (i.e. not tailored to the parties’ unique circumstances), or worse, non-existent. Many of these disputes could have been avoided, or their damage minimised, if the co-owners had implemented a robust co-ownership agreement.


Our usual approach is to:

  • provide you with a clear and transparent fee quote;
  • get context regarding your business, the co-owners and your objectives;
  • have a workshop meeting with you to explore your preferences in more detail;
  • guide you through our draft co-ownership agreement; and
  • refine the contract until you are comfortable with the terms.

We pride ourselves on adopting a pragmatic and sensitive approach during these discussions. Our wealth of experience enables us to deal with challenging issues in a delicate manner.

Shareholders Agreements & Unitholder Agreements


Greg Thomas

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What is business co-ownership?

Where a business has multiple owners. For example, if you own 50% of a business and someone else owns the other 50%, you two are in a business co-ownership relationship because you do not own the relevant company entirely yourself.

Who commonly enters into a business co-ownership arrangement?

Common people who get involved in business co-ownership arrangements include friends, family members and third party investors.

What can I do to help mitigate the impact of a dispute if it does arise in future?

Enter into a co-ownership agreement (e.g. Shareholders Agreement, Unitholders Agreement or Partnership Agreement) as soon as possible after the inception of the business.

These agreements essentially create a rule book for the co-ownership relationship, and should contain an appropriate dispute resolution process.

There are only two of us that own the business. Do I need one of these documents?

It is important to have a co-ownership agreement in place, even if there are only two co-owners. Some argue that only having two business partners makes a co-ownership agreement even more essential (due to the increased chance of a deadlock).

How do you charge?

Trust is one of our core values. We pride ourselves on not causing 'bill shock'. Our usual approach is to provide you with a clear and transparent fee quote to ensure that there are no surprises. You can then make an informed decision about whether you want to proceed or not.

What is the difference between a Shareholders Agreement and a Unitholders Agreement?

The common theme with these contracts is that they regulate the relationship between co-owners. However, the underlying business structure is different. Owners of a company are shareholders (hence, an agreement between them is a Shareholders Agreement). Owners of a unit trust are unitholders (hence, an agreement between them is a Unitholders Agreement).

What is a Buy Sell Agreement?

A Buy Sell Agreement is an agreement which typically deals with the consequences of a business partner suffering death, trauma or incapacity. The payment made by the remaining partners to the outgoing partner is commonly funded by insurance policies.

Shareholders Agreements & Unitholder Agreements
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Sydney NSW 2000

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