proprietary limited companies in
Australia continues to be an attractive
option for many international
investors. But what happens when
the shareholders, international or
domestic, in any given private company
enter into a dispute? One of the most
expeditious and cost effect methods of
resolving shareholder disputes is having
a shareholders' agreement in place.
This article highlights some of the key
clauses to include in any shareholders'
agreement and emphasizes the benefit
of having a shareholders' agreement in
place before acquiring or expanding
your or your client's shareholding in an
Australian company.
A standard company constitution will
not always protect shareholders in the
event of a dispute between members.
This is where a shareholders' agreement,
regulating the rights and obligations
of shareholders, can help avoid the
uncertainty of costly court litigation.
While it is not compulsory under the
of legislation regulating companies in
Australia, a considered and properly
formulated shareholders' agreement is
highly recommended for all companies.
a shareholders' agreement?
be individually tailored because every
company is different. The specific
provisions of each shareholder agreement
should take into account the number
of shareholders, the objectives of the
shareholders, the funding arrangements,
and the nature of the business or
industry in which the company operates.
However, there are also some basic
clauses that every shareholder agreement
should have.
proceedings, it is recommended for
all parties to try resolve their disputes
through an alternative dispute
resolution (ADR) process stipulated
processes generally take less time and
cost less money than proceedings in
a court. ADR may include mediation,
arbitration or conciliation. It should be
noted that a provision in a shareholders'
agreement to resolve disputes through
an ADR process will not preclude a
court from hearing the dispute at a later
date. A well drafted ADR clause will be
effective in making litigation an absolute
last resort.
circumstances where shareholders
cannot agree on the management of the
company. The shareholders' agreement
should set out a procedure to resolve
a deadlock if one arises. There are a
number of procedures that can be used to
resolve deadlocks, including:
shareholder to serve notice on
another shareholder requiring the
construction division of HHG Legal Group. His background
involves significant litigation and dispute resolution matters in
Australian courts and arbitrations, as well as strategic advice to
private companies, not-for-profits and business leaders. He is
active in professional and industry bodies and regularly lectures
on issues including governance and risk management.
Level 1
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