Tegan Milne – Solicitor
Commercial and Succession Planning
If you’re a business owner or considering starting a business, an Equity Holders Agreement is an essential document that can safeguard the interests and clarify expectations of stakeholders in the business.
An Equity Holders AgreementAn Equity Holders Agreement (or shareholders’ agreement) is an arrangement between equity holders – such as shareholders, directors, unit holders and trustees – of a business. It outlines and provides a framework for how the business should be operated, dispute resolution processes, decision-making rights as well as the obligations of each equity holder.
Because every business is different, every Equity Holders Agreement should be individually tailored to that business. When preparing an Equity Holders Agreement, our team will work with the business to determine the rights and rules around key items such as:
- Roles and responsibilities – what role each equity holder will play in the business and clearly outlining the roles, rights and obligations of each equity holder so as to clarify expectations and prevent misunderstandings from the outset.
- Issuing new shares or units – when and if the business is entitled to issue new shares or units to any third-party. For example, is the business able to offer new shares or units at any time, or must they first offer those shares or units to the existing equity holders?
- Sale and transfer of existing shares or units – when the equity holders are entitled to sell or transfer their shares or units. For example, must they offer the sale or transfer to the remaining equity holders first? Are there any restrictions on who they can sell or transfer to?
- Decision making – who is entitled to make key decisions in the business? Key decision making may include buying or selling assets, hiring and firing employees, entering contracts.
- Involuntary and voluntary exit strategies – how are equity holders able to exit the business and what happens to their shares or units when they exit. For example, if an equity holder was to become insolvent or deceased, what should happen to their shares or units?
An effective Equity Holders Agreement needs to be specific to the business and reflective of the business’ growth and development. If you would like our team to assist you with preparing an Equity Holders Agreement for your business, please contact our team today on (03) 5445 3333