Shareholders’ Agreements can bite you on the…um, well you know!

Do you have a Shareholders’ Agreement? If yes, do you remember what it says? 

Very often, they contain a somewhat standard clause that says the company needs to circulate the budget each year for shareholder approval or, at least, for comment. This is particularly common if you’ve taken investments from family or friends. 

Yet, because it’s not standard practice, people often forget to comply and that can be a disaster. You see, it’s only when things go wrong that shareholders dust off their agreements to make sure they have been adhered to. 

Naturally, the shareholder group wants answers, certainty and performance. A dissatisfied shareholder group can be a nightmare to handle.

Inadvertently, in seeking those things, it can cause chaos and interference (though often well-intentioned), bringing actions against the company and distracting the Board and management from the task at hand, often at a time when they can least afford the time and cost burden that comes with the territory.

Now, this particular example is just that – an example. So, if you have a shareholders’ agreement in place, now is the time to dust it off and see what it says. If there are any gaps between the requirements and undertakings made, against what you actually do, make sure you proactively address them before it bites you on the bum.

If you’re not sure how to interpret your shareholders’ agreement, give us a call on 1300 656 141.

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Mitchell Turnbull

DIRECTOR

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