1. how the business is run 2. Shareholders` responsibilities 2. Clarity and certainty 3. reduced conflicts between shareholders 4. Protection of shareholders` rights in the event of a conflict Despite the fact that these documents cover a similar territory, there are generally a number of substantial differences between a company incorporation and a shareholders` agreement. Lawyers are often asked to design shareholder agreements, most often for small and family businesses. [1] These agreements operate in conjunction with the traditional incorporation of the company in order to regulate the relationship between the main parties interested in more specific rules, rights and obligations. When setting up a new entity, stakeholders should carefully consider whether a shareholders` agreement would help to better define their rights and obligations.

There is no prescribed form that should adopt a written constitution. Instead, it depends on what your shareholders choose for the needs of the business. As a rule, a business incorporation deals with day-to-day business and management. This includes: there are many types of companies, but in simple terms, there are the shareholders who belong to the company and the directors who manage the day-to-day affairs of the company. A shareholders` agreement therefore offers the possibility of determining without which decisions it is not possible to take: shareholder agreements are also useful when unexpected events are envisaged. If a partner dies or is no longer able to participate in the management of the company, a shareholder agreement may define the rights and obligations of the parties concerned. It is customary for shareholders to expect that, where a shareholders` agreement and a company incorporation deal with the same subject matter, an inconsistency clause in the shareholders` agreement would mean that the provisions of the shareholders` agreement take precedence over those of the Constitution. Cody`s decision against Live Board Holdings Limited [2014] NSWSC 78 highlights the shortcomings of this approach. 1.

Incorporation of the undertaking 2. Corporations Act 2001 (Cth) 3. Common Law A shareholders` agreement is a contract that takes into account the specific purpose of a company and whose terms have been negotiated and agreed upon by all the shareholders of the company. As mentioned earlier, shareholder agreements are tailor-made documents dealing with specific management situations or unexpected scenarios. As this document is a commercial agreement between the parties, the parties concerned may conclude any business they wish to include, provided that such matters are not contrary to the requirements of company law. In order to minimise the risk of shareholder litigation, it may be advisable: the clearest example of these provisions is that key persons have taken on a joint venture, on the basis of their participation in the day-to-day management. If one of these persons loses their abilities or dies, the remaining person(s) may wish to take control of the business so as not to be forced to operate it with the guardian or estate of the other key person. Shareholder agreements can also describe how shares are valued and when they are to be transferred and paid….