Last Updated on 22/08/2025 by Damin Murdock
A well-structured shareholders agreement is essential for protecting the rights of both founders and investors in any Australian startup or private company. The shareholders agreement outlines how decisions are made, who controls what, and how disputes or exits are handled. Without one, founders and investors risk confusion, legal disputes, or diluted interests as the business grows.
Governance and Board Management
A key component of the shareholders agreement is how the company is managed. This includes board composition, voting rights, and management authority. Governance clauses should also define director responsibilities and limit their powers to align with shareholder interests.
Shareholder Rights and Protections
To prevent dilution and ensure participation, shareholders should be granted pre-emptive rights over new share issuances. The agreement should also define how and when shareholders receive reports, and establish voting thresholds for key decisions. Share transfer mechanisms like tag-along and drag-along rights help protect minority interests during exit events.
Capital Contributions and Funding Rules
The shareholders agreement must document capital funding obligations and the consequences of non-compliance. If a shareholder defaults on their obligation, the agreement should outline penalties or share dilution processes.
Share Transfer Restrictions
To ensure that control remains within agreed parties, the agreement should limit share transfers without prior approval. Provisions such as first right of refusal and mandatory sale on trigger events (e.g. death, insolvency, resignation) offer security and stability.
Dispute Resolution and Exit Strategies
Dispute resolution clauses are essential to avoid prolonged legal battles. Procedures should include mediation, arbitration, or buy-out rights in case of deadlocks or irreconcilable differences.
Exit strategies, including IPOs, company sales, or forced exits, should be well defined. The agreement should also state how shares will be valued upon exit and who must approve such transactions.
Legal Compliance and Practical Considerations
All provisions must comply with the Corporations Act 2001 (Cth) and other relevant laws so that all contractual clauses are enforceable and consistent with legislative requirements. Regular reviews are necessary to ensure the agreement remains relevant as the company evolves.
Legal advice is also crucial. This is because a shareholders’ agreement is a complex document and can led to misunderstandings about shareholder obligations and rights. Founders and investors should consult with legal professionals to draft, interpret, and revise their shareholders agreement effectively.
Final Thoughts
A shareholders agreement is more than a formality, it’s a foundational document that ensures transparency, minimises conflict, and protects long-term value. Whether you’re forming a new company or bringing on investors, clarity and balance in shareholder arrangements are essential for sustainable growth.
Feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our newsletter via our Website, and subscribe to our YouTube , LinkedIn, Facebook and Instagram. If you liked this article or video, please also give us a favourable Google Review.
DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.
Damin Murdock (J.D | LL.M | BACS - Finance) is a seasoned commercial lawyer with over 17 years of experience, recognised as a trusted legal advisor and courtroom advocate who has built a formidable reputation for delivering strategic legal solutions across corporate, commercial, construction, and technology law. He has held senior leadership positions, including director of a national Australian law firm, principal lawyer of MurdockCheng Legal Practice, and Chief Legal Officer of Lawpath, Australia's largest legal technology platform. Throughout his career, Damin has personally advised more than 2,000 startups and SMEs, earning over 300 five-star reviews from satisfied clients who value his clear communication, commercial pragmatism, and in-depth legal knowledge. As an established legal thought leader, he has hosted over 100 webinars and legal videos that have attracted tens of thousands of views, reinforcing his trusted authority in both legal and business communities."
