Where a business has more than one owner it is usual for those persons to enter into a contract to record their rights and obligations concerning circumstances that may arise during the business relationship. Therefore when you buy/sell a part interest in a business (entity), including an incorporated or un-incorporated joint venture, the buyer will have an ongoing relationship with the other owners of the business (entity). In that situation it is common and desirable for the holders of the ownership interests to enter into an agreement (often called a ‘Shareholders’ Agreement’ for a company or a ‘Unitholders’ Agreement’ for a trust) regulating their rights and obligations as to the conduct of the affairs of the business (entity).

Practice area overview

The type of contract depends on the type of business entity/structure used to run, and to hold ownership interests, in the business. This type of contract often includes: how the business is to be owned, controlled, managed and financed; restrictions on the disposal of interests in the business entities; agreed methods for resolving disputes. To reduce the risk of misunderstandings and disputes, equityholders’ agreements usually record matters already agreed between the business owners and also provides for what is to happen if certain events occur: e.g. a business owner ceases to be actively engaged in the running of the business for any reason.


What we do:

We can assist you with preparing an equityholders’ agreement or advising on the terms and adequacy of an equityholders’ agreement that you are asked to sign. Issues likely to arise are:

Our services include

  • Whether any pre-emptive rights are to apply to the transfer of existing, or the issue of new, interests in the business (entity) or the underlying shares/units in the joint venture business (entity) adopted.
  • Whether the equityholders’ agreement should provide a structure for the approval of various matters going forward in relation to the business (entity).
  • The future funding obligations of the equityholders to the business (entity) and the related default provisions which may include provision for:
  • loss of information rights;
  • loss of voting rights;
  • imposition of high interest rates on late payments;
  • loss of entitlement to profits;
  • exercise of rights under cross securities over the respective interests of the equityholders;
  • dilution of a equityholder’s interest in the business (entity);
  • compulsory sale to a non-defaulting party;
  • forfeiture of the entire interest.
  • Voting powers concerning the business (entity).


Other particular issues may need to be considered:

  • What terms will there be for the acquirer to increase or the disposing party to decrease their interest in the business (entity) over time?
  • Are those rights/obligations to be subject to any conditions – e.g. performance hurdles?
  • Is Foreign Investment Review Board approval required?
  • What right (if any) will the buyer have to distribute its product/services through the business (entity)?
  • Is Commission approval required under the Competition & Consumer Act 2010 (Cth) if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market?

Related Practice Areas


We think outside the square

We help our clients comply with changing legal requirements and seek to ‘think outside the square’ to provide our clients with solution oriented legal services, with attention to detail.