What should a shareholders agreement cover?
Zohra Ali, principal solicitor23/10/2026 · 6 minute read
When you start a company with someone else, everyone is usually on the same page. A shareholders agreement is how you make sure you stay there when things change: someone wants out, someone stops pulling their weight, or an offer comes in for the business.
It sets out how the owners deal with each other. Without one, the company's constitution and the general law fill the gaps, and they rarely fill them the way the owners would have chosen.
Isn't the constitution enough?
The constitution sets the internal rules of the company: how directors are appointed, how meetings are run, how shares are issued. Most are standard documents, and they say little about the commercial deal between the owners.
A shareholders agreement sits alongside the constitution and covers that deal. It is a private contract between the owners, and it can be tailored to your circumstances in a way a standard constitution usually is not.
The 8 things it should cover
Who decides what. Day-to-day decisions sit with the directors. Bigger decisions, such as borrowing above a set amount, taking on a new owner, selling major assets or changing the business, can be reserved for the shareholders and require unanimous or majority approval.
Funding. What happens when the company needs more money. Do the owners have to contribute, in what proportions, and what happens if one of them cannot or will not?
Issuing new shares. Existing owners usually get the first right to take up new shares, so their percentage is not diluted without their agreement.
Selling shares. Most agreements stop an owner selling to an outsider without first offering the shares to the other owners. This keeps control of who you end up in business with.
Exits. What happens when an owner wants to leave, retires, becomes ill, dies or stops working in the business. This includes how their shares are valued and how and when they are paid out.
Default events. What happens if an owner breaches the agreement, becomes insolvent, or acts against the company's interests. A common approach is a right for the other owners to buy that owner's shares, sometimes at a discount.
Tag along and drag along. If a buyer offers to buy the majority owner's shares, tag along lets minority owners sell on the same terms. Drag along lets the majority require the minority to sell too, so a buyer who wants 100% can get it.
Disputes and restraints. A process for resolving disagreements before they reach court, and restrictions on an owner who leaves competing with the business or poaching its clients and staff.
When should you put one in place?
The best time is at the start, while everyone agrees and nobody has an advantage. Agreeing exit and valuation terms is much harder once a dispute has started, or once one owner has become far more important to the business than the others.
Other good moments are when a new owner comes in, when the business takes on outside investment, or when the business has grown and the original arrangement no longer reflects who does what.
A 50/50 company needs extra care
With 2 equal owners, either one can block any decision. A shareholders agreement for a 50/50 company needs a clear way to break a deadlock, such as an independent expert, mediation, or a mechanism that lets one owner buy the other out.
Where Legally Sorted fits
Legally Sorted has a shareholders agreement with optional tag along and drag along provisions, and a separate agreement for 50/50 companies. Both are written and kept current by a practising NSW solicitor. You answer plain-English questions, and the questions tell you when your situation needs a solicitor rather than a template.
You can choose a DIY document, or have a solicitor check it for a fixed fee before you receive it. If you are unsure which document fits, you can browse our company documents or ask for a fixed-fee quote.