The Shareholder Relationship
Useful for: Business
In Brief
- The words “member” and “Shareholder” are interchangeable in this article.
- The Company Constitution provides a basic framework for the structure and management of a company. It provides a standard set of rules for a company with very simple governance requirements.
- A shareholders agreement is a private agreement put in place between the shareholders and the company, and each shareholder with other shareholders. It expands on the Constitution and the two documents, read together, can provide a much more detailed governance structure.
- The shareholders agreement provides a detailed first point of reference for members (and executive management) in relation to all aspects of the structure, dealings with shares, and management of the company, avoiding the potential for deadlocks in general meeting and legal disputes between members. The shareholders agreement will override the Constitution where inconsistent (unless the agreement states otherwise).
- The Corporations Act provides that a minority shareholder may bring an action against the company in certain circumstances where it has suffered commercial detriment due to an action or course of actions taken by the company. The Court has wide powers to make orders to remedy the detriment of the minority shareholder/s in such situations.
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