Benefits of a Shareholders Agreement revisited

A recent case in the Victorian Supreme Court has highlighted the benefits of a properly drafted shareholders agreement.

The two parties, who each owned 50% of a private construction company, were, as the Court described, in “a classic deadlock”. There was no shareholders agreement between the parties which could have contained a buyout mechanism which may have prevented the matter reaching litigation. In the end however, without one party having “oppressed” the other, there was no way the Court could order a buyout under the Corporations Act 2001. The Court was left with little option but to order the company be placed into liquidation and wound up.

It is arguable that in the circumstances, a shareholders agreement may have not only stopped the matter reaching Court but also avoided the costs of liquidation. For assistance with shareholder agreements and company structuring, please contact Certus Legal Group.