A Shareholders Agreement is essential for any company, especially for those with multiple shareholders. It ensures that shareholders’ rights, responsibilities, and obligations are clearly defined, protecting the business from future disputes and mismanagement. A well-drafted Shareholders Agreement can prevent costly legal battles and keep the company running smoothly. But a critical question many business owners face is: How much does a Shareholders Agreement cost?
This article explores the costs involved in obtaining a Shareholders Agreement, the factors that affect pricing, and the different ways to secure one, from downloadable templates to fully bespoke legal services.
How Much Does a Shareholders Agreement Cost?
The cost of a Shareholders Agreement can vary depending on several factors, including:
- Complexity of the Business – Companies with simple shareholding structures may need less complex agreements, which are generally less expensive.
- Number of Shareholders – More shareholders usually mean more complex agreements to cover voting rights, exit strategies, and other considerations.
- Level of Customisation – A highly customised Shareholders Agreement tailored to your business will typically cost more than using a standard template.
- Legal Expertise – The choice between using an online service, a general practitioner lawyer, or a specialised commercial lawyer will significantly impact the cost.
Different Ways to Purchase a Shareholders Agreement
There are several options available when obtaining a Shareholders Agreement, each with its own advantages and disadvantages:
A. Downloadable Shareholders Agreement Templates
These are readily available on various websites and typically range from free to $300. While they are easy to access and cheap, these templates are often generic and may not address the specific needs of your business.
- Advantages:
- Low cost
- Immediate access
- Disadvantages:
- Not tailored to your business
- No legal advice or review
- Does not provide access to a law firm’s professional indemnity insurance
B. Low-Cost Online Legal Services
Many online platforms offer customisable Shareholders Agreements for $300 to $1,000. These agreements are created using a standard template but can be tailored somewhat to suit your business needs.
- Advantages:
- Affordable with some customisation
- Faster than hiring a lawyer
- Disadvantages:
- Limited legal oversight
- Templates are still generic
- No backing of a law firm or access to indemnity insurance
C. Engaging a General Practitioner Lawyer
Using a general commercial lawyer typically costs between $1,500 and $5,000. They will create a more tailored agreement and offer legal advice throughout the drafting process.
- Advantages:
- Customised to your business
- Legal advice and review provided
- Disadvantages:
- Higher cost than online services
- May lack in-depth expertise for complex arrangements
D. Hiring a Commercial Law Specialist
This is the most expensive but also the most comprehensive option. A commercial law specialist charges between $5,000 and $10,000+ for a bespoke Shareholders Agreement.
- Advantages:
- Expert legal advice
- Fully tailored and comprehensive agreements
- Provides access to indemnity insurance in case of errors
- Disadvantages:
- High cost, not ideal for small businesses or start-ups
Different Ways to Obtain a Shareholders Agreement
| Method | Cost Range | Advantages | Disadvantages |
|---|---|---|---|
| Downloadable Template | Free to $300 | – Low cost – Quick access | – Generic, not tailored to your business – No legal backing or indemnity insurance – May not cover complex issues or future disputes |
| Low-Cost Online Legal Services | $300 to $1,000 | – Slight customisation options – Affordable compared to hiring a lawyer – Quicker than a lawyer | – Limited legal oversight – Templates may not be comprehensive – No access to professional indemnity insurance in case of errors |
| General Practitioner Lawyer | $1,500 to $5,000 | – Customisation to your specific business – Legal advice and review provided – More comprehensive | – Higher cost than templates – May not have the depth of expertise for complex agreements – Time-intensive process |
| Commercial Law Specialist | $5,000 to $10,000+ | – Expert legal advice tailored to your business – Comprehensive agreements that minimise risk – Access to indemnity insurance if required | – High cost, may not be suitable for small businesses or start-ups – Time-consuming – Most expensive option but the best protection in the long run |
What Should Be Included in a Shareholders Agreement?
A well-drafted Shareholders Agreement should include the following critical elements:
- Share Structure – Detailing the types of shares, voting rights, and ownership percentages.
- Decision-Making Processes – Defining how decisions will be made, including which decisions require unanimous agreement.
- Transfer of Shares – Outlining how shares can be transferred and restrictions on selling shares to third parties.
- Dividend Policies – Clarifying how profits will be distributed among shareholders.
- Dispute Resolution – Establishing the process for resolving disputes among shareholders.
- Exit Strategies – Covering what happens when a shareholder wants to leave the company or sell their shares.
Why You Should Invest in a Tailored Shareholders Agreement
While it might be tempting to opt for a free or low-cost template, investing in a tailored Shareholders Agreement is critical for the long-term protection of your business. A bespoke agreement ensures that the specific needs and complexities of your business are covered.
Additionally, working with a law firm like Blaze Business & Legal provides the added protection of indemnity insurance, which templates and online services do not offer.
Why Choose Blaze Business & Legal?
At Blaze Business & Legal, we offer tailored Shareholders Agreements at competitive prices and also customised template versions that are cheaper but do not contain generic drafting.
Criteria our Shareholders Agreements meet
We ensure that:
- Your Shareholders Agreement is specifically designed to meet the needs of your business (and we will advise if the customised template is not going to meet your needs).
- You have access to expert legal advice throughout the process.
- Your agreement is fully compliant with Australian law.
- You are protected by our professional indemnity insurance policy, ensuring peace of mind.
Shareholders Agreement Options
Blaze Business & Legal offers two main options for obtaining a Shareholders Agreement:
- Basic Shareholders Agreement – This is customised to your company’s details but does not include bespoke legal drafting. It’s ideal for businesses looking for a standard agreement, with pricing starting at $795 (excluding GST).
- Bespoke Shareholders Agreement – Designed for startups with two shareholders and directors, this option also incorporates provisions from a Director’s Agreement, offering more comprehensive protection. Fixed fee of $2,500 (excluding GST).
- For more Complex Shareholders Agreements, we provide fixed fees upon request, ensuring transparency and tailored service based on your company’s specific needs. From $2,500 (excluding GST).
Types of Shareholders Agreements and Providers
| Category | Provider | Cost Range | Customisation | Includes Director’s Agreement | Indemnity Insurance |
|---|---|---|---|---|---|
| Basic (Template-Based) | Cleardocs (Template) | $269.50 | – Template-based – Limited input | No | No |
| Blaze Business & Legal – Basic | $795 (excluding GST) | – Customised to company details – No bespoke drafting | No | Yes | |
| Semi-Customised (Limited Input) | LegalVision | $950 to $2,500 | – Limited customisation – Reviewed by lawyers | No | No |
| Local General Practitioner Lawyer | $1,500 to $5,000 | – Customised – General legal advice | No | No | |
| Bespoke (Fully Tailored) | Blaze Business & Legal – Bespoke | $2,500 (excluding GST) | – Fully tailored – Incorporates Director’s Agreement | Yes | Yes |
| Commercial Law Specialist | $5,000 to $10,000+ | – Fully tailored – Expert legal advice | No (unless specified) | Yes |
The Tax Implications of a Shareholders Agreement
In Australia, the legal fees for drafting a Shareholders Agreement may generally qualify as blackhole expenditure. This type of expenditure refers to capital costs that are not otherwise deductible and that relate to a business carried on for a taxable purpose. Under the Income Tax Assessment Act 1997 (ITAA 1997) s 40-880, businesses can deduct these expenses over five years at a rate of 20%, provided no other provisions deny the deduction.
It’s important to understand the specifics around claiming blackhole expenditure, especially in terms of whether your particular costs qualify. You may also want to review information on Claiming a tax deduction for depreciating assets and capital expenses. If you’re uncertain about your eligibility for deductions, it’s advisable to seek guidance through Early Engagement with the ATO, which can offer a more tailored approach to your situation.
Need for Ongoing Maintenance and Updates
A Shareholders Agreement is not a one-time document. As your business grows or changes, the agreement will need to be updated to reflect new shareholders, changes in ownership, or shifts in business strategy. Regular reviews of the agreement will help ensure that it remains relevant and continues to protect all shareholders.
Working with a law firm such as Blaze Business & Legal allows for easy updates and ongoing legal advice to maintain the effectiveness of your Shareholders Agreement.
Conclusion: Getting the Most Value for Your Shareholders Agreement
The cost of a Shareholders Agreement will depend on your business’s specific needs, the complexity of the arrangement, and the level of customisation required. Opting for a tailored Shareholders Agreement from a reputable law firm like Blaze Business & Legal provides significant advantages over templates and online services, offering bespoke legal protection backed by professional indemnity insurance.
Investing in a properly drafted Shareholders Agreement will save you from potential disputes and costly litigation, protecting your business in the long run. Consider the value of expert legal advice and long-term protection when choosing how to secure your Shareholders Agreement.
By selecting Blaze Business & Legal, you benefit from competitive pricing, expert legal services, and the assurance of ongoing support, making it the ideal solution for businesses looking for comprehensive, reliable, and cost-effective legal protection.
FAQs About Shareholders Agreements
1. What is a Shareholders Agreement, and do I need one for my business?
A Shareholders Agreement is a legally binding contract between the shareholders of a company. It outlines how the business will be operated, the shareholders’ rights and responsibilities, and procedures for resolving disputes. Every business, particularly those with multiple shareholders, can benefit from having a Shareholders Agreement to avoid potential conflicts in the future.
2. How much does a Shareholders Agreement typically cost in Australia?
The cost of a Shareholders Agreement in Australia varies based on the complexity of the business, the number of shareholders, and whether you use a lawyer or a template. It can range from as little as a few hundred dollars for a downloadable template to $10,000 or more for a custom-drafted agreement by a commercial law specialist.
3. Can I use a template for my Shareholders Agreement?
You can use a downloadable template for a Shareholders Agreement. However, these templates are often generic and may not address the specific needs or complexities of your business. Without proper legal review, a template may leave you exposed to risks that a bespoke agreement would cover, and you may not be covered by professional indemnity insurance of the provider as many providers disclaim all liability.
4. What are the benefits of hiring a lawyer to draft a Shareholders Agreement?
Hiring a lawyer ensures that your Shareholders Agreement is customised to your business and fully compliant with Australian law. Lawyers provide expert guidance on critical aspects like share transfers, decision-making, and dispute resolution, which helps prevent costly legal disputes down the line.
5. What happens if shareholders disagree after signing the Shareholders Agreement?
If shareholders disagree after signing the Shareholders Agreement, the dispute resolution process outlined in the agreement will guide how the conflict is handled. This could involve mediation, arbitration, or court proceedings, depending on the terms of the agreement.
6. Is a Shareholders Agreement legally binding?
A Shareholders Agreement is legally binding. Once all shareholders sign the document, they are bound by its terms and must comply with the procedures and rules outlined in the agreement. It is important that the agreement is drafted in accordance with Australian law to ensure it is enforceable.
7. Are the costs of drafting a Shareholders Agreement tax-deductible in Australia?
The costs incurred in drafting a Shareholders Agreement can generally be tax-deductible as “blackhole expenditure.” These costs may be deductible over a period of five years under ITAA 1997 s 40-880, provided no other provision denies the deduction. It’s best to seek guidance from a tax professional or Early Engagement with the ATO to ensure compliance with your tax obligations.
8. What should be included in a Shareholders Agreement?
A Shareholders Agreement should include several key provisions: share structure, decision-making processes, the appointment and removal of directors, dividend distribution, exit strategies for shareholders, share transfer procedures, and a dispute resolution mechanism. Tailoring these provisions to your business is essential.
9. How often should I update my Shareholders Agreement?
Your Shareholders Agreement should be updated as your business grows or experiences significant changes, such as new shareholders joining, shifts in ownership structure, or alterations to business strategy. Regular updates ensure that the agreement continues to meet the needs of all shareholders.
10. Can a Shareholders Agreement override the company’s constitution?
A Shareholders Agreement cannot override the company’s constitution. Both documents should be consistent with each other, which is one big reason why it is best to engage a lawyer to draft your Shareholders Agreement. If there is a conflict between the constitution and the Shareholders Agreement, the constitution generally prevails.
11. Can a Shareholders Agreement protect minority shareholders?
A well-drafted Shareholders Agreement can include specific provisions to protect minority shareholders, such as tag-along rights, veto powers, and anti-dilution provisions. These protections ensure that minority shareholders are not unfairly disadvantaged by majority shareholders.
