Shareholder & partnership agreements in Victoria.

A company constitution governs the company. It says nothing about the relationship between the people who own it, who decides what, what happens if one owner wants to sell, dies or becomes unable to work, and how a disagreement between equal owners is resolved before it becomes a winding-up application. A shareholders or partnership agreement is the document that answers those questions, and it matters most exactly when the relationship is under strain, which is the worst possible time to negotiate it from scratch.

The core of a good agreement covers control, board composition, voting thresholds for major decisions, and what a minority owner can and cannot block, alongside money: how profits are distributed, how further capital is raised, and what happens if an owner cannot or will not meet a capital call. Then come the exit mechanics: a valuation method agreed in advance (an independent valuer, an agreed formula, or a shotgun clause), pre-emptive rights so an owner cannot sell to a stranger without first offering existing owners, and drag-along and tag-along rights so a majority sale is not held hostage by a minority, or a minority is not left behind by one.

Some of the most valuable clauses deal with the events no one wants to plan for: death, permanent incapacity, divorce and insolvency of an owner. Well-drafted agreements include compulsory transfer provisions and, ideally, insurance-funded buy-outs, so the surviving owners are not suddenly running the business alongside a spouse, an estate or a trustee in bankruptcy they never chose to be in business with.

Agree the valuation and exit mechanism while every owner still gets on. Once a dispute has actually started, no one will sign a method they think might work against them, and that is usually the moment it is needed most.