Shareholder and Partnership Agreements

Shareholder Agreement Lawyer Sydney: Shareholder and Partnership Agreements

A shareholder agreement sets the rules between the owners of a company: who makes decisions, what happens on deadlock, and how an owner can leave or be bought out. As a shareholder agreement lawyer in Sydney, Invictus Legal drafts shareholder and partnership agreements that reduce the risk of costly disputes between co-owners. Without one, you are left with the company constitution, the Corporations Act's replaceable rules or, for partnerships, the default rules in the Partnership Act 1892 (NSW).

Reviewed by Sam Saadat, Principal Lawyer, Invictus Legal. Last reviewed: 7 October 2026

Why do you need a shareholder agreement?

You need a shareholder agreement because the default rules rarely match what business owners actually agreed. Most disputes between co-owners start when the owners fall out, one wants to leave, someone stops contributing, or an investor or buyer arrives. A well-drafted agreement answers those questions in advance and makes the answer enforceable.

What are the key clauses in a shareholder agreement?

The key clauses deal with control, deadlock, share transfers, exit and protection of the business. An experienced shareholder agreement lawyer will tailor each of these to your company:

• Decision-making: which decisions the board can make and which need approval by a set majority or all shareholders (for example, issuing shares, borrowing, selling the business or changing the business).

• Deadlock: a process for breaking a stalemate, such as escalation, mediation, an independent chair or a buy-sell ("shotgun") mechanism.

• Pre-emptive rights: existing shareholders' right to be offered new shares, or shares another shareholder wants to sell, before outsiders.

• Drag-along and tag-along: drag-along lets a majority require minority holders to join a sale; tag-along lets minority holders sell on the same terms as the majority.

• Valuation and exit: how shares are valued on exit, death, incapacity, default or a breakdown in the relationship, and how and when the price is paid.

• Restraints: confidentiality, non-compete and non-solicitation obligations that protect the business, drafted to be reasonable so they are more likely to be enforced.

• Dispute resolution: notice, negotiation and mediation steps before litigation, while preserving the right to seek urgent court orders.

How does a shareholder agreement relate to the company constitution and replaceable rules?

A shareholder agreement works alongside the company's constitution and the replaceable rules in the Corporations Act 2001 (Cth); it does not replace them automatically. A company's internal management is governed by its constitution, the replaceable rules, or a combination of both. Section 141 of the Corporations Act contains a table showing which provisions are replaceable rules. They cover matters such as directors' powers, appointing and removing directors, directors' and members' meetings, issuing shares, dividends and share transfers.

A constitution can replace all or some of the replaceable rules. Any rule that is not replaced continues to apply. The replaceable rules do not apply to a proprietary company whose sole director is also its sole shareholder. The constitution operates as a contract between the company and each member, the company and each director and secretary, and between members. A company can change its constitution by special resolution, which requires at least 75% of the votes cast.

Because a shareholder agreement binds only the parties who sign it, we check that it is consistent with the constitution and, where needed, amend the constitution so the two documents work together.

What rules apply to a partnership without a partnership agreement?

Without a partnership agreement, the default rules in the Partnership Act 1892 (NSW) govern the partnership. A partnership is the relation that exists between persons carrying on a business in common with a view of profit (s 1). Every partner is an agent of the firm (s 5), and every partner is liable jointly with the other partners for the firm's debts and obligations incurred while they are a partner (s 9).

Subject to any agreement between the partners, s 24 provides that:

• all partners share equally in capital and profits and contribute equally to losses, whatever each partner actually contributed;

• every partner may take part in managing the business;

• no person may be introduced as a partner without the consent of all existing partners; and

• ordinary matters may be decided by a majority, but the nature of the business cannot be changed without the consent of all partners.

A majority cannot expel a partner unless the partners have expressly agreed to that power (s 25). Where no fixed term has been agreed, any partner may end the partnership by notice to all the other partners (s 26). Subject to any agreement, the death or bankruptcy of a partner dissolves the partnership (s 33). These defaults surprise many business owners. A written partnership agreement can set unequal profit shares, management roles, expulsion rights and a buy-out on death or retirement so the business can continue.

What if co-owners are already in dispute?

If a dispute has already started, the agreement you signed, or the default rules that apply without one, will shape your options. Our shareholder and partnership disputes team acts in negotiations, mediations and proceedings in the Supreme Court of NSW and the Federal Court, and Invictus Legal appears in courts across Sydney and NSW. If you are buying into or selling an existing business, see also buying and selling a business.

What does it cost?

The cost depends on the number of owners, the company structure, whether investors or different share classes are involved, whether the constitution also needs updating and how much negotiation is needed between the parties. Fees for commercial matters are determined by the scope of work involved, and we issue a costs agreement before we commence any work, so you have full transparency from the start.

Frequently asked questions

Is a shareholder agreement legally required in Australia?

No. A company can operate under its constitution, the Corporations Act replaceable rules, or both. A shareholder agreement is optional, but it lets owners agree matters such as deadlock, exit and valuation that the default rules do not deal with in a tailored way.

What is the difference between a constitution and a shareholder agreement?

The constitution governs the company's internal management and operates as a contract between the company, its members, directors and secretary, and between members. It can be changed by special resolution (at least 75% of votes cast). A shareholder agreement is a private contract that binds only those who sign it and can usually only be changed with their agreement, so the two documents should be drafted to work together.

Do the replaceable rules apply to my company?

The replaceable rules apply to a company to the extent its constitution does not replace them; section 141 of the Corporations Act sets out which provisions are replaceable rules. They do not apply to a proprietary company where the same person is the sole director and sole shareholder.

What happens to a partnership if a partner dies?

Under section 33 of the Partnership Act 1892 (NSW), subject to any agreement between the partners, the death or bankruptcy of a partner dissolves the partnership as regards all partners. A partnership agreement can provide for the business to continue and for the remaining partners to buy out the deceased partner's share.

How are profits shared in a partnership without an agreement?

Under section 24 of the Partnership Act 1892 (NSW), subject to any agreement, partners share equally in capital and profits and contribute equally to losses. This applies even if the partners contributed different amounts, which is why a written partnership agreement is important.

Why choose Invictus Legal as your shareholder agreement lawyer in Sydney?

We act in disputes between business owners, so we draft agreements with an eye on the clauses that are fought over when relationships break down. You receive specialist, practical advice from a principal lawyer and documents written in plain English. See our full range of commercial law services.

Talk to a shareholder agreement lawyer in Sydney. Call 02 8553 0500 or book online. For urgent matters call 0410 600 230.

This page is general information only and is not legal advice. Contact Invictus Legal to discuss your situation.