A shareholders agreement is a private contract between a company's owners. No law requires one, but without it your company runs on its constitution or the Corporations Act's default rules, which let a majority remove a director and set no buyer or price for a departing owner's shares.
A shareholders agreement is a private contract between a company’s owners. It sets out how decisions are made, who puts in more money, and what happens when an owner wants to leave, dies or falls out with the others. No law says you must have one. But without one, your company runs on its constitution or the default “replaceable rules” in the Corporations Act 2001 (Cth). Those rules let a majority remove a director and let directors refuse to register a share sale for any reason.
General information about Australian company law, not legal advice. See the note at the end. Section numbers are from the Corporations Act 2001 (Cth) unless we say otherwise.
In this guide: Do you need one?; Without an agreement; Agreement or constitution; What to include; Is it binding?; Templates; When to sign; Cost; FAQs.
Not by law. Every company must be run under a constitution, the replaceable rules, or both (ss 134, 135), but a shareholders agreement is optional. It matters most when two or more people own the company: when the split is 50/50, when one owner works in the business and another only invests, or when family members are involved. If you are the only director and the only shareholder, the replaceable rules do not apply to your company (s 135(1)) and there is no one else to agree with.
This guide is about a proprietary company (a Pty Ltd company) with a few owners. ASIC says: “Your company must be governed by either a constitution or a set of rules called the ‘replaceable rules’.”
If your business is a partnership or a trust, different rules apply. See choosing a structure for a family business.
Your company runs on its constitution, or on the Corporations Act’s replaceable rules if it has no constitution. Those rules were not written for your business. Under them, the directors run the company and decide dividends, shareholders with a majority can appoint and remove directors, and the directors of a proprietary company can refuse to register a share transfer for any reason. No default rule makes anyone buy a departing owner’s shares, or sets a price. When owners cannot agree, the fallback is often a court application.
A constitution can displace or change these defaults (s 135(2)), so check yours first.
Directors manage the business (s 198A). Shareholders appoint directors by resolution at a general meeting (s 201G), and a proprietary company can remove a director by resolution (s 203C).
An ordinary resolution at a meeting needs a majority of the votes cast (Part 1.5, paragraph 1.9). On a show of hands, each member has 1 vote. On a poll, each member has 1 vote for each share (s 250E(1)). Members with at least 5% of the votes can demand a poll (s 250L(1)(b)). So an owner with more than half the shares can usually remove the other owner as a director.
Example (hypothetical). Jo holds 60 shares and Lee 40 in a plumbing company, and both are directors. After a falling out, Jo demands a poll at a general meeting and wins 60 votes to 40 on a resolution to remove Lee. Lee keeps 40% of the company but is off the board.
Directors’ resolutions need a majority of the votes cast (s 248G(1)). The chair has a casting vote at directors’ meetings (s 248G(2)) and at members’ meetings (s 250E(3)). The chair is chosen by a vote (ss 248E, 249U). So in a 50/50 company, whoever chairs may decide a tie, but if the two owners cannot agree who chairs, the company can stall. The replaceable rules have no other way to break a deadlock.
The directors decide whether to pay a dividend, how much and when (s 254U(1)). A dividend can be paid only if the company’s assets exceed its liabilities by enough, the payment is fair and reasonable to shareholders as a whole, and it does not materially prejudice the company’s ability to pay its creditors (s 254T(1)).
New shares in a proprietary company must first be offered to existing holders of that class, in proportion to their holdings (s 254D(1)). But a general meeting can let the directors skip that step for a particular issue (s 254D(4)). So a majority owner may be able to issue new shares that shrink a minority owner’s percentage. This is called dilution.
Selling. The directors of a proprietary company “may refuse to register a transfer of shares in the company for any reason” (s 1072G). They must still use that power in good faith and for a proper purpose (s 181(1)), and a buyer refused without just cause can ask the Court to order registration (s 1071F). Until the transfer is registered, the seller stays the holder (s 1072F(1)). No replaceable rule makes the other owners buy, or sets a price.
Death. For shares in the owner’s sole name, the company recognises only their personal representative, usually the executor (s 1072A(1)). Once the executor gives the directors the information they reasonably need, the executor can elect to be registered as the holder, and the company must register them. Registered or not, the executor has the owner’s rights (s 1072A(2), (3)). If the executor transfers the shares instead, the usual transfer rules apply, including the directors’ power to refuse (ss 1072A(4), 1072G). For jointly held shares, the company recognises only the survivor (s 1072A(5)). So the other owners may end up in business with the estate or the family. See what an executor does, and make sure your will deals with your shares.
Loss of capacity. A person entitled to the shares because an owner has lost mental capacity can elect to be registered as the holder, or transfer them (s 1072D(1)). In Queensland, an enduring power of attorney lets an adult appoint attorneys for financial matters. It is not revoked if the adult later loses capacity for those matters (Powers of Attorney Act 1998 (Qld), s 32(1)(a), (2)). Ask a lawyer how your enduring power of attorney and your company’s documents fit together.
Even without an agreement, the Act gives minority owners some rights:
A 20% owner has these rights, but not a set board seat, a veto over big decisions or an agreed exit price. Most of them also mean a formal meeting or a court application. An agreement sets the process in advance.
The middle column shows the replaceable rules, which apply unless your constitution changes them. The right column lists common clauses (general information).
| Topic | Without an agreement | What an agreement can set |
|---|---|---|
| Who runs the business | The directors (s 198A) | Which owners sit on the board, and each owner’s role |
| Appointing and removing directors | Shareholders by resolution; a proprietary company can remove a director by resolution (ss 201G, 203C) | A right for each owner to appoint a director while they hold an agreed stake |
| Big decisions | Directors decide by a majority of votes cast (s 248G(1)) | A list of “reserved matters” that need every owner, or an agreed majority |
| Tied votes | The chair has a casting vote (ss 248G(2), 250E(3)) | Deadlock steps: talk, then mediation, then a buy-sell process |
| Dividends | Directors decide (s 254U), within the s 254T tests | A dividend policy |
| New shares | Offered first to existing holders of that class, unless a general meeting decides otherwise (s 254D) | Consent and anti-dilution rules for new shares and new investors |
| Selling your shares | Directors may refuse to register a transfer for any reason (s 1072G); no replaceable rule makes anyone buy | A first right for the others to buy, and a price formula or independent valuer |
| A buyer for the whole company | No replaceable rule | Drag-along and tag-along clauses |
| Death | The executor can be registered or transfer the shares (s 1072A(1) to (3)); for jointly held shares, the company recognises only the survivor (s 1072A(5)) | A right or duty to buy the shares, and how the price is funded |
| Loss of capacity | The person entitled can be registered or transfer the shares (s 1072D) | Buy-out triggers that work alongside each owner’s enduring power of attorney |
| Leaving the business | The departing owner keeps their shares (no replaceable rule forces a sale) | Good leaver and bad leaver terms, restraints and confidentiality |
| Disputes | Court applications, such as the oppression remedy (ss 232, 233) | Negotiation and mediation steps before anyone goes to court |
A shareholders agreement is a private contract signed by some or all of the shareholders, and often the company too. A constitution is the company’s own rulebook. The Corporations Act makes the constitution, or the replaceable rules, a contract between the company and each member, and between the members themselves (s 140(1)). The company can change its constitution by special resolution, which needs at least 75% of the votes cast (ss 9, 136(2), 250MA). A shareholders agreement usually changes only in the way the agreement itself allows.
ASIC says: “If you want to change some or all of the replaceable rules, your company must have a constitution” (see s 135(2)). It adds that shareholders’ rights may also be set out in a “company shareholders agreement, if it has one”. So think of three layers: first the Act, then the constitution or replaceable rules, then the shareholders agreement.
At a minimum: who owns what, who sits on the board, which big decisions need everyone’s agreement, how extra money is raised, and how dividends are decided. It should also say what happens when an owner wants to sell, leaves the business, dies, loses capacity or goes bankrupt; how shares are valued; how deadlocks are broken; what a departing owner cannot do; and how disputes are resolved. Finally, it must fit with the company’s constitution, with a clause saying which document wins.
The usual topics (general information, not clauses):
Deadlock, exits and valuation, death and incapacity, and who works in the business. In a small company each owner has a large stake, and there is often no one else to break a tie.
Owners often plan how a buy-out would be paid for if an owner dies. Take insurance, tax and stamp duty questions to a financial adviser and an accountant.
Yes. It is a contract, so it binds the people who sign it. A new shareholder is bound only if they sign on, usually by a short deed. It cannot override the Corporations Act, and only the constitution can change the replaceable rules (s 135(2)). That is why the agreement and the constitution should be drafted to work together, with a clause that says which one applies if they conflict. Keep a signed copy with the company records.
You can. The law does not require a lawyer to prepare it. The risk is in the fit. Some templates found online are written for the US or UK and talk about bylaws, LLCs or articles of association. Others assume a startup with outside investors, or clash with your constitution. A template also cannot tell you what your shares are worth, or what your co-owners will accept. Consider having a lawyer review it before everyone signs.
If you are about to take on a co-owner or investor, or want an existing agreement reviewed, call Catton Roderick Lawyers on 1300 673 792.
Before the new owner gets their shares or pays any money. At that point everyone wants the deal to work, so it is easier to agree on exits, valuation and deadlocks. Once a dispute starts, the same questions are much harder to settle. Review the agreement when ownership changes, when an owner stops working in the business, when an investor comes in, and when the owners update their wills.
If you are buying into a business, deal with the agreement as part of the purchase. Still deciding between a company, a trust and a partnership? Start with choosing a structure for a family business.
The cost depends on the work, so ask for a quote first. The main factors are how many owners there are, whether there are different share classes or an outside investor, whether the constitution also needs changing, how much the owners need to negotiate, and whether death and incapacity buy-outs are included. Reviewing an existing agreement is usually a smaller job than drafting one.
To talk to a shareholders agreement lawyer, see our contact details below.
No. A company must be run under a constitution, the Corporations Act’s replaceable rules, or both (ss 134, 135). A shareholders agreement is optional, but it covers what those rules leave open, such as exits, valuation and deadlocks. It is most useful when two or more people own the company.
Directors run the business day to day (s 198A). Shareholders choose the directors (s 201G), can remove a director of a proprietary company by resolution (s 203C), and can change the constitution by special resolution (s 136(2)). In many small companies the same people hold both roles.
Not automatically. Under the replaceable rules, the directors decide whether to pay a dividend (s 254U), and a dividend can only be paid if the tests in s 254T are met. A shareholders agreement can set a dividend policy. Ask your accountant how dividends are taxed.
With at least 5% of the votes, you can ask for a general meeting (s 249D), demand a poll (s 250L) and, in a small proprietary company, direct that financial reports be prepared (s 293). Any member can apply to the Court about oppressive conduct (ss 232 to 234). But a majority can still remove you as a director (s 203C).
If the shares were in their name alone, the company deals with their personal representative, usually the executor, who can be registered as the holder or transfer the shares (s 1072A). For jointly held shares, the company recognises only the survivor. Unless an agreement or the constitution says otherwise, no default rule makes anyone buy them. See what an executor does.
To have a shareholders agreement prepared or reviewed, call Catton Roderick Lawyers on 1300 673 792 or email info@cattonroderick.com.au. Dr Darren Catton, the firm’s principal, handles our commercial work. He has been a lawyer since 1987. We see clients at our Caboolture office (Unit 3, 9 East Street) and our Redcliffe office (First Floor, Cominos Arcade, 133 Redcliffe Parade), and in Birtinya (Sunshine Coast) and Brisbane by appointment.
You can also send an enquiry through our contact page.
This page is general information about Queensland law as at 27 September 2026. It is not legal advice about your situation. Time limits apply, so please get advice about your own circumstances.
Last reviewed: 27 September 2026
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