Problems with relying on standard items vary depending on the circumstances and the percentage of shares you hold. If you control 75% of the voting rights, you can change the default statuses and cure many problems. But minority shareholders do not enjoy this power. In limited cases, a minority shareholder may invoke protection under the Corporations Act. But in practice, the provisions applicable to minority shareholders are cumbersome and often little or no practical help. A minority shareholder will be in a better position if the issues are resolved, when the shares are acquired or before problems arise. Although the outgoing shareholder generally cannot tax the sale of the business, the other shareholder may accept the business if there is no other solution. Such a change may result in shareholder objectives no longer being harmonized, increasing the likeies of divergence and other problems. For example, a shareholder may have to sell its shares, which, as mentioned above, can lead to disagreements and problems.
Due to the difficulties encountered in the absence of a shareholder pact, the sale is often to the remaining part. Part of the reason for this is that such agreements do not contain some of the provisions that are important to protect you from the kinds of problems that arise. For example, I have never seen one that contains a mechanism for an angry shareholder to leave in a way that avoids problems. Nor have I seen a clause to settle a disagreement over the valuation of shares. If there is no shareholders` pact as long as shareholders agree on how the company`s business is managed and the relationship between the company and the company is satisfied, no problem is likely. But when these things collapse, there are few things in the general law that can help a lot – often, the solution is drastic and causes the company to cease to exist, or that shareholders are involved in long and costly legal disputes. While a shareholder pact cannot prevent all disputes, it can be a very useful tool to prevent and deal with such difficulties. They are also invaluable if a company`s investors want an exit plan that other shareholders approve in advance. It is therefore essential that shareholders reach a formal agreement with each other at an early stage of their relationship, highlighting and circumventing potential problems in advance.
Too often, people come together to believe that they agree on all important issues and think that they do not need formal treaties just to regret it in the event of disagreement. The best way to obtain this security is for them to enter into a shareholders` pact and include a mechanism that, when they leave their jobs, must put their shares up for sale. The agreement can then determine at what price it should be. Sometimes, for a “good graduate,” it can be different from a “bad graduate.” It is equally important that a shareholders` pact be specifically tailored to your particular circumstances, not just details such as names, addresses, number of shares, number of directors, etc. Otherwise, let someone else decide what provisions or mechanisms work for you without providing information that would allow them to make that decision. Of course, when two or more people start a business, they focus on things like degeneration of income and hiring the right people. With all their energy focused on exploitation, owners sometimes pay too little attention to developing an agreement between them.