NSW Commercial Law overiding a "profit agreement"

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zb193000

Member
9 September 2020
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Hi all,

New to this place, so please go easy on me! ;)

From my understanding commercial legislation will always overide an agreement that isn't in line with said legislation.

Here is my question:

Can a director (who is also a shareholder) write up an agreement that stipulates revenue/profit generated by him/her is only then entitled to be dispursed to said person?

Say hypothetically this shareholder closes a project worth $1mil. And the profits for this project would only go to the director/shareholder that closed and did this project.

I understand that there might be additional questions like who is doing the work, are there staff working on this, etc. I just want to know at a very base level if this type of agreement can actually co-exist within commercial law under a private company entity.

It sounded fishy when I heard it and hence why I am asking the question.

Thank you in advance!
Z.
 

Rob Legat - SBPL

Lawyer
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Simple answer: yes, sort of. But it's much more complicated than that.

It's also relevant to note that there are legislated provisions you can contract out of and ones you cannot. It isn't a blanket proposition of 'overriding' as you put it.

The situation you've described where the person doing the work gets the profit is allowable. The devil is in the detail, and it's mainly around the taxation implications based on how the agreement is structured. You'd need to talk to an accountant to get an understanding of that. That's assuming the company is the one engaged to do the work. Having it otherwise is (a) likely not palatable to the party paying and (b) almost assuredly opening the director up to personal liability, which is a sold reason for doing it via a company in the first place.
 

zb193000

Member
9 September 2020
2
0
1
Hi Rob,

Thanks so much for your fast reply. I understand that moving forward it would now come down to detailing this both in the agreement and then with an accountant to make sure I understand fully my tax abligations that would occur from that receipt for profit.

Appreciate your input and knowledge.

Cheers,
Z