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NSW Shareholder For Small Business - How to Set Up Agreement?

Discussion in 'Commercial Law Forum' started by Chris Devon, 16 September 2014.

  1. Chris Devon

    Chris Devon Guest

    Hi there,

    I am just after a bit of information. I currently own a cafe and lunch bar in Sydney. A friend has decided he would like to join me and I need to set up a shareholders agreement between the two of us. Anyone have any idea who I could approach to have this set up with accordance to contract law and commercial law?

    Many thanks!
  2. Tim W

    Tim W Lawyer

    28 April 2014
    Likes Received:
    Any solicitor who does commercial work can do it.

    But be clear on exactly what you are doing.

    For example, you are talking about shares - so are you incorporated (an entity capable of being owned in shares); or
    is he simply buying into a partnership; or
    is he making you a loan, secured by some share (say 50%) of the profits?
    Will he be working in the business? Full time, part time? How many hours, what days?
    What will he have to actually DO as his work?
    How will he be paid? You may need to distinguish salary/wages compared to
    annualised profit-sharing ("share dividends").
    And most importantly, how will you resolve disputes?
    Rod likes this.
  3. Chris Devon

    Chris Devon Guest

    Hi Tim,

    Many thanks for the reply - I'm not really familiar with any of this so your response is really helpful. Would you be able to recommend a lawyer who can help or how much would you charge yourself to do this?

  4. Sarah J

    Sarah J Well-Known Member

    16 July 2014
    Likes Received:
    Hi Chris,

    Further to what Tim raised, think about:

    - If you wish to set up a private company (limited by shares), who will be the director of this company? Who will be the company secretary?
    - What about directors' meetings and annual members' meetings?
    - An Articles of Association (the company's constitution) will also be required. There should be a model articles available but you will need to alter or amend some articles to make this suited to your situation.
    - What is it that your friend wants (i.e. most concerned about) in this business arrangement? And what do you want out of this business arrangement? If it is purely to raise funds, setting up a company is expensive and requires complicated regular bookkeeping of accounts, public filing of information, costly compliance procedures and notices etc. so this may not be the best option for you. A partnership also allows you to raise funds (limited) but may mean you would give up some of your management/control over the business.

    I suggest researching the differences between a (i) sole proprietor taking loans from friends and having them on board as skilled employees; (ii) a partnership: whereby your friend could be a limited partner (i.e. silent partner who invests but does not manage business and will have liability limited to his investment) or a general partner (i.e. full agent of the partnership with joint and several liability); or (iii) private company (with liability limited by shares bought into the company and more flexible management/investor/director roles but is much more costly and subject to many compliance requirements).

    After you figure out which business structure you want, you can then look into how to go about setting this up. But really do your research so you know what you are getting yourself into.

    Unless you have already decided on a private company?
    Tim W likes this.
  5. Tim W

    Tim W Lawyer

    28 April 2014
    Likes Received:
    This is very do-able work, and pretty well any solicitor who does commercial work
    can be relied upon to get you sorted out.

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