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Checklist For New Shareholders

Checklist For New Shareholders

Just become a new shareholder in a business? Not sure exactly what shareholders rights and responsibilities are? Learn today about being a new shareholder!

3rd October 2019

Know Your Rights

Becoming a shareholder in a new business is an exciting prospect. Whether you have just set up a new company or invested in a start-up, there are some essential features to being a shareholder. Shareholders agreements define shareholder rights. Shareholders hold a business together by providing funds and support. The agreement should set out the essential features of being a new shareholder. The agreement should also reflect what the shareholders originally envisioned when creating the company. This article will explore some of the critical elements of a shareholders agreements and what you need to know as a new shareholder.

Typical Features Of A Shareholders Agreement Include:

What Is The Role Of The Shareholders In A Company?

Moreover, shareholders should understand their relationship with owners and directors. The directors and officers of the company have specific responsibilities. Shareholders and directors can share titles. Directors have particular duties under the Corporation Act 2001. Failure to comply with these duties could result in disputes, and they may be found liable for a breach. However, shareholders may be required to vote on specific issues. As a shareholder, consider reviewing the relationship with your directors within your shareholder agreement. Therefore, always consider your relationship and responsibilities with the directors and management.

Shareholders Share Arrangement and issuance for new shares.

Furthermore, a shareholder should also be aware of their share arrangement and the ability of the company to issue new shares. All share agreements should define how exactly they issue new shares. Companies can issue shares for a variety of reasons such as injecting cash into the business. It is essential to consider that when a company issues new shares, they are potentially diluting the value of your shares. Understanding the rules around issuance will allow you to protect your interest if the company wishes to offer new shares. Therefore, always consider how a share issuance affects the share agreement.

Dividend Arrangement and Classes of Shares.

An essential aspect of being a new shareholder is being able to measure your return on investment. Dividends are one of the main ways a person can measure their return on investment. A share arrangement should consider competing interests when distributing or sharing profits. The agreement should set out methods of payments, and when payments via dividends should occur. The class of shareholder may also affect your return on investment. For example, if you have been issued deferred ordinary shares, you will not be paid out until all the other classes have received their dividends. Therefore, always consider the dividend arrangement when measuring your return on investment.

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Thus, it is vital as a new shareholder to understand your new share agreement. A share agreement should dictate your rights and responsibilities. Understanding your relationship with directors, management, and other shareholders is essential for maintaining an efficient company. Always be aware of when the company can issue new shares and dividends. This article has only explored a few of the critical features of a share agreement. There are many other things to consider, such as the sale and disposition of shares. Always seek legal advice if you are unsure of your rights and responsibilities. Therefore, as a shareholder, consult your share agreement to determine your rights.

Author
Joshua Cutrone

Josh is a Legal intern at Lawpath. He is a Commerce/Law student at Macquarie University. He has an interest in cyberlaw and blockchain technology.