Australian companies are primarily regulated by the Corporations Act 2001 (Cth), although shareholder disputes involving Sydney businesses may be litigated in courts including the Supreme Court of New South Wales.
A shareholders agreement is a private contract governing the relationship between the shareholders of a company.
It commonly deals with management and board representation; voting rights; major business decisions; funding; dividends; new shareholders; transfers of shares; valuation; confidentiality; deadlocks; and exit arrangements.
ASIC also recognises shareholders agreements as one of the sources from which shareholder rights may arise. ASIC
They are different documents.
Under s 140 of the Corporations Act 2001, a company’s constitution and applicable replaceable rules operate as a statutory contract between the company, its members and relevant officers.
A shareholders agreement is instead an ordinary private contract between its parties.
Where the two documents deal with similar matters, they should be drafted consistently to minimise disputes about which rule applies. ASIC
A 50/50 company can become deadlocked if the shareholders cannot agree on important decisions.
A shareholders agreement can establish a deadlock mechanism, such as negotiation between principals, mediation, an independent expert determination, a structured buy-out procedure or ultimately a sale of the business.
Without an agreed mechanism, shareholder disputes can become expensive because neither shareholder necessarily has sufficient voting power to resolve the disagreement.
Minority shareholders have contractual rights under the company’s governing documents as well as statutory protections.
In particular, s 232 of the Corporations Act 2001 allows the Court to intervene where company conduct is oppressive, unfairly prejudicial or unfairly discriminatory against a member. Under s 233, the Court has broad powers, including ordering one shareholder’s shares to be purchased. Federal Register of Legislation
In Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, the High Court considered the concept of oppression and emphasised that unfairness is assessed objectively in the context of the company’s affairs. Case Judgments
Not simply because they hold the majority.
In Gambotto v WCP Ltd [1995] HCA 12; (1995) 182 CLR 432, the High Court considered an attempt by majority shareholders to alter a company’s articles to compulsorily acquire minority shares.
The Court held that an expropriation of minority shares requires, among other things, a proper purpose and fairness to the minority shareholders. The case remains an important authority concerning minority shareholder protection. CaseChat
For privately owned businesses, some of the most important provisions usually concern reserved matters, deadlock, pre-emptive rights, valuation, compulsory transfers, tag-along rights, drag-along rights and exit arrangements.
These provisions become particularly important when a shareholder wants to leave the business, becomes incapacitated, dies or has a serious disagreement with the other owners.
Last updated: September 2026
Jurisdiction: New South Wales, Australia
Disclaimer: This article provides general information only and does not constitute legal, financial or tax advice. The law may change and its application depends on individual circumstances. You should obtain professional advice before acting on the information contained in this article.