Shareholders agreement, Kelvin Grove Diagnostics
Shareholders agreement template for a company after a seed round
A shareholders agreement template sets out who owns what, who sits on the board, which decisions need shareholder consent, how shares are sold, and how a deadlock ends. This one is filled in for a Queensland veterinary diagnostics company that has just taken $1.5 million from one seed fund, leaving the two founders with 80 per cent between them. Its central number is an 85 per cent consent threshold for eight reserved matters, and the page below shows what that number does and does not protect.
The document, page by page
Every page as it renders and as it prints, with nothing summarised. Read the wording before you reuse it.
Section by section
What each section is for, so you can keep the ones you need and drop the rest.
- Contents
- Thirteen clause groups with their numbers, so an investor can find the reserved matters and the transfer controls without reading forwards.
- 1. Parties and the company
- The company, both founders and the seed fund as trustee, what the business actually is, and a line saying the agreement exists because the investor subscribed.
- 2. Shares held
- A cap table by class and holding, a stats row for the $1.5 million subscription at $1.50 a share, the liquidation preference, and a 500,000 share employee pool.
- 3. The board
- One director each for the two founders and one for the investor while it holds 10 percent, a quorum rule, no casting vote, and a reminder that directors duties still apply.
- Agreement against constitution
- An information panel on why the private document carries the commercial bargain while the lodged constitution stays public, pointing forward to the clause that resolves a conflict.
- 4. Decisions reserved to shareholders
- Eight numbered matters the company cannot do without holders of 85 percent agreeing in writing, each with the scope written into the item rather than left broad.
- 5. Information rights
- A five row table of what gets reported and when, from monthly management accounts within 20 days to the cap table within 10 business days of an issue, plus inspection rights at 10 percent.
- 6. Issuing new shares
- Pre-emption in proportion to holdings with 15 business days to accept, a second round for shares not taken up, and broad based weighted average protection below $1.50.
- 7. Selling shares
- A transfer notice to the other holders first, 60 days to sell outside at no lower price, permitted transfers to a family trust, and no sale to a competitor at any price.
- 8. Drag along and tag along
- Holders of 75 percent can require the rest to sell into a genuine offer with title warranties only, and any sale passing 50 percent lets everyone else sell the same proportion.
- 9. Founder vesting
- Half of each founder holding on a twelve month cliff then 36 months, buyback of unvested shares at issue price, twelve months of credit for a good leaver, and full acceleration on a sale.
- 10. Deadlock
- A four step timeline from the deadlock notice through a shareholders meeting and mediation to a buy or sell offer that has to be answered within 30 business days.
- 11. Confidentiality and restraint
- Confidentiality with a carve out letting the fund report to its own investors on a no names basis, a twelve month founder restraint, and an assignment of founder intellectual property.
- 12 and 13. Priority and general
- Which document wins, the company's own obligations, deeds of accession before any transfer is registered, notices, Queensland law and electronic signing.
- Schedule and execution
- A notices table naming the reporting contact for each party, a panel explaining the 85 percent figure against the cap table, then four signature blocks including one for the company itself.
Clauses in this document
- Anti dilution clause: protecting an investor's price in a down round
- Deadlock clause: breaking a tie in a 50 50 company
- Drag along clause: making minority shareholders join a sale
- Exit clause in a shareholders agreement: planning the sale or listing
- Further assurances clause: signing whatever else the deal needs
- Good leaver bad leaver clause: pricing a departing founder's shares
- Information rights clause: what investors are told and when
- Jurisdiction clause: picking the courts before the dispute
- Mediation clause: a required attempt at settlement before litigation
- Non compete clause: wording, enforceability and reform
- Non disparagement clause: wording for settlement deeds and exits
- Pre emptive rights clause: first right to buy new shares
- Restraint of trade clause: building a cascade for a business sale
- Right of first refusal clause: matching an outside offer for shares
- Tag along clause: letting minority shareholders join a sale
- Variation clause: the rule for changing the contract later
- Vesting clause: earning founder shares over time
What the 85 per cent threshold does here
The panel at the back of this agreement explains the 85 per cent threshold against the cap table. The founders hold 44 and 36 per cent, 80 per cent together, so without the fund they fall five points short and cannot issue shares, borrow over $250,000, pay a dividend or sell the business. The fund cannot act with one founder against the other either: 44 plus 20 is 64 per cent and 36 plus 20 is 56. In practice every reserved matter needs all three holders. A 75 per cent threshold would have let the two founders act alone, which is why the line sits above 80. The drag along stays at 75 per cent, so the founders together can still require the fund to sell into a genuine offer for the whole company, which the fund should weigh before signing.
Where the investor is protected
The board clause gives the fund one of three seats while it holds at least 10 per cent, and a board meeting has no quorum unless the investor director is there, so the founders cannot hold a board meeting without the fund. The chair has no casting vote. Information rights send management accounts within 20 days of month end, the budget by 31 May and reviewed annual accounts within 120 days of 30 June, and a holder of 10 per cent can inspect the records. Pre-emption and broad based weighted average anti dilution protect the fund's 20 per cent if new shares are issued, and the seed preference pays it first on a sale or winding up.
How to adapt this template
For two founders with no investor yet, drop the preference shares, the investor board seat and the anti dilution clause, and set the reserved matters threshold so that both founders must agree, which with equal holdings means more than 50 per cent. For a round with several investors, give the investor class its own consent right on the matters that affect it rather than relying on one threshold across all shares. Keep the deadlock ladder, the transfer controls and the directors duties clause in every version, and have each shareholder take independent legal advice, which the execution page already records.
What makes this document work
The consent threshold can be checked against the cap table
Eight reserved matters need holders of 85 per cent. With holdings of 44, 36 and 20 per cent, no two holders reach it, not even the two founders together at 80 per cent. Every reserved matter needs all three, so each founder and the investor holds a veto, on top of the investor's board quorum and information rights.
Only half of each founder holding is exposed to vesting
1,100,000 of Dr Marchetti's shares and 900,000 of Mr Baptiste's sit on a twelve month cliff and 36 monthly instalments. The other half is already theirs. That is the shape most seed rounds actually land on, and it is far more useful to read than a clause that puts every founder share back on the table.
Deadlock finishes somewhere instead of trailing off
A matter is deadlocked once a reserved decision has failed twice in 30 days. Then a meeting inside ten business days, mediation inside twenty, and finally a buy or sell offer where the shareholder who names the price must be willing to sit on either side of it within 30 business days.
Questions people ask
What is the difference between a shareholders agreement and a constitution?
A constitution is the company's internal rulebook and it is a matter of public record with ASIC. A shareholders agreement is private, so it is where the commercial bargain sits: who gets a board seat, what needs consent, how someone gets out. Clause 12 here says the agreement prevails between the shareholders and commits them to vote the constitution into line.
Do you still need an agreement if the company has a constitution?
Usually. A constitution and the replaceable rules cover mechanics such as meetings, share issues and the appointment of directors. Neither says anything about reserved matters, drag along, anti dilution or founder vesting. Anything that is in neither document is not enforceable when the relationship goes wrong.
Can an investor's nominee director vote in the investor's interests?
No. A director appointed by a shareholder still owes their duties to the company under the Corporations Act 2001, and no shareholders agreement can relieve them of that. Clause 3.3 states it explicitly, which is worth doing because nominee directors are the most common place where the point gets forgotten.
What are reserved matters in a shareholders agreement?
The list of things the company cannot do without a stated level of shareholder consent. There are eight here, all at 85 per cent: issuing shares, selling the business, borrowing over $250,000, changing what the company does, paying a dividend, lifting founder pay by more than 15 per cent, related party contracts, and any winding up or administration. Set the threshold against the cap table, because it decides who holds a veto.
What are information rights?
They set what the company must send shareholders and how often. This agreement gives them clause five, covering the accounts and reporting an investor receives. Without them a minority shareholder can be entirely in the dark between annual filings, which is the point at which small disputes become large ones.
How does the deadlock clause end a dispute?
It sets a timetable instead of leaving it to a court. A matter is deadlocked when a reserved decision fails twice in 30 days, and with holdings of 44 and 36 per cent any one of the three holders can cause it, since all three are needed to reach 85 per cent. The shareholders then meet within ten business days, mediate within twenty, and finally one names a price for a buy or sell offer.
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