Simple Heads of Agreement for a Shareholder's Agreement

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A Simple Heads of Agreement is a preliminary agreement between three individuals who are setting up a new company in which each of them will be both a shareholder and a director. This agreement assumes that a formal Shareholders Agreement will be entered into but until that time, this agreement will have contractual effect. A written Simple Heads of Agreement will prove valuable in the event of disagreements, misunderstandings or litigation.

Among others, this form includes the following provisions:
  • Purpose of the Agreement: This provision sets out the intention of the parties and the company’s principles;
  • Parties, Purpose and Date:These provisions set out the identity of the parties, the company’s purpose and the date of incorporation;
  • Initial Capital: This provision sets out the percentage of initial capital each party will contribute;
  • Withdrawal from Company: This provision sets out the ability of each party to withdraw from the company.

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This lawyer-prepared packet contains:
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  3. Simple Heads of Agreement for a Shareholder’s Agreement for use in Australia
Law Compliance: This form complies with the state and territory laws of Australia
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
SIMPLE HEADS OF AGREEMENT
FOR A SHAREHOLDERS AGREEMENT

 

Relating to the Shareholders Agreement
For
_______________________________________ PTY Ltd.
 
 
1. Purpose of the Heads of Agreement:
The Heads of Agreement set out the intention of the Parties and the agreed key principles upon which the __________________________________[Name of company] (the “Company”) shall be incorporated and the contractual framework established.
 
In particular, the Heads of Agreement shall ensure that:
 
1.1.   The Company is established in accordance with the agreed principles set out below;
1.2.   in principle, the initial operation and initial funding of the Company is agreed;
1.3.   the mechanism for ongoing funding of the Company is, so far as practicable, agreed;
1.4.   the contractual framework reflects and is consistent with the agreed principles set out below;
1.5.   __________________________________[Name of Solicitors/Lawyers/Law firm] are instructed to draft the Memorandum and Articles of Association of the Company and a Member/Shareholders Agreement strictly in accordance with the Heads of Agreement.
 
 
2.    Definitions: [Set out meanings of distinct terms which are mentioned in the agreement]
 
3.   Parties : [The full name and address of each of the parties]
 
 
4.   Purpose of __________________________________[Name of company] :
The Company shall operate as __________________________[Mention business of the Company]. No other function shall be exercised by the Company, unless by unanimous agreement.
 
5.   Date for incorporation: [Mention Date]
 
6.   Members of __________________________________[Name of company] : To be limited to ____[Number of members] Members, unless unanimous agreement otherwise.
 
7.   Directors: [Mention the names of the directors; Read Instructions].
 
8.   Management of Business: [Read Instructions].
 
9.   Directors Voting Rights: [Mention voting rights].
 
10.   Rotation of Chairperson: The position of Chairperson will be elected annually, but there will be no rotation. [Sample Only].
 
11.   Vice Chairperson: [Mention if there shall be a Vice Chairman for those purposes where Chairperson is absent. If there is not one, how will a chair be elected for those meetings where the Chairperson is absent].  There will be no Vice Chairperson of the Company. Should the Chairperson not be present at a meeting within a specified time, then the Members present will elect a Chairperson for that meeting. That Chairperson will be empowered to exercise a second or casting vote.  [Sample Only].
 
12.   Casting Vote: The Chairperson shall be entitled to exercise a second or casting vote.
 
13.   Appointment of Proxies: A power to appoint proxies shall be provided.
 
14.   Frequency of Director Meetings:  The calling of meetings shall be at the discretion of the Directors of the Company.  However, as a matter of principle, it is agreed that the meetings of Directors shall comprise as a minimum:
 
14.1.   Setting Annual Budget and Performance Targets;
14.2.   Mid-year review of 1.
14.3.   Annual Financial Statements and Annual Performance/Audit Review.
 
15.   Quorum for Directors Meetings: No business shall be transacted unless there are at least ____[Number] Human Directors or ____[Number] nominated Director representatives present and entitled to vote.
 
16.   Employment of Staff: The Company shall appoint such, and as many, staff as it considers necessary for the proper performance of its obligations, having due regard to the contractual framework, and the views of the Board of Directors.
 
17.    Appointment of Secretary and Auditors to Company: [Mention who and how the Secretary and Financial Advisers shall be appointed and also their functions].
 
18.   Appointment of Bankers and Authorised Signatories: [Read Instructions]
 
 
19.   Other Officers of the Company (not being employees of the Company): It is agreed that the Company shall appoint:
19.1.   An external legal adviser to the Company,
19.2.    Such other officers that may be required for the effective and efficient operation of the Company. Such officers may, for example, include an internal audit function or HR support or procurement [Depending on business].  Such positions may be provided externally by way of a contract for services, or internally by an employee.
 
20.   Initial Capital : The initial capital shall be made in the following manner:
20.1.   Director 1: __%.
20.2.   Director 2: __%.
20.3.   Director 3: __%.
 
21.   Additional Capital: This has been decided that additional capital shall be infused in the Company by way of ____________________________________________[Mention the way] after _____[Number] years of operation.
 
22.   Financial formula: The dividends and losses shall be calculated as below:
____________________________________________[Mention the way
 
23.   Contractual Framework:  As a condition precedent to the establishment of the Company, the following shall be approved by the Board of Directors:
23.1.   Shareholders/Members Agreement.
23.2.   Memorandum and Articles of Association of the Company.
23.3.   Other Key principles set out
 
24.   Decisions requiring unanimous agreement: The following issues shall require the unanimous agreement of the Board of Directors:
24.1.   Admit a new member of the Company;
24.2.   Amend the agreed audit process formula.
24.3.   Amend the Memorandum and Articles of Association.
24.4.   Exercise of a power to diversify.
24.5.   Any merger.
24.6.   Any acquisition.
24.7.   Any amendment to the contractual framework.
 
25.   Dispute Provisions: A mechanism shall be established to enable Company deadlocks to be progressed, so far as is possible. This will link into dispute resolution.  The deadlock provision will encourage resolution through independent facilitation and review.  A mechanism to identify an independent person/body shall be incorporated into the contractual framework and the Company Memorandum and Articles of Association.
 
26.   Profit Policy: [Read Instructions]
 
27.   Termination/Notice:  Should the Company be wound up at any time in the future, then the assets (and liabilities) shall be shared in accordance with the agreed financial formula set out in the contractual framework.  Termination of the contractual framework will trigger termination of the Company.
 
28.   Withdrawal from Company:  A director/shareholder shall have the ability to withdraw from the Company.  This flexibility should be permitted, with certain safeguards agreed. An exit strategy shall be agreed between the Parties.  Exit provisions should be drafted accordingly, which shall provide for rights and liabilities to be realised.
 
29.   Remuneration: [State if remuneration will be provided]  The Company shall not pay any remuneration to any representative of a corporate Member/Director other than reasonable travel and subsidence allowances in accordance with an agreed policy and scheme adopted by the Company.  In respect to remuneration of officers in support of the Company, these services shall be provided on an agreed recharge basis.
 
30.   Financial Treatment: The annual accounts of the YHRCC shall be consolidated as appropriate.
 
31.   Disputes: A mechanism shall be established for the prompt, effective resolution of disputes, initially at a local level. Disputes should be resolved by external independent arbitration should a dispute not be resolved first at a local level. This will be linked to the deadlock provisions.
 
32.   Insurance/Indemnity: The Company shall arrange and maintain effective insurance provision in respect to its operation. [State if there are any Professional Indemnity and Directors Indemnity Insurance and the amounts].
 
33.   Power to Contract: The Company shall have a power to enter into contracts, subject to any restrictions set out in the contractual framework.
 
34.   Lease: The Company shall on ___________ enter into a lease of the premises known as ____________________. No lease shall be entered into on behalf of the Company until the Parties are satisfied that the terms of the lease are reasonable and that the Company possesses (or will possess) sufficient funds to meet all costs.
 
35.   Boiler plate clauses: To be agreed and shall include:
 
35.1.   Governing law/jurisdiction
35.2.   Notices
35.3.   Third Party Rights
 
It is agreed by the Parties that these Heads of Agreement set the principles upon which the Memorandum and Articles of Association and the contractual framework will be drafted, in readiness for the establishment of the Company in ,,.
 
Signed on behalf of:-
_________________________________ Date: ________________________
Name of Director 1
_________________________________ Date: _________________________
Name of Director 2
_________________________________ Date: _________________________
Name of Director 3
Number of Pages8
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#32597
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
SIMPLE HEADS OF AGREEMENT
FOR A SHAREHOLDERS AGREEMENT

 

Relating to the Shareholders Agreement
For
_______________________________________ PTY Ltd.
 
 
1. Purpose of the Heads of Agreement:
The Heads of Agreement set out the intention of the Parties and the agreed key principles upon which the __________________________________[Name of company] (the “Company”) shall be incorporated and the contractual framework established.
 
In particular, the Heads of Agreement shall ensure that:
 
1.1.   The Company is established in accordance with the agreed principles set out below;
1.2.   in principle, the initial operation and initial funding of the Company is agreed;
1.3.   the mechanism for ongoing funding of the Company is, so far as practicable, agreed;
1.4.   the contractual framework reflects and is consistent with the agreed principles set out below;
1.5.   __________________________________[Name of Solicitors/Lawyers/Law firm] are instructed to draft the Memorandum and Articles of Association of the Company and a Member/Shareholders Agreement strictly in accordance with the Heads of Agreement.
 
 
2.    Definitions: [Set out meanings of distinct terms which are mentioned in the agreement]
 
3.   Parties : [The full name and address of each of the parties]
 
 
4.   Purpose of __________________________________[Name of company] :
The Company shall operate as __________________________[Mention business of the Company]. No other function shall be exercised by the Company, unless by unanimous agreement.
 
5.   Date for incorporation: [Mention Date]
 
6.   Members of __________________________________[Name of company] : To be limited to ____[Number of members] Members, unless unanimous agreement otherwise.
 
7.   Directors: [Mention the names of the directors; Read Instructions].
 
8.   Management of Business: [Read Instructions].
 
9.   Directors Voting Rights: [Mention voting rights].
 
10.   Rotation of Chairperson: The position of Chairperson will be elected annually, but there will be no rotation. [Sample Only].
 
11.   Vice Chairperson: [Mention if there shall be a Vice Chairman for those purposes where Chairperson is absent. If there is not one, how will a chair be elected for those meetings where the Chairperson is absent].  There will be no Vice Chairperson of the Company. Should the Chairperson not be present at a meeting within a specified time, then the Members present will elect a Chairperson for that meeting. That Chairperson will be empowered to exercise a second or casting vote.  [Sample Only].
 
12.   Casting Vote: The Chairperson shall be entitled to exercise a second or casting vote.
 
13.   Appointment of Proxies: A power to appoint proxies shall be provided.
 
14.   Frequency of Director Meetings:  The calling of meetings shall be at the discretion of the Directors of the Company.  However, as a matter of principle, it is agreed that the meetings of Directors shall comprise as a minimum:
 
14.1.   Setting Annual Budget and Performance Targets;
14.2.   Mid-year review of 1.
14.3.   Annual Financial Statements and Annual Performance/Audit Review.
 
15.   Quorum for Directors Meetings: No business shall be transacted unless there are at least ____[Number] Human Directors or ____[Number] nominated Director representatives present and entitled to vote.
 
16.   Employment of Staff: The Company shall appoint such, and as many, staff as it considers necessary for the proper performance of its obligations, having due regard to the contractual framework, and the views of the Board of Directors.
 
17.    Appointment of Secretary and Auditors to Company: [Mention who and how the Secretary and Financial Advisers shall be appointed and also their functions].
 
18.   Appointment of Bankers and Authorised Signatories: [Read Instructions]
 
 
19.   Other Officers of the Company (not being employees of the Company): It is agreed that the Company shall appoint:
19.1.   An external legal adviser to the Company,
19.2.    Such other officers that may be required for the effective and efficient operation of the Company. Such officers may, for example, include an internal audit function or HR support or procurement [Depending on business].  Such positions may be provided externally by way of a contract for services, or internally by an employee.
 
20.   Initial Capital : The initial capital shall be made in the following manner:
20.1.   Director 1: __%.
20.2.   Director 2: __%.
20.3.   Director 3: __%.
 
21.   Additional Capital: This has been decided that additional capital shall be infused in the Company by way of ____________________________________________[Mention the way] after _____[Number] years of operation.
 
22.   Financial formula: The dividends and losses shall be calculated as below:
____________________________________________[Mention the way
 
23.   Contractual Framework:  As a condition precedent to the establishment of the Company, the following shall be approved by the Board of Directors:
23.1.   Shareholders/Members Agreement.
23.2.   Memorandum and Articles of Association of the Company.
23.3.   Other Key principles set out
 
24.   Decisions requiring unanimous agreement: The following issues shall require the unanimous agreement of the Board of Directors:
24.1.   Admit a new member of the Company;
24.2.   Amend the agreed audit process formula.
24.3.   Amend the Memorandum and Articles of Association.
24.4.   Exercise of a power to diversify.
24.5.   Any merger.
24.6.   Any acquisition.
24.7.   Any amendment to the contractual framework.
 
25.   Dispute Provisions: A mechanism shall be established to enable Company deadlocks to be progressed, so far as is possible. This will link into dispute resolution.  The deadlock provision will encourage resolution through independent facilitation and review.  A mechanism to identify an independent person/body shall be incorporated into the contractual framework and the Company Memorandum and Articles of Association.
 
26.   Profit Policy: [Read Instructions]
 
27.   Termination/Notice:  Should the Company be wound up at any time in the future, then the assets (and liabilities) shall be shared in accordance with the agreed financial formula set out in the contractual framework.  Termination of the contractual framework will trigger termination of the Company.
 
28.   Withdrawal from Company:  A director/shareholder shall have the ability to withdraw from the Company.  This flexibility should be permitted, with certain safeguards agreed. An exit strategy shall be agreed between the Parties.  Exit provisions should be drafted accordingly, which shall provide for rights and liabilities to be realised.
 
29.   Remuneration: [State if remuneration will be provided]  The Company shall not pay any remuneration to any representative of a corporate Member/Director other than reasonable travel and subsidence allowances in accordance with an agreed policy and scheme adopted by the Company.  In respect to remuneration of officers in support of the Company, these services shall be provided on an agreed recharge basis.
 
30.   Financial Treatment: The annual accounts of the YHRCC shall be consolidated as appropriate.
 
31.   Disputes: A mechanism shall be established for the prompt, effective resolution of disputes, initially at a local level. Disputes should be resolved by external independent arbitration should a dispute not be resolved first at a local level. This will be linked to the deadlock provisions.
 
32.   Insurance/Indemnity: The Company shall arrange and maintain effective insurance provision in respect to its operation. [State if there are any Professional Indemnity and Directors Indemnity Insurance and the amounts].
 
33.   Power to Contract: The Company shall have a power to enter into contracts, subject to any restrictions set out in the contractual framework.
 
34.   Lease: The Company shall on ___________ enter into a lease of the premises known as ____________________. No lease shall be entered into on behalf of the Company until the Parties are satisfied that the terms of the lease are reasonable and that the Company possesses (or will possess) sufficient funds to meet all costs.
 
35.   Boiler plate clauses: To be agreed and shall include:
 
35.1.   Governing law/jurisdiction
35.2.   Notices
35.3.   Third Party Rights
 
It is agreed by the Parties that these Heads of Agreement set the principles upon which the Memorandum and Articles of Association and the contractual framework will be drafted, in readiness for the establishment of the Company in ,,.
 
Signed on behalf of:-
_________________________________ Date: ________________________
Name of Director 1
_________________________________ Date: _________________________
Name of Director 2
_________________________________ Date: _________________________
Name of Director 3
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