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Silent Shareholder Agreement

Silent Shareholder Agreement Template for Australia

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Key Requirements PROMPT example:

Silent Shareholder Agreement

"I need a Silent Shareholder Agreement for my Australian tech startup, where an investor will contribute AUD 500,000 for a 15% stake, with quarterly financial reporting requirements and a planned exit option by January 2025."

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Document background
The Silent Shareholder Agreement is essential for businesses seeking passive investment while maintaining operational control. This document is particularly relevant in the Australian business context where companies want to raise capital without diluting management control. The agreement carefully balances the silent shareholder's right to financial returns with their non-participation in business operations, complying with Australian corporate law requirements. It includes comprehensive provisions for investment terms, profit distribution, information rights, and exit mechanisms, while addressing key legal considerations under the Corporations Act 2001 and state-specific regulations. The document is commonly used in private companies, startups, and family businesses where silent investors want to participate in business growth without assuming management responsibilities.
Suggested Sections

1. Parties: Identification of the Company, existing shareholders, and the silent shareholder

2. Background: Context of the agreement, including company status and purpose of the silent investment

3. Definitions and Interpretation: Key terms used throughout the agreement and rules for interpretation

4. Investment Terms: Details of the silent shareholder's investment amount, form of investment, and timing

5. Shares and Shareholding: Number and class of shares, percentage ownership, and share certificate details

6. Rights and Limitations: Specific rights granted to and limitations placed on the silent shareholder

7. Profit Distribution: Terms for dividend payments, profit sharing, and distribution priorities

8. Non-Participation in Management: Express provisions regarding non-involvement in company management and operations

9. Information Rights: Silent shareholder's rights to receive financial reports and company information

10. Confidentiality: Obligations regarding confidential information and trade secrets

11. Transfer Restrictions: Limitations on transfer of shares and right of first refusal provisions

12. Exit Provisions: Terms for exit including put/call options, drag-along and tag-along rights

13. Duration and Termination: Term of the agreement and circumstances for termination

14. Dispute Resolution: Procedures for resolving disputes between parties

15. General Provisions: Standard boilerplate clauses including notices, amendments, and governing law

Optional Sections

1. Pre-emptive Rights: Detailed provisions for share transfers when some shareholders wish to maintain closer control

2. Tax Provisions: Specific tax treatment and obligations, particularly relevant for complex investment structures

3. Anti-dilution Protection: Protection against share dilution, important for larger investments

4. Board Observer Rights: Rights to appoint a non-voting board observer, useful for larger silent investments

5. Warranties and Representations: Additional assurances about company status and operations, important for significant investments

6. Change of Control Provisions: Specific rights in case of company sale or major ownership changes

7. Intellectual Property Rights: Specific provisions regarding IP ownership and rights, relevant for technology companies

8. Compliance with Shareholders Agreement: Interface with existing shareholders agreement, if applicable

Suggested Schedules

1. Schedule 1 - Company Details: Details of the company including share capital structure and existing shareholders

2. Schedule 2 - Investment Details: Specific details of the investment amount, payment terms, and share allocation

3. Schedule 3 - Calculation of Returns: Formula and methods for calculating profit share or investment returns

4. Schedule 4 - Information Rights: Details of financial and other information to be provided to silent shareholder

5. Schedule 5 - Transfer Procedures: Detailed procedures for any permitted share transfers

6. Appendix A - Share Certificate: Pro forma share certificate

7. Appendix B - Deed of Accession: Template deed for new shareholders to join the agreement

8. Appendix C - Confidentiality Agreement: Detailed confidentiality terms and obligations

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions


















































Clauses



































Relevant Industries

Technology and Startups

Professional Services

Manufacturing

Retail and Consumer Goods

Real Estate and Property Development

Healthcare and Medical Services

Financial Services

Hospitality and Tourism

Agriculture and Farming

Construction and Engineering

Media and Entertainment

Education and Training

Relevant Teams

Legal

Finance

Corporate Governance

Investment

Executive Leadership

Board of Directors

Company Secretariat

Risk Management

Compliance

Business Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Director

Company Secretary

Corporate Lawyer

Investment Manager

Business Development Manager

Private Equity Manager

Venture Capitalist

Financial Controller

Legal Counsel

Managing Director

Board Member

Investment Advisor

Business Owner

Startup Founder

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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