Unitholders Agreement

Unitholders Agreement

Bringing on investors in the form of unitholders is a major milestone for a growing company; but it can also be a complex, intricate business arrangement.

Our do-it-yourself document generator tool makes it straightforward and fast. In less than 20 minutes you’ll have a custom, legally binding Unitholders Agreement that clearly defines the relationship between your business and its investors.
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Unitholders Agreement

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When you’re done, print or download a PDF versions for you to review, customise or sign. 

What is a Unitholders Agreement?

A Unitholders Agreement outlines the specific rights of an investor, known as a unitholder, who owns one or more unit, or share, in a unit trust.

This document formalises the relationship between a trust and its investors, and can help in the event of a dispute by clearly outlining what the parties agreed to.

Our document generator creates a top-tier, custom agreement that automatically adapts to govern shares or securities issued by a company or units of a unit trust. It has been meticulously drafted to standards that meet and sometimes exceed those of the largest Australian and international law firms. 

This agreement gives you full control over how important decisions of the business will be made. It offers a comprehensive range of reserved matters and flexibility for each as to whether majority or unanimous approval of the key Unitholders will be required.

When should I use it?

The Unitholders Agreement should be used if you would like to lay down the rules and document the relationship between the unitholders of a unit trust.

What topics does the Unitholders Agreement cover?

  • Definitions and interpretation
  • Operation of the business
  • Directors and the board
  • Board meetings
  • Duties of directors
  • General meetings
  • Issue of new units
  • Transfers and restrictions on parties
  • Insurance
  • Confidentiality
  • Contracts, transactions and conflict of interests
  • Commencement and termination
  • Amendment
  • Notices
  • Relationship of parties
  • Assignment
  • Waiver or variation of rights
  • Powers, rights and remedies
  • Entire agreement and understanding
  • Governing law and jurisdiction

What are the main decisions I need to make in creating a Unitholders Agreement?

  • How do you want to structure the Unit trust? This document can be adapted for use for a wide variety of corporate structures and purposes. 
  • Who are the key security holders and what are their powers? These are significant security holders that have important rights.
  • The unit trust cannot undertake certain actions without the prior written approval of all, or a majority of, the Key Securityholders. You can choose which actions require unanimous VS majority approval.
  • How are you going to calculate voting power? At a given moment in time, the voting power of the securityholders can be calculated in one of two ways – either:
    1. (Typical approach – actual voting rights only)  by reference only to the votes that are actually capable of being cast at that time or
    2. (Alternative approach – notional voting rights on a fully-diluted basis)  by reference to the votes that would be capable of being cast if all of the outstanding options, convertible notes and other similar rights to acquire voting securities were immediately exercised.
  • What business are you operating? This agreement will include the description of the business that you are operating to give context in drafting the document.
  • What is the role and responsibilities of the Board of Directors at your company? This would include their obligations and powers as well as their voting arrangements and the frequency of board meetings.
  • What are the classes of units you would like to issue and the funding requirements for Unitholders? You must take into account: 
    1. The types of units you would like to issue and the rights that go with them 
    2. How many units you’re issuing
    3. The value of each unit
    4. How they will be paid
  • How would you like to approach and resolve disputes? There are several approaches that can be taken when disputes arise, this agreement will take you through the various options such as mediation and arbitration and the procedures that should be followed by all parties involved

What other names does Unitholders Agreement go by?

A Unit holder’s Agreement is also known as: 

  • Unit Trust Holders Deed
  • Unit Trust Members Agreement
  • Unit Trust Holders Agreement
  • Unit Trust Members Agreement
  • Unit Trust Agreement

Frequently Asked Questions

The parties involved are the unit trust and its unitholders

If you are a unitholder in a trust that holds assets such as a business (it may be your business), you should have a unitholder agreement. 

You are not legally required to have one, but it is advisable from a business perspective to execute your unitholder agreement when you are setting up your trust, before any disputes can occur. 

Unitholder agreements are quick and simple to execute, cost-effective, and offer great protection.

The agreement also covers what steps to take when a dispute arises, and the roles and responsibilities of all the parties involved.

  1. It will prevent misunderstandings which may result in expensive litigation.

The agreement clarifies unitholders’ expectations of one another and help avoid misunderstandings and disputes from occurring later on. Obtaining individual legal advice to explain the unitholder agreement prior to unitholders’ signing the agreement further elucidates the governing rules contained in the agreement.

  1. It sets clear rules for unitholder voting rights, fixed claims to income, and unitholder ability to sell their units.

Having these rights clarified in a legal document helps if there is a misunderstanding or dispute later on.

In relation to selling units, as the exiting unitholder may have voting rights, most unitholder agreements include a clause ensuring the exiting unitholder gives other unitholders a chance to purchase their units (at a set or market price) prior to offering them for sale to outside parties.

Drag along/tag along clauses are  included and require minority unitholders to agree if the majority unitholders want to sell to a third party purchaser.

  1. It will include alternative dispute resolution clauses for unitholders and a framework for resolving disputes.

This is useful in case there is ever a deadlock between unitholders during a meeting, or an issue that has to be resolved immediately so as not to affect the operation of the trust and its holdings.

  1. It will address the potential risk of one unitholder putting their personal interests ahead of the unit trusts’ investment.

Non-competition clauses are often included to prevent unitholders from commencing a competing business or development that has potential to reduce the unit trusts’ business/investment value.

The agreement will require unitholders to declare any conflicts of interests, and ensure confidentiality is maintained at all times – unitholders will be prohibited from disclosing details of the trusts’ activity to outsiders.

  1. It will prescribe how units will be issued, valued and transferred.
  2. It will detail the circumstances when one owner may be forced out by the other owners.

Ensuring that process will be undertaken in a fair and legal way for all involved, and without the need for Court intervention.

This agreement will govern the composition of the board of directors of the trustee company, but will not regulate the ownership of shares in the trustee company in detail. 

If you want to regulate the ownership of shares in the trustee company in detail, then you will need to either use this form to create a separate shareholders’ agreement for the trustee company, or obtain legal advice.

This agreement assumes there is a trust deed constituting the unit trust that contains provisions governing the unit trust along the lines of a company’s constitution.  

If you are concerned that your trust deed may be deficient, please obtain legal advice.

If shares in the trustee company and units in the unit trust will always be held in the same proportions, you can include a clause to that effect in this agreement.

Yes. This agreement becomes legally binding on all parties involved once it is signed.

When a Unit Trust is registered and all parties are fully committed. This agreement ensures everybody is aware of the direction, structure and responsibilities of each Unitholderand knows the process for dispute resolution.

Yes. These requirements are outlined in the Corporations Act 2001.

Drag along and tag along provisions allow majority unitholders to require the minority unitholders to sell their shares. This often happens when a Unit Trust is being taken over by another.

A drag along tag along provision will “drag along” the minority unitholders whilst the majority unitholders are in the process of selling the underlying asset/business and dissolving the unit trust, requiring minority unitholders to sell their units in the process. 

Tag along provisions will allow other security holders to “tag along” and require the buyer to make an offer to buy their securities when an offer is made that fulfills the set out criteria.

Drag along and tag along provisions are  included in this document.

  • Applicant details
  • Unit Trust details (Name, Place of Business)
  • Director details
  • Type and number of units being offered 
  • Fundraising Requirements for Unitholders
  • Types of Insurance wanted
  • Leaver provisions
  • Transfer of Units provisions
  • Choice of Governing Law
  • Dispute Resolution choices
  • Board of Directors structure, powers and voting rights.

There are several signing options available. How you sign largely depends on where the parties are located and if they will attend signing together. You can print on paper and sign, or use electronic signature tools such as Docusign or Hellosign.

This document can help you issue a wide variety of securities or units.

If you need a hand, we’ve got your back. Should you need any assistance please contact us directly, we are always happy to help.

If you have any questions or are uncertain about any aspect of the document, please do not sign it or use it. Contact us directly and we will be happy to assist.

Absolutely! Get in touch with us and we can provide a fixed-fee price to review it.

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Not quite right? Looking for something else?

What other documents may I need?

If you’re interested in a Unit holder’s Agreement you might also need to think about:

  • Company Constitution — A company constitution contains a lot of the relevant information needed like the company registration details.
  • Deed of accession to a Unit holder’s agreement — The information here is relevant to determine the types of units offered.
  • Securities Issuance Pack — This pack is vital as it includes resolutions of the director(s) for the issue of the units, an application form for the units, as well as a ‘unit certificates’ for officially issuing the unit.

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