Unitholders Agreement

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.

2. 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.

3. 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.

4. 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.

5. It will prescribe how units will be issued, valued and transferred.
6. 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.