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.
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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
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
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
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