May 2, 2021

startup investments

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Should my company have a shareholder or security holder deed?

2 May 2021

When starting your business and looking at startup funding options, you may consider a shareholder's deed. 

Or, alternatively, you may consider a shareholder's deed if you have 2 or more shareholders onboard already.

More than likely, when you think of a legal document for shares you'll likely first think of shareholder agreement and probably not a security holder's deed.

So, what exactly is the difference between the two?

First, a shareholder’s deed, deals with exactly that - shares, and shares only.  

On the other hand, a security holder’s deed will cover shares as well as notes and options, so it’s the better choice if you think your company could have other security types other than shares down the track and for cashflow reasons, flexibility is a good thing when it comes to legal drafting.  

Even if your company ONLY has shares now, its good to plan ahead so you don’t need to re-draft your deed if other security types are added later on. 

About the author 

Vivian Michael

As founder and lawyer at Michael Law Group, Vivian advises Australia's top entrepreneurs on business and employment matters. Clients benefit from Vivian's commercially focussed and pragmatic legal advice, business experience, and commitment to deliver the best quality business legal services to her clients.

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