How To Remove A Shareholder From A Company In Australia

If your company is seeking to remove a shareholder or you wish to remove a shareholder as part of a Family Law Property Settlement, you must understand the circumstances in which a shareholder can be removed and the process you need to undertake. You should be across the detail your company’s constitution as this, in conjunction with the Corporations Act 2001, governs the internal management of the company.

This blog sets out the process you will need to follow if you want to remove a shareholder, once an agreement has been reached with the shareholder or in other circumstances such as when a shareholder is in default of a shareholders’ agreement. It is important that you receive solid legal advice in terms of for example, whether there has been a breach of the Shareholder’s Agreement and/ or Company constitution. The Shareholder’s Agreement generally outlines the process for buy-back or transfer of shares, the relevant time frames and often indicates whether shares must be offered to other shareholders. It is important to note that Shareholders, including minority shareholders, are subject to protections under the Corporations Act 2001.

This article is general in nature, and you must seek appropriate legal advice about your specific situation to make sure that you are complying with the relevant rules, regulations and Caselaw.

What Must You Do To Remove A Shareholder From A Company?

Once you have agreement from that Shareholder to remove or transfer shares from that Shareholder, then usually, to remove a shareholder from a Company, you will need to ensure that three key documents are drafted and finalised as follows:

1. A record of sale or disposal of the shares.
2. Minutes of meeting and a resolution to remove the shareholder from the registry.
3. In order to formally record the change you will be required to submit to ASIC, a Change of Details Form (known as a ‘Form 484’).

Record of Share Sale

If the share is sold, then as with any purchase of ‘property’, you must record the transaction details in writing in the form of a formal ‘receipt’ must record the transaction details. Your receipt of Share sale must include the following:

• Date of sale
• Sellers details
• Date of purchase
• Purchaser’s details
• Amount of shares sold
• Total price paid to seller
• Total sale price of shares
• Amount of shares bought

Both the seller and the purchaser must sign and date the receipt of Share sale.

NOTE:  Your company may incur ‘stamp duty’ fees on the transfer or sale of shares, depending on the state of registration.

Company Meeting Minutes: Recording the Share change

It is important to ensure that you keep an undisputed record of events. Therefore, to formalise the Share change, it is recommended that you hold a meeting and record minutes regarding the removal of the member and the terms of their removal.

Every change decided on in a company meeting must be documented as a resolution.  A Directors Resolution to Remove a Shareholder from the register is used to confirm and record the removal of a shareholder from a company. A Resolution to Remove a Shareholder is done in a meeting of the Directors of the company when a company decides to remove a shareholder from the register. A Resolution to Remove a Shareholder is also known as a Director’s Resolution or a Resolution to remove a shareholder from the register.

A Director’s Resolution to Remove a Shareholder from the Register must include:

• Details of the meeting where the decision to remove a Shareholder was made
• Details of the shareholder to be removed from the company
• Confirmation that ASIC will be notified of this change

You have 28 Days within which to notify ASIC of this change from the date the directors make the decision to remove a shareholder from the register. If you do not notify ASIC within this timeframe, fines will apply.

How Can You Lodge Your Change Of Company Details Form (Form 484)?

Companies have 2 options to submit the Change of Company Details Form (Form 484) to inform ASIC of the change regarding the removal of a shareholder:

1. You can submit through ASIC’s online portal via the company ‘Corporate Key’.
2. You can appoint a ‘registered agent’ who can submit the form on behalf of the Company.

Lodgement Of Your Form 484 Via Corporate Key

In order to lodge your Form 484 to inform ASIC of the removal of the Shareholder from the Register, you will need your Australian Company Number (ACN). The ACN is the unique number that was assigned to your company when your company was first registered.  You will also have been issued with the company’s Corporate Key. A Corporate key is used to keep your company information secure. Your company has only a single corporate key which comprises of unique 8-digit number.

What happens if you cannot find your Australian Company Number?

1. You can search for your Australian Company Number on ASIC’s company register. 
2. You can request a new key to be issued to the email address registered on the company’s records.

If you decide to lodge via the ASIC portal, and are going to tackle the Change of Company Details (Form 484) yourself then the following checklist may assist you.

Checklist for Completing your Form 484

Before you start make sure you have the following details to hand:

• Corporate Key
• Company Name
• Name of person lodging the form
• Postal address of person lodging the form
• Telephone number of person lodging the form
• Australian Company Number (ACN) or Australian Business Number (ABN)

About The Shareholder Being Removed

• Date of the change taking effect
• Share class affected
• The amount paid for the shares
• Amount of shares being removed
• If the shareholder being removed is an Individual:
  • Full name of person who is being removed
• If the shareholder being removed is a Company:
  • Company Name, ACN or ABN, Office address

For The Person or Company Who Is Being Assigned The Shares Of The Person Or Company Being Removed

• Date of the change taking effect
• Share class affected
• The amount paid for the shares
• Amount of shares being removed
• If they are an Individual:
  • Full name of person who is being removed
• If the shareholder being removed is a Company:
  • Company Name, ACN or ABN, Office address
• Whether the shares are held for the benefit of the entity that owns them or if the shares are held for the benefit of another entity (like a trust)

Lodgement via Registered Agent

If you choose to, you can appoint a registered agent to lodge Form 484 to notify ASIC of the Removal of a Shareholder from a Company. These agents are ASIC certified and they are responsible for completing documentation accurately. Generally, these ASIC Certified agents are commercial lawyers or financial accountants.

The following example demonstrates the process of Share Transfers in a commercial setting.

Case Study:

Company X Pty Ltd approached Anumis Legal for advice on whether Mr B was in breach of the Company Constitution and the Shareholders’ Agreement. Even though Mr B was a minority shareholder and he had certain protections under the Corporations Act 2001, it was found that he had been in clear breach of his employment agreement, the Shareholders’ Agreement, and the Company X Pty Ltd’s constitution. Mr B was appropriately notified according to the process set out in the Shareholders’ Agreement.

On termination of his employment at Company X Pty Ltd, the company secured Mr B’s agreement to transfer his 5 shares in Company X Pty Ltd back to Company X Pty Ltd in accordance with the existing Shareholders Agreement under a buy-back clause that gave Company X Pty Ltd the first right of refusal of Mr B’s shares in the event Mr B wished to divest himself of the shares.

The Company Secretary who held the Share Register, prepared a Share Transfer Form that authorised the transfer of Mr B’s shares back to Company X Pty Ltd. The Company Secretary recorded on the Share Register the cancellation of the Share Certificate that had been issued to Mr B. Then the Company Secretary issued a new Share Certificate showing Company X Pty Ltd holding the transferred shares. The Company Secretary then completed a Form 484 and, within 28 days, lodged the Change of Company Details form with ASIC via the ASIC Portal, using Company X Pty Ltd’s corporate key.

Are You Thinking Of Removing A Shareholder Or Transferring Shares?

If you are considering removing a shareholder, buying, or selling shares, drafting Shareholders’ Agreements or you have concerns or questions regarding the structure or restructure of your Company it is wise to seek advice before you make any decisions that will likely have legal as well as commercial implications. If you would like trustworthy legal advice and sound, commercial input, Anumis Legal offers expert commercial law guidance.

For your complimentary chat or to book an appointment so that we can advise you on your options regarding removing a Shareholder, Your Shareholders’  Agreements and securing your Commercial interests call Anumis Legal on 07 5455 6347 or book your free chat, now.