PA LAW · ARTICLES · BUSINESS & COMMERCIAL

Author: Manal Amro, Principal Solicitor, PA Law Pty Ltd
Last reviewed: 15 October 2026

Starting a business with a friend, relative or colleague can feel straightforward: each person owns half, contributes to the business and shares in its success. The difficult questions often emerge later. What if one owner works longer hours? What if the company needs money that only one person can provide? What if one wants to expand and the other wants to sell?

This guide expands on PA Law’s 50/50 business ownership video. It explains what to discuss before signing a 50/50 shareholders agreement for an Australian company, including a business in South Australia. If you operate through a partnership or trust, different documents may be needed.

Does 50/50 ownership mean equal control?

Holding half the shares does not automatically give you half of every management decision, a salary or access to half the company’s bank balance. Share rights can differ, and company assets belong to the company. Directors and shareholders also have different roles. ^[1]

A shareholders agreement records arrangements between its parties. The company’s constitution and any applicable replaceable rules also govern how it operates. Review these documents together: signing an agreement does not itself amend the constitution or override mandatory law. ^[2]

1. Funding: what is each person contributing?

Before money changes hands, identify what each payment represents. Money paid for newly issued shares, money paid to buy an existing owner’s shares and money lent to the company have different purposes. The paperwork and accounting records should reflect the arrangement.

Your 50/50 shareholders agreement and supporting documents should record:

• Each person’s cash, equipment or other agreed contribution, and when it must be provided.
• Any shareholder loan, including interest, repayment timing and priority.
• How a future funding request is approved and whether further contributions are compulsory or voluntary.
• What happens if only one owner can contribute, including any proposed loan or issue of additional shares.

If extra shares may be issued, address the approval process, price and effect on voting power. Changes to the share structure also carry company record and ASIC notification requirements. ^[3]

2. Work and pay: what is expected of each owner?

A 50/50 investment can involve very different working arrangements. One owner may manage staff and customers full time while the other supplies capital and attends monthly meetings. Put those expectations into writing before either person feels the arrangement is unfair.

Set out responsibilities, expected availability, reporting and how remuneration is approved. Separate payment for work from a return on share ownership: salaries, director fees, dividends and loan repayments serve different purposes. Dividends are not an automatic right to withdraw company cash. ^[1]

Discuss extended leave, illness, reduced hours and retirement from an operational role. If stopping work is intended to trigger an offer to sell shares, the 50/50 shareholders agreement needs a clear process and suitable terms. Check that employment or service agreements support the same arrangements.

Question to resolve: If one owner stops working next month, what changes to their pay, responsibilities and shareholding?

3. Decisions: who can commit the company?

Agree which routine decisions can be delegated and which significant decisions require joint approval. A written authority schedule can help both owners and staff understand the limits.

Check the chair’s casting vote. The replaceable rules in sections 248G and 250E of the Corporations Act 2001 include casting votes for chairs of directors’ and members’ meetings respectively. Whether those rules apply to your company needs checking. Do not assume a 50/50 share split guarantees an equal veto. ^[4]

Also review meeting attendance requirements, director appointment rights, banking permissions and access to financial reports. Internal approval limits do not necessarily prevent a third party from enforcing a transaction, so obtain advice about how authority will work in practice.

4. Deadlock: what happens when you cannot agree?

A deadlock arises when a necessary decision cannot pass under the company’s voting arrangements. The agreement should define the decisions and circumstances that trigger its deadlock procedure, rather than treating every disagreement as a reason to end the business relationship.

A 50/50 shareholders agreement can set a staged process. Options to discuss with your solicitor include:

1. A written notice identifying the decision and each owner’s position.
2. A meeting within an agreed period, with the relevant financial information available.
3. Mediation if the owners cannot reach agreement.
4. A defined next step if mediation fails, such as a negotiated buyout, an agreed sale process or another tailored mechanism.

Decide how essential payments and existing operations will continue while the disagreement is addressed. Preserve access to urgent legal remedies where needed. Directors must still comply with their duties, including obligations concerning insolvent trading. ^[5]

Be cautious about a clause allowing one person to name a price and require the other to buy or sell at that price. Consider how it would operate if only one owner could raise finance. A process that appears even-handed on paper may produce a very different result in practice.

5. Exit: who buys the shares, at what price and when?

“We will agree on a fair price” leaves several important questions unanswered. Discuss voluntary departures, death, incapacity and serious breaches separately, because each event may need a different process.

Your exit provisions should address:

• Whether the continuing owner has a first opportunity to buy and when an outside sale is allowed.
• The valuation date, method and appointment of an independent valuer if needed.
• How debt, cash, shareholder loans and any proposed valuation discounts are treated.
• Payment timing, finance, instalment security and the consequences of default.
• Handover of records, systems and business information, and release from personal guarantees.

Agree what happens if the continuing owner cannot fund a purchase. If a buyout following death or incapacity is intended, coordinate the agreement with succession planning and any proposed insurance.

An arrangement between owners does not itself release a guarantor from obligations owed to a bank or landlord. Address the creditor’s requirements as part of the exit. A proposed company buyback also needs separate legal and tax consideration.

What should you take to your solicitor?

Bring the company constitution, share register, existing agreements, details of contributions and loans, and a short description of the owners’ intended roles. Include relevant leases, finance documents and guarantees.

Before the meeting, write down your answers to three practical scenarios: the company needs more money; one owner stops working; and both owners disagree about selling. Where your answers differ, you have identified an issue the agreement needs to resolve.

50/50 shareholders agreement FAQs

Is a 50/50 shareholders agreement compulsory?

It is not generally required merely because two people own equal shares. However, default company rules may not provide the funding, working arrangements or exit process the owners expect. A tailored agreement can address those gaps.

Is a shareholders agreement the same as a company constitution?

No. A constitution governs the company’s internal operation. A shareholders agreement records contractual arrangements between its parties, such as funding and exit terms. Review them together so their voting, transfer and other provisions work consistently. Neither removes mandatory legal obligations. ^[2]

Does a shareholder lose their shares if they stop working?

Stopping work does not, by itself, cancel share ownership. Check whether the agreement contains a valid transfer mechanism triggered by that event. Employment, directorship and share ownership are distinct, so changes to one role need to be considered separately from the others.

Can a 50% shareholder force the other owner to sell?

A 50% holding alone does not create a general right to force a sale. A compulsory transfer may depend on valid agreement provisions or a court order. Check the relevant trigger, procedure and legal position before taking action.

How should shares be valued when one owner leaves?

The agreement can specify a valuation method or a process for appointing an independent valuer. It should identify the valuation date, how company debt and shareholder loans are treated, and how payment will be funded. Agreeing on value does not ensure a buyer can pay it.

Will ASIC resolve a dispute between equal owners?

ASIC generally does not resolve private disputes between owners of small proprietary companies. It distinguishes those disputes from misconduct within its regulatory responsibilities. Owners may need legal advice, mediation or court proceedings. ^[6]

Can we put an agreement in place after trading has started?

Yes. Review the existing documents and agree the proposed terms, including any necessary company approvals or constitutional changes. It is usually easier to settle expectations while both owners are working cooperatively.

Watch the video: 50/50 Business Ownership — 5 Shareholders Agreement Checks

This article provides general information about Australian company arrangements and is not legal, financial or tax advice. The appropriate terms depend on your company, documents and circumstances.