What is a deed of accession?

Sometimes called a 'deed of adherence', a deed of accession is a deed that binds a person to an existing shareholders agreement.

When are they used?

Where a shareholders agreement is in place, new shareholders will usually be required to sign a deed of accession before they can be registered as a shareholder.

By signing a deed of accession,  the new shareholder is bound by the same rules as the existing ones. It also ensures that the new shareholder receives the benefit of the rights given to the other shareholders under the shareholders agreement.

Why are they necessary?

A shareholders agreement is only binding on the people that sign it, or who agree to be bound by it. This is different to the company's constitution, which is automatically binding on all shareholders (new and existing) as a result of the Corporations Act. 

Download your free Shareholders Agreement Guide to learn more.

Does it have to be a deed?

Lawyers prepare deeds of accession as 'deeds', as opposed to 'agreements', to ensure they are enforceable. In essence,  the document will take a particular form and will need to be signed in a particular way.

This is because obligations in an 'agreement' will not be enforceable unless the person bound by them has given consideration to the other parties. The requirement for consideration does not apply to deeds.

Is there a standard form of deed of accession?

No, but they are fairly simple documents that tend to cover the same ground. There can be differences in the way they are prepared.

Sometimes they will be written as a deed poll, so that the only person signing it is the new shareholder. Other times they might require the other shareholders to sign, or require the company to sign on their behalf.

The basic concepts are:

• the new shareholder will agree to be bound by all of the obligations in the existing shareholders agreement; and
• the new shareholder will be able to enforce the terms of the shareholders agreement against the existing shareholders.

The precise form of the document will depend on the structure of your existing shareholders agreement. Sometimes the shareholders agreement will contain a deed of accession template in an appendix.

What to look for?

The deed of accession is likely to be a fairly simple document. It should address the basic points above. However your main point of focus is likely to be the shareholders agreement itself, as that is where your substantive rights and obligations will be found.

If you're an investor, there are a number of things you should consider before making your investment, as we explain here. Depending on the size and circumstances of your investment, it may be appropriate to change the shareholders agreement before signing up to it.