Somewhere near the bottom of most Australian term sheets sits a line that reads something like “customary investor consent rights / reserved matters”. It attracts far less negotiation than valuation or the liquidation preference, and it deserves far more. The schedule of reserved matters — usually the last schedule in the shareholders’ agreement — is where control of the company actually moves. The default position under the Corporations Act 2001 (Cth) is that the business of a company is managed by or under the direction of its directors (section 198A, a replaceable rule that almost every startup constitution restates). A consent schedule rewrites that default: for every listed matter, the board can no longer act alone. After the round closes, the practical question isn’t “who owns the company?” — it’s “who needs whose permission?”, the same test we’ve applied to term sheet power dynamics generally.
The Two Tiers: Board Matters and Shareholder Matters
Australian consent schedules almost always operate on two levels, and it matters which level a given decision sits on.
Board reserved matters require more than an ordinary board majority. The Australian Investment Council’s open-source seed templates (published by the AIC, formerly AVCAL — see our much older note on why the template shouldn’t be signed unread) have long called these “Critical Business Matters”, needing a “Required Resolution” of the board: in the AIC’s open-source Shareholder Agreement, a resolution of a supermajority of directors (the template’s bracketed suggestion is 75%) which must include the investor-appointed director. Read that proviso twice. On a three- or five-person board, a 75% threshold that must include the investor director is a personal veto for the investor’s nominee, dressed as a majority requirement. Every board matter on the list is one the investor can block through a single seat — which is exactly why board composition after the round and the consent schedule have to be read together.
Shareholder reserved matters sit above the board entirely. The AIC’s earlier template put these to a contractually defined “Special Resolution” — approval by holders of 75% or more of the issued shares held by shareholders present and entitled to vote. (Note the label: it borrows the name of the Corporations Act’s special resolution but is a private, contractual threshold with its own counting rule.) When the AIC reissued its open-source seed suite in November 2023, the Shareholders Agreement became a Shareholders Deed and the drafting moved further in the investors’ direction: the updated deed frames the special shareholder approval threshold as a percentage of the seed preference shares — so founders holding ordinary shares don’t count towards the consent, and can’t block it, at all. From Series A onwards the same idea is standard: consent of an “Investor Majority” or “Preference Majority” — holders of more than a defined percentage (often 50% or a supermajority) of the preference shares, voting as a bloc. The definition is worth as much attention as the list. If “Investor Majority” aggregates all investors, no single fund can hold the company hostage; if each major investor (or each round of preference shares) gets its own consent right — often smuggled in through side letters — the company accumulates stacked vetoes with every raise, and by Series C needs four signatures to do anything on the list.
One tier exists whether or not you draft it: class rights. Under section 246B of the Corporations Act, if the constitution sets out a procedure for varying or cancelling the rights attached to a class of shares, those rights can be varied only under that procedure — which may be more or less protective than the statute. Only where the constitution is silent does the statutory default apply: a special resolution of the company plus either a special resolution of the affected class or the written consent of members holding at least 75% of the class’s votes. The harder statutory backstop is section 246D, which lets members with at least 10% of the votes in the class apply to the court, within a month, to set a variation aside. So preference shareholders have real protection over their own share rights before anything is drafted — but it’s the consent schedule that extends protection to decisions which don’t touch their share rights at all.
What the Standard Schedule Actually Covers
The list in the AIC’s open-source Shareholder Agreement is a fair map of the territory — and per the firms involved in the 2023 update, the current Shareholders Deed’s list is more extensive, not less. Board-level consent matters include: adopting or varying the business plan; hiring, firing or materially changing the terms of founders and executives above a total remuneration package threshold (the template’s bracketed placeholder is $100,000 a year — and remember a package crosses that line well before base salary does; negotiate it upwards, or your first senior engineer needs investor sign-off); adopting or varying the employee share plan; approving accounts and changing accounting policies; material changes to the nature of the business; issuing any securities (other than defined “Excluded Issues”); creating any class of securities senior to the investor’s preference shares; group restructures; dividends; appointing an external administrator or liquidator; material partnerships, JVs and technology licences; capital expenditure and borrowing above dollar thresholds; granting security over company assets; and any sale of the main undertaking or the company’s intellectual property. Shareholder-level matters are shorter and more structural: varying share rights, amending the constitution, and non-arm’s-length related party transactions.
Three of these do most of the constraining in practice:
- The new-issue veto is a fundraising veto. If issuing securities is a reserved matter, your next round happens on terms your current investor will consent to. That’s the clause doing the work when an insider blocks a down round or conditions consent on their own participation — the anti-dilution clause gets the attention, but the consent right is the harder stop.
- The asset-sale and IP veto is an exit veto. Together with the security interest and borrowing restrictions, it means most acquisition structures and most venture debt need investor consent — quite apart from drag-along mechanics.
- The administration veto interacts badly with insolvency. More on that below.
The Legal Limits: Duties, Fetters and Oppression
Consent rights are contractual covenants — the company promises not to do listed things without consent — and they operate alongside, not above, the general law. Three doctrines set the boundaries.
First, directors can’t contract out of their duties. A shareholders’ agreement cannot validly require a director to vote as their appointing investor directs, because directors owe their duties (sections 180–184: care, good faith in the interests of the company, proper purpose) to the company, not to an appointor. The orthodox position on fettering comes from the High Court in Thorby v Goldberg [1964] HCA 41: directors may bind the company to future action if, at the time of contracting, they genuinely judge the transaction to be in the company’s interests — which is why a properly entered consent schedule is enforceable, but a nominee director who mechanically votes their fund’s ticket is exposed. The same logic protects founders in the other direction: an investor director who blocks a board matter must still be exercising their own judgment in the company’s interests, not just the fund’s.
Second, insolvency trumps the schedule. If the company is approaching insolvency, a contractual requirement for investor consent before appointing an administrator will not save directors from personal liability for insolvent trading under section 588G, and a director who trades on because consent to appoint couldn’t be obtained has a duties problem, not a defence. Well-drafted schedules carve out steps a director reasonably considers necessary to comply with the law.
Third, oppression polices abuse at both ends. The oppression remedy in section 232 turns on commercial unfairness, and courts have made clear that conduct which is strictly permitted by the documents can still be oppressive. A majority ramming through conduct the schedule was meant to prevent is the classic case, but a minority investor wielding a veto for a collateral purpose — starving the company of a needed raise to force better terms for itself — can also find its conduct scrutinised. Consent rights are protection, not a licence.
Negotiating the Schedule Before You Sign
In a priced Australian venture round the existence of a consent schedule is effectively a given (SAFE and convertible-note rounds usually defer it to the priced round that follows); its contents and mechanics are where the negotiation happens. Where founders should focus:
- Keep it structural, not operational. Vetoes over share issues, constitutional change, exits, debt and senior hires are market. Vetoes over ordinary-course contracts, small capex or individual hires below a realistic threshold turn a partnership into a reporting relationship. Push dollar thresholds to figures that match the post-round budget, and get the approved business plan and option pool expressly carved out.
- Aggregate the consent. One definition of Investor Majority across all preference shareholders, refreshed each round — not per-investor or per-round vetoes, and no expansion via side letters.
- Add fall-aways. Consent rights (like board seats and information rights) should lapse when a holder falls below a stated shareholding, and should not survive an IPO.
- Build in process. A deemed-consent mechanism — consent requests answered within, say, 10 business days or treated as approved (or at minimum escalated) — plus an obligation to act in good faith, prevents the schedule becoming a pocket veto by silence.
- Check the interaction set. The schedule has to reconcile with the constitution (they are different documents doing different jobs), with new investors acceding each round via deeds of accession, and with whatever the drag-along assumes can happen without consent.
The Bottom Line
Reserved matters are where the real post-round control settlement lives. The standard Australian schedule — critical business matters needing a board supermajority that includes the investor’s director, plus structural matters needing the consent of an Investor Majority or a defined supermajority of shareholders — is a reasonable bargain when it’s confined to genuinely structural decisions, aggregated across investors, and subject to fall-aways and a working consent process. It becomes a problem when it creeps into operations, stacks round on round, or hands a single small holder a veto over the company’s next raise. Founders should read the schedule the way their investors do: as the answer to the only governance question that matters — who needs whose permission?
This article is general information only, not legal advice — the right consent schedule depends on your cap table, your board structure and the round you’re raising. Viridian Lawyers advises Australian founders, startups and investors on term sheets, shareholders’ agreements and governance. If there’s a reserved matters schedule in front of you — on either side of the table — get in touch before you sign it.
