Many shareholders of a company enter into a shareholders’ agreement with each other as to how they will behave in respect of their company. However, the agreement is widely disregarded by many businesses as it is not a legal requirement. Some shareholders believe that nothing will go wrong in the future. Many shareholders consider an agreement unnecessary, as they could rely on their close friendship with other shareholders, to solve problems. Some shareholders also feel that if the provisions in an agreement, could also be included in the company’s articles of association, then why the need for a shareholders’ agreement? This article will explore what a shareholders’ agreement is and whether or not it is needed.
What is a Shareholders’ Agreement?
A shareholders’ agreement is a private contract between the shareholders of a company that creates legally binding obligations between shareholders. The agreement provides clarity on important matters that affect shareholders, such as their duties, and how disputes are to be resolved, for example. A shareholder does not have to enter into an agreement. If a shareholder enters into an agreement he must do so without compulsion. Agreements are not regulated by the Companies Act 2006, so there is no legal process under the CA 2006, to alter the agreement. Therefore, most shareholders’ agreements will normally state that all shareholders, who are a party to the contract, must give consent to amend it.
Do I Need a Shareholders’ Agreement?
Friendships with other shareholders could deteriorate without a well drafted agreement, resulting in expensive litigation. A minority shareholder can have more control in the running of a business, under an agreement, as all parties to the contract, must agree to an amendment. A shareholders’ agreement can include a shareholder’s personal rights which are contractually enforceable, for example, the right for a specified person to be appointed as a director. By contrast, if this right was included in the company’s articles, it would not be contractually enforceable under section 33 CA 2006. An agreement also allows for commercially sensitive information to be included, as it is a private document. The impact of Covid-19 has necessitated the need for a shareholders’ agreement. The pandemic has initiated changing circumstances for business owners, such as cash flow problems, a desperate need for investment, shareholders becoming incapacitated due to Covid-19. A shareholders’ agreement is essential as it can be tailored to suit the needs of the business and cover a myriad of situations.
A shareholders’ agreement is a crucial document that legally binds all parties and can avoid potential conflict between shareholders, especially as the company’s articles of association, do not provide adequate protection. Obtaining a bespoke shareholders’ agreement from MLS will ensure the effortless running of the business and provide it with the best chance to flourish financially. It is imperative that every company has a shareholders’ agreement, or an updated agreement, that grows in harmony with the business, and takes the impact of Covid-19 into account.
This article is for informational purposes only and does not constitute legal advice. Contact us today on 02144 478 730 to book your free, no obligation, consultation.
Author: Niresh NaidooRead More
Due to the outbreak of Covid-19, the Coronavirus Act 2020, provided tenants, in the rented sector, with protection from eviction, to pevent a homelessness crisis. Tenants received an extension to the notice periods, when a landlord tried to recover possession of their property. The Government also prevented evictions from being enforced by bailiffs. However,the ban on eviction enforcement in England came to an end on 31 May 2021. This article explores the ban being lifted and the impact of the ban being lifted.
Lifting of Eviction Ban
In England, bailiffs will be able to enforce evictions from 1 June 2021. However, if someone in the property, has Covid-19 symptoms, or is self-isolating, bailiffs will not be able to enforce evictions. Landlords will only need to give four months’ notice of eviction, as opposed to six months’ notice, that was required since the start of the pandemic. Subject to the Government’s roadmap, it is likely that from 1 October 2021, two months’ notice periods will return. Notice periods for serious cases will remain lower: domestic abuse (2 to 4 weeks’ notice), anti-social behaviour (immediate to 4 weeks’ notice), death of a tenant (2 months’ notice), false statement (2 to 4 weeks’ notice), 4 months’ or more accumulated rent arrears (4 weeks’ notice), breach of immigration rules (2 weeks’ notice). From 1 August, where there is less than 4 months’ unpaid rent, notice periods should reduce to 2 months’ notice.
Impact of the Ban being Lifted
Many councils are warning that the ban being lifted will result in a wave of homelessness, costing a potential £2.2 billion. A study by Shelter, found that 72% of private renters in England, are worried about losing their home, and are already cutting back on heating and food to pay rent. However, tenants still have access to the furlough scheme, and a £20.00 per week uplift in Universal Credit, which the Government has extended until 30 September 2021. Also, evictions will not be enforced if someone in the property has Covid-19 symptoms or is self-isolating. This caveat could prompt a tenant to feign Covid symptoms to prevent enforcement action from a bailiff, and stay in the property. Whilst the ban has been lifted, the ban has not been lifted completely.
The true impact of the ban being lifted is yet to be seen. It is clear that the narrative has been very tenant-centric but more consideration needs to be given to landlords. The Ministry of Housing, Communities and Local Government stated that 45% of private landlords own one property, and are extremely vulnerable to rent arrears. Landlords have outgoings, such as mortgages and bills. There needs to be a consideration of the need for landlords to access justice, and their financial plight, as a result of the Covid pandemic. Specialist legal advice from MLS will be needed by landlords, who seek to evict their tenants, as the eviction ban has not been lifted absolutely.
This article does not constitute legal advice. The law relating to landlord and tenant matters changes rapidly. Please ring us for an up to date legal advice on 01244 478 730