By Hayley Mauro
Wilson Browne Solicitors
WHEN setting up a company, cash flow and other commercial pressures inevitably take priority. This quite often results in the need to obtain legal advice and bespoke legal documents being overlooked until there is a problem and relationships sour. By such time, seeking to resolve the difficulties without bespoke Articles of Association and Service Agreements can be an extremely costly exercise, particularly in cases where the parties on an equal footing. For example, in the event of a subsequent disagreement and termination of a director’s employment contract on grounds of misconduct, the company can find itself in an untenable situation whereby the director cannot be removed, or be required to relinquish their shareholding in the company.
Throughout the life of a company, a multitude of issues can arise between its members and officers because of differences of opinion, claims that a party’s interests are being unfairly prejudiced, directors’ acting in breach of the fiduciary duties and interests to the company. A complete breakdown in trust and confidence leading to a deadlock scenario can arise, whereby the company is unable to continue to operate effectively and vital business decisions cannot be made to drive the business forward.
If matters cannot be resolved amicably, the parties may be left with no alternative but to petition the court for a remedy, be it the removal of a director, right to acquire the allotted shares, winding up the company, or obtaining a declaration to take direct action on behalf of the company. Seeking court intervention is an extremely costly exercise.
Bespoke agreements and articles can assist in creating party obligations and by tying the life of the various directorships, employment and shareholding agreements together.
Should a situation arise, it is advisable to seek legal advice early, particularly when attempting to manage the situation and seek an amicable resolution for all concerned.
If the various agreements and arrangements have not previously been formalised, the ideal time to review matters and do so is when everyone is still fully on board and happy with how the company is being run.
Call 0800 088 6004 for more details, email or visit www.wilsonbrowne.co.uk
