COVID-19 has severely affected the economy. The significant economic uncertainty has affected business owners and partnerships. This calamitous situation has negatively impacted on staff, whether furlough has been enforced or if they have been laid off, or even if they are working and still on payroll, the uncertainty has affected absolutely everyone.
The government has promised to assist businesses in the UK in order to survive this catastrophic phase in our history. But still directors, officers and shareholders may be liable if they breach duties relating to care, diligence, and don’t act in the best interests of the company and staff. As hard as this may sound, shareholders are still under obligation towards their staff and the business.
We understand that it’s hard to make decisions, especially so swiftly as the coronavirus has struck so swiftly and the lockdown happened almost overnight. We have had to deal with reduced dividends or complete loss of business. But these decisions may impact on both staff and shareholders quite harshly. There are new laws and regulations to protect business owners at present. For instance, landlords cannot evict tenants because it was the government’s decision to shut the doors of non-essential shops, cafes, bars and restaurants.
One scenario shareholders may find themselves in, is challenging the competency of leadership. A shift in leadership could potentially raise disputes amongst the shareholders. Disputes such as contested share value may arise, leading to litigation cases. Some shareholders could exercise their right to buy or sell shares, which is a right incorporated in the shareholders agreement but this could also give way to litigation.
If you are concerned with what is covered in your company’s shareholders agreement and if you are covered for any eventuality, please give us a call. We’d like to hear from anyone concerned about the present situation and what rights they have in relation to their company’s shareholders agreement. SG
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