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Shareholder Decisions and Funding

Coronavirus and Shareholders

The current coronavirus outbreak may also have an impact on shareholder decision making and calls for additional shareholder funding injections into companies.

How shareholder decisions are made as well as shareholder obligations to the company, for example to provide additional funding through equity or debt, will largely be determined by the provisions of any shareholders’ agreement that the company has in place. Therefore, if a shareholders’ agreement is in place, this should be the first point of reference.

Common methods of dispute resolution in shareholders’ agreements include the chairman having a casting vote or the ability to exercise put and call options. However, shareholders cannot be obliged to make further investments into a company if there is no contractual obligation to do so. If you are a director as well as a shareholder, your obligations as a shareholder are not affected by virtue of your position as a director. However, as a director you must consider your duties and the position of the company which may impact how as a shareholder you decide to proceed.

If no shareholders’ agreement is in place, the parties may need to rely on the provisions of the company’s articles of association.

Due to the written resolution procedure for private companies, it should be relatively easy for shareholder decisions to be made. As most private limited companies use this procedure anyway, there should not be a change to this.

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