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JUL
20

What happens in Insolvency Litigation?

The current global economy's instability means that individuals and organisations have to be aware of insolvency procedures in relation to either their own business or the people that they deal with (including customers, clients and suppliers). Insolvency occurs when a business is no longer able to pay its creditors any debts when they are due. In this situation, the creditors will try to recover what is owed to them by starting court action. This can result in the company being wound up (ending all business affairs) and having its assets liquidated (sold off) to cover its debts. An insolvency practitioner is generally appointed to oversee the whole process. The purpose of insolvency proceedings is to produce the best possible outcome for the creditors that have amounts owing to them. However, there are also some measures that can be taken to protect the directors and shareholders of an insolvent company.

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69 Hits
MAR
27

How can Minority Shareholders Take Action?

Every shareholder has basic rights bestowed on them by the Companies Act 2006. But minority shareholders have limited control over the management of the company or how it distributes its profits. This does not mean, though, that they are completely powerless. A minority shareholder can take various actions to protect their interests, including through the courts. A major way to enhance the rights of minority shareholders is via the articles or shareholder agreements. To offer the most protection this should be done before the shares are acquired.

Enhancing Basic Shareholder Rights

The Companies Act 2006 details the basic rights of a shareholder, which are dependent on the percentage size of the shareholding, ranging between 5%, 10%, 25%, 50%, 75% and 90%. Minority shareholders’ rights can be offered increased protection by adapting the standard articles or shareholders' agreement, which have limited minority shareholder rights.

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494 Hits
MAR
27

The Advantages and Disadvantages of Share Capital

There are various ways to raise capital for a company. The company can use debt capital to fund a business (such as a bank loan) or it can raise equity capital by the sale of shares in the business. This can be more appealing and/or appropriate than other methods, but it raises further issues on the business that must be considered.

Advantages of Share Capital

One of the attractions of raising capital via the sale of shares is that the company does not have repayment requirements for the initial investment or for interest payments. This can make it more appealing than other forms, such as bank loans and bonds, that are debts of the company. Debts require the company to make payments at regular intervals in relation to interest, as well as eventually repaying the initial amount that was borrowed. Any shares sold can require a distribution of profits as a dividend but these can be halted if necessary. Therefore, the business is given more flexibility over its finances.

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8697 Hits
MAR
27

The Importance of Due Diligence and Disclosure

Why is due diligence and disclosure so important? The disclosure letter is one of the most significant documents in a sale of a business or shares and has major consequences for both the seller and the buyer. It has long-lasting importance to the deal and can have far-reaching consequences. Due diligence is assisting the buyer in determining that what they are actually buying is what they expect and at the same time protecting the seller from any future legal ramifications.

For the seller, correct due diligence and disclosure will give them valuable protection in the future if the buyer tries to bring a misrepresentation claim after the sale. For the buyer, due diligence and disclosure are vital and can either reassure the buyer about the key issues about the sale, or if a problem is revealed, can be used as a bargaining tool where the buyer can:

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218 Hits
MAR
27

Conflict of interest" in Relation to Directors' Duties under the Companies Act 2006

The law on conflicts of interest in relation to directors was codified in the Companies Act 2006. Under this legislation, directors must ensure they avoid situations where any interest that they have conflicts (or possibly conflicts) with the interests of the business.

Directors of a board have a duty to act objectively and make decisions that are based on the best interests of the business. Section 175 of the Act covers the duty to avoid a conflict of interest, and states that "a director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company". The duty applies in particular to the exploitation of any property, information or opportunity and it is immaterial whether or not the company could actually take advantage of this property, information or opportunity.

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163 Hits

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