PARTNERSHIP NEWS
Understanding director duties key to good governance As agribusiness has become more sophisticated, it has also become more complex. What were once simple family businesses are often now corporate structures, triggering the need to understand corporate governance and what each individual’s duties and liabilities are.
You should also make sure that if
this; whether a stake can be sold to
your company has more than one
a third party, the other shareholders
shareholder you have an effective
buy them out, or if certain assets
shareholders’ agreement in place
are sold to facilitate an exit.
As a first pointer, for everyone’s sanity, save business for your director and shareholder meetings, not for Sunday dinner. When working together as a family it can be hard to separate work and family time. However, it can be critical for the success of your business to do so. The growth of business has also meant increased ability for business holders to easily set up a company online. Many do this without a second thought as to what their duties will be as a director, or indeed how to be a good director of a company. There are many organisations who provide training as well as online resources that support directors and trustees to fully understand their role and responsibilities.
to govern how your business operates – even if shareholders are family members. When drafting
in the shareholders’ agreement is
these agreements there are three
around succession planning. To ensure
areas of key significance:
that everyone is on the same page and
• It is critical to agree upon how
that there is agreement on how family
directors are appointed. Otherwise,
succession will work, the younger
this is decided in accordance with
generation can be granted an option to
the Companies Act, which may not
buy out the parents’ shares over time,
be appropriate for your business.
on certain circumstances being met.
• What actions cannot be carried out without the consent of all
Time and again we see clients fall
shareholders, or a certain threshold
short of understanding their duties
of shareholders. We would usually
as a director or the implications of
advise that key matters affecting
not having a proper shareholders’
the direction of the business need
agreement in place and it can cause
this higher threshold of consent. • How will each party exit the business? Not everyone will wish to exit at exactly the same time and it is imperative that the agreement has a mechanism to accommodate
Governance isn't a matter for the dinner table.
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Another area that can be great to cover
significant stress. We are always happy to discuss these matters and to provide guidance. Article supplied by Phoebe Davies, a partner at Wynn Williams specialising in corporate and commercial law, with specialist knowledge in the agribusiness sector.
We are delighted to partner with Farmlands in offering all Shareholders 15 minutes free advice over the phone, and a 7.5% discount on all legal fees. Simply call us on 09 300 2600 (North Island) or 03 379 7622 (South Island) or visit www.wynnwilliams.co.nz/farmlands for more details.
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