Saturday, April 14, 2018

Why crucial agreements should not be postponed


Shareholders’ agreement

Our company is in the process of being formed. Is a shareholders’ agreement something we must put in place early on in the lifecycle of our company or can it be shelved until later?

The biggest problem with postponing the making of a shareholders’ agreement is that the personal interests, plans, dreams, hopes and aspirations of the shareholders may diverge over time, making it difficult to come to an understanding on the terms of the agreement later on in the lifecycle of your company. Putting in place a shareholders’ agreement early on in the lifecycle of the company is stress-free, inexpensive and fast compared with attempting to negotiate a settlement in the eventuality of a dispute amongst the shareholders and there’s no shareholders’ agreement to determine how the dispute will be settled.

Commercial agency

I act as an agent in Tanzania for an American-based medical devices manufacturer. Can the principal make direct sales into Tanzania regardless of my appointment as the agent?

Whether or not the principal is allowed to sell directly into Tanzania will depend on the terms of the contract you, as the agent, entered into with the principal. In the absence of a contract, the provisions set out under Part X (sections 134-189) of the Contracts Act, Cap 345 (R.E.2002) will apply. Unfortunately, those provisions are silent on agent’s right of recourse against the principal to obtain commission on the goods that the principal directly sells into Tanzania. However, you and the principal can agree to insert a clause on such a right in your contract.

E-mail communications

I run a project management consulting business through a single shareholder company as the sole shareholder and director. Many engagements with clients are agreed via e-mail. Although I do not have a company e-mail account, I have a Hotmail account. Must I add my company name on my e-mails to avoid personal liability?

In order to avoid personal liability, it is important to make it clear in e-mail and other types of correspondence that you are a director acting on behalf of the company, particularly when entering into engagements with clients. Always state your title, for instance, Director, in your sign off and include your company’s details in the footer to every email.

Company secretary

I am an engineer by profession and an old high school friend has invited me to take up the role of company secretary in his new business. The company will be utilizing the services of an external accountant. If I take up the role, will I have any legal responsibility for the preparation of company accounts?

Regrettably, many professionals believe that being appointed a company secretary carries little risk and few responsibilities. However, by virtue of the provisions the Companies Act, Cap 212 (R.E.2002), this is not the case. In the event that your relative’s company fails to comply with the requirements on accounting records, all the officers of the company commit an offence—and, of course, a company secretary is an officer of a company. Another point you and old high school friend might want to consider is that the Companies Act is not clear about the qualifications of a company secretary.

Going to court

I was involved in a road traffic accident just over six months ago now. At the time I did not pursue any claim because I felt that I was fine. The owner of the car that knocked me was not the one driving it, but his worker. Now however I feel constant pain in my neck which is interfering with my daily life. Is it too late to make a claim?

The Law of Limitation Act, Cap 89 (R.E.2002) specifies the time within which proceedings must be commenced to prevent the claim becoming time barred. If the limitation period has expired, the person you intend to sue (called, a defendant) will have a complete defense to your claim. In your specific accident case of personal injury, you must initiate your claim against the actors whose negligence concurred to cause your injury within two years of the date on which the accident occurred. You are within the time limit to commence a claim but as it can take some time to obtain a medical report, which is extremely important for your claim, it is advisable that you go to see your lawyer as soon as possible.