Necessary consents: Overview, definition, and example
What are necessary consents?
Necessary consents refer to the approvals, permissions, or authorizations required from relevant parties before certain actions or transactions can proceed. These consents are typically needed to ensure that the parties involved comply with legal, contractual, or regulatory requirements. Necessary consents can come from various sources, including government agencies, business partners, shareholders, or other stakeholders, depending on the nature of the decision or transaction.
For example, in a business acquisition, the buyer may need to obtain the consent of the target company's shareholders, or if a company is merging with another, it may need approval from regulatory bodies or a board of directors.
Why are necessary consents important?
Necessary consents are important because they ensure that actions are taken legally, ethically, and in accordance with the terms of existing agreements. Obtaining the proper consents protects parties from potential legal disputes, regulatory penalties, or breaches of contract. For businesses, understanding which consents are required before undertaking major decisions helps mitigate risks and avoid delays in transactions.
In transactions such as mergers, acquisitions, or financial agreements, securing the necessary consents is essential to ensure that the deal is legally sound and acceptable to all parties involved.
Understanding necessary consents through an example
Imagine a company, XYZ Corp., wants to sell a large portion of its assets to another company. Before proceeding, XYZ Corp. must obtain necessary consents from its board of directors, major shareholders, and possibly regulatory bodies to ensure the sale is legal and compliant with internal policies and external regulations. Failure to obtain these consents could result in the deal being delayed or invalidated.
In another example, a company may be required to seek consent from a landlord before making structural changes to a leased property. If the landlord’s consent is not obtained, the tenant may be in violation of the lease agreement.
An example of a necessary consents clause
Here’s how a clause like this might appear in a contract:
“The Parties agree that all necessary consents, including approvals from relevant shareholders, board members, and regulatory authorities, must be obtained before proceeding with this transaction.”
Conclusion
Necessary consents are approvals or permissions required to move forward with specific actions or transactions. They ensure compliance with legal, contractual, or regulatory obligations and help mitigate risks for businesses. By understanding and securing the necessary consents, businesses can protect themselves from potential issues and ensure that their decisions are legally sound.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.