Required consents: Overview, definition, and example
What are required consents?
Required consents refer to the approvals or permissions that must be obtained from one or more parties before a particular action, transaction, or agreement can proceed. These consents are often outlined in contracts, legal documents, or regulatory requirements, and are necessary for ensuring that the involved parties are in agreement or that the action complies with applicable laws or regulations. Required consents are typically sought in situations such as mergers, acquisitions, loans, or significant business decisions that affect the parties involved.
For example, a company may need to obtain the consent of its shareholders or board of directors before entering into a major contract or acquiring another company.
Why are required consents important?
Required consents are important because they ensure that necessary approvals are in place before actions are taken, reducing the risk of legal disputes or non-compliance with laws. These consents help protect the interests of all parties involved and ensure that the terms of agreements are valid and enforceable. In some cases, failing to obtain the required consents could invalidate a contract, trigger penalties, or result in financial or legal consequences.
For businesses, securing the required consents is a vital part of ensuring that decisions are legally sound and that all relevant parties are appropriately involved in or informed about the process.
Understanding required consents through an example
Imagine a business looking to sell a significant portion of its assets. The company’s contract with its investors may require that the investors consent to the sale before it can proceed. This consent ensures that the investors are in agreement with the decision and that their interests are considered before the transaction is finalized. Without obtaining the required consents, the business could face legal challenges or potential claims of breach of contract.
In another example, a company seeking a loan may need the consent of its board of directors to proceed with the loan application, as outlined in the company’s bylaws or lending agreement. Without this consent, the company may not be authorized to take on the debt.
An example of a required consents clause
Here’s how a required consents clause might look in a contract:
“The Parties agree that, prior to the execution of this Agreement, each Party shall obtain all required consents and approvals from [Insert Relevant Parties, e.g., shareholders, regulatory authorities, lenders, etc.]. These consents must be provided in writing and received by [Insert Date], and failure to obtain such consents shall render this Agreement null and void.”
Conclusion
Required consents are essential in many business transactions and agreements, ensuring that all necessary approvals are in place before actions or decisions are finalized. They provide a legal safeguard and ensure compliance with applicable laws, organizational rules, or regulatory requirements.
For businesses, understanding the importance of obtaining required consents helps mitigate risks and ensures that decisions are made in a legally compliant manner, protecting the interests of all parties involved.
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.