May 19 2025 |
What are Agreements with Limiting Clauses?
Agreements with limiting clauses summarize the provisions that constrain certain rights of your company and/or new investors in case of a future transaction.
A critical company contract , these constraints or restrictions could be related to:
- Change of Control: Clauses that restrict change of ownership or management of your company
- Change of Business Operations: Clauses that restrict the ability of your company to engage in any business activity across any jurisdiction
- Change of License Ownership: Clauses thatrestrict the transfer of company operation licenses to third parties.
Why are agreements with limiting clauses important for business today?
Agreements with limiting clauses enable your company to:
- Mitigate the risks and liabilities of your company related to non-compliance of limitation clauses
- Restrict the transfer of ownership and control to third parties, including your competitors
- Comply with regulatory norms and registrations with various authorities.
Why is it important for an event tomorrow?
Agreements with limiting clauses are important for an event tomorrow, as they help:
- Evaluate the business activities that your company can undertake, across jurisdictions
- Make sound financial decisions by accounting for agreements that restrict the transfer of licenses post transaction
- Evaluate the limitations on issuance and transfer of your company’s shares
- Put in place the necessary processes and reviews for your company, to prevent any default or lawsuits
Pros of addressing agreements with limiting causes
- Determine the importance of various licenses in your day-to-day operations and your ability to transfer their ownership
- Evaluate the financial and legal consequences of any non-compliance with limitation clauses
- Safeguard the ownership and management of your company
- Assess the expenses for permits required to engage in a business activity across jurisdictions
- Assist in contracting with third parties as per the guidelines and avoid any defaults
Cons of not addressing this topic
- Increase in the financial cost and operational risk as strategies to replace non-transferable licenses are not formulated
- Increase in the risk of transferring your company’s ownership to competitors
- Disruption to your company’s business operations due to increased regulatory interventions and legal consequences
- Higher probability of third-party lawsuits
LEARN MORE ABOUT COMPANY CONTRACTS
- Asset Ownership Agreements
- Customer Agreements
- NDAs
- Commercial Property Leases
- Supplier Agreements
- Service Agreements
