08 Apr 2021by tobiasschaller

Change Of Control Clause In Lease Agreement


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However, if the lease agreement contains a transfer provision providing that any change in the control of the tenant company is considered an assignment under the lease agreement, the transfer of 21% or more of the ownership of shares to Corporation A or Corporation B by Corporation B by Corporation B by Corporation B would be considered an assignment under the lease agreement, if the term “control” is considered to be 51% or more of a company`s voting right. The analysis of the lease transfer provisions in the context of a merger should not stop here. Even if a merger is not limited by the terms of the lease, if the stages of the merger involve the “movement” of the merged entity within its corporate structure or in that of another family of companies (as may be the case with a merger and acquisition), restrictions on the change of control could be triggered. For example, if the majority shareholders of the pre-merger of tenants become minority shareholders in the tenant merger, the amendment to the control provisions of the tenancy agreement could also apply. If you want to know how lexology can advance your content marketing strategy, please email enquiries@lexology.com. The leases of the most demanding landlords generally contain broad provisions that prohibit or contractually restrict the tenant`s ability to association without the landlord`s consent, in the same way that the assignment of the tenancy agreement is limited. Similarly, demanding tenants will strive to ensure that they have sufficient flexibility and exemptions from the lessor`s consent obligations to carry out the necessary restructurings. Such exceptions are often contingent on the lessor`s reasonable assurance that the financial obligations of the merged tenant and the continued management and quality of the business are not compromised. Thus, the parties will often include in the contracts amending clauses that resolve the issues of rights and reciprocal obligations of the parties in the event of a change in the ownership structure of one or both parties. Most of the time, these clauses contain provisions under which a change in one party`s ownership structure requires the agreement of the other party or authorizes the other party to terminate the contract prematurely. Such clauses are regularly included in agreements with banks and other financial institutions. Black and Decker were followed regularly.

The notable exception is the decision of the Saskatchewan Court of Queen`s Bench in Crescent Leaseholds Ltd. against Gerhard Horn Investments Ltd., [1983] 1 W.W.R. 182 (B.C.S.C) (Crescent Leaseholdshold). In rejecting the “flow confluence” theory defended by the Black-Decker Supreme Court and in defiance of Stare Decisis`s principle, the court found that a merger was contrary to a limitation of a lease prohibiting the transfer by law. Crescent Leaseholds has generally not been followed and it seems certain that the merger of a tenant with another company, without prohibition or limitation of mergers in the lease itself, will not in itself represent a delay under a provision of non-compliance with a tenancy agreement. Even in cases where a commercial distribution of rents prohibits the landlord from unduly refusing consent to a proposed assignment, the landlord`s consent generally remains conditional on certain conditions. These conditions generally include information about the proposed assignee and his use of the premises, copies of the proposed transferor`s annual accounts, payment of additional rent or guarantee where the lessor authorizes the transfer, the execution of a transfer and takeover agreement by the proposed assignee, and payment of the lessor`s legal fees as part of the document verification.

Categories: Allgemein