1 Flashcards
(18 cards)
Heads of Agreement
Records the main points on which buyer and seller have agreed & the basis on which they are prepared to proceed with the transaction.
May provide for an agreed period of exclusive negotiation.
Unintended to be legally binding
Confidentiality agreement
Specifies parties’ obligations in relation to the confidential info, procedures for handling it & remedies for breach
Due Diligence
The process by which detailed info about the target is obtained & assessed.
Helps the buyer decide whether it wants to proceed with the purchase, and if so, at what price and what terms
Due diligence report highlights the main areas of risk and how such risks may be minimised by the inclusion of appropriate terms in the sale & purchase agreement
Contract
Once parties are ready to commit contractually, they will enter into a sale & purchase agreement
Disclosure Letter
Prepared by seller’s solicitors. Incorporates a disclaimer that all info has. been provided by the client, that the lawyers accept no responsibility for its contents.
Has bearing on seller’s potential liability
When does completion take place?
Immediately after sale and purchase agreement has been signed
Completion
Title to assets subject to acquisition formally transferred by seller to buyer (in exchange for buyer providing purchase price / consideration)
share sale- stock transfer forms & completion BM
asset sale - individual assets transferred in the appropriate manner
Post-completion
stock transfer forms are duly stamped
internal registers of target co are duly updated
appropriate registrations at LR
further steps to incorporate acquired assets / co into existing business organisation (changes to constitution of target, transfer of ownership or licences re particular assets)
Why would a seller want buyer to enter into a confidentiality agreement?
Buyer may be a competitor - seller might be wary of revealing info such as customer lists /important contracts
What terms will a confidentiality agreement generally include?
a) definition of confidential info
b) obligation on the buyer not to disclose or use such info except for authorised (defined) purposes in connection with the acquisition
c) undertaking by buyer to return or destroy such info (including copies) if the acquisition does not proceed.
d) agreement that parties will not without the written consent of the other party, make any announcement or disclosure that negotiations are taking place
purpose of completion accounts
where price was calculated on net assets/profits, the figure may be out of date -> adjustment on price
how can an acquisition be broken up
pre contract
contract
pre completion
completion
post completion
tax covenant
seller agrees to indemnify the buyer for any tax costs occurring prior to sale
why might there be a gap between completion and pre completion
parties enter into the spa with completion conditional upon the happening of certain events
how should a HOT be marked if it is not to be legally binding?
subject to contract
purpose of exclusivity clause
target reluctant to spend time and money unless it is granted exclusive bargaining rights for a certain period
what did walford v miles say re lock out (exclusivity clauses(
enforceable provided it is sufficiently certain
what does walford v miles say about lock in (good faith) clauses
unenforceable due to lack of certainty unless the term is objectively ascertainable
