This case shows the importance of a thorough due diligence process, even in the case of an accelerated sale. and also, from a sell-side perspective, the importance of well-formulated warranties and restrictions to protect the seller from claims after closing. A seller will generally try to limit the extent of its liability for warranties. The general principle is that a breach of a warranty obliges a seller to compensate the buyer for the damage suffered directly. This would generally be measured by a loss in the value of the stake. The most important documents are the share purchase agreement (in the case of a share sale) or the Asset Sale and Purchase Agreement (in the case of an asset transaction), the guarantees and indemnities it contains are a major concern for a seller. The sales contract sets out the agreed terms for the transaction and the mechanisms of the transaction (e.g.B. the parties involved, the amount to be paid, the date of completion and any necessary authorizations or authorizations before the completion of the contract). It usually contains a number of provisions relating to buyer protection, including: if the target company is part of a larger group, it can share assets (such as IT systems, property and insurance policies) with other members of the group.
Consider whether these agreements can be unraveled without incurling prohibitive costs or disruption to the target business. An agreement can be reached on how the assets will be distributed and shared after the sale is completed. The signing of the sales contract and the conclusion of the transaction are often done simultaneously, but a gap between them may be necessary if the closing conditions are to be met. For example, the forms of share purchase agreements used in England and Wales are largely similar to those in Ireland. As a rule, the share purchase agreement (SPA) is concluded between a buyer and a seller of the share capital of a target company. The seller`s parent company or an additional independent person may be required, as a party, to guarantee the guarantees and commitments made on behalf of the seller. The buyer will want to “come back” or in recourse against a company with the means to satisfy claims such as the parent company or any other essential business. Here, we consider the main legal factors from the perspective of a seller of an asset sale versus a stock sale. The base cost of shares or assets and the tax efficiency of whoever receives the consideration (you or your business) are tax factors for you as a seller. The main tax on buyers is stamp duty – which is 1% on shares or 2% on most assets. In El Makdessi v Cavendish Square Holdings BV and another  EWCA Civ 1539, the United Kingdom Court of Appeal held that the terms of a share purchase agreement provide that, if the seller breaches restrictive obligations, the buyer`s obligation to pay deferred consideration and that the buyer is entitled to acquire the remainder of the seller`s shares at a price, based on net asset value (and excluding good). were unenforceable penalties.
The case suggests that a prudent approach is necessary where a share buyer links the payment of deferred consideration to the seller`s compliance with non-compete or similar obligations after the closing of the transaction. Acquisitions are very business sensitive. Sign a confidentiality agreement (also known as a confidentiality agreement) at an early stage. This usually requires both parties to keep the agreement secret until it is officially announced and protect all information exchanged by the parties. . . .