This article deals with the general conditions and variants of a SPA, but is by no means exhaustive. Some transactions and companies from different industries require different conditions and are often the subject of extensive negotiations between the parties. This article does not take into account the laws of a particular jurisdiction, or antitrust or competition law considerations that may be relevant to certain M&A transactions. In addition, PPS may also be controlled or influenced by existing shareholder agreements between the shareholders of a target company. Investigations should be carried out to cover the authorised and issued share capital, including information on the classes of shares and the number of shares of each class, as well as on the names and addresses of all registered shareholders indicating the number of shares held, whether held economically or otherwise. When drafting a share purchase agreement, it is important to provide details about the shares to be sold, para. B example the type of actions. Common, Preferred, Voting, and Non-Voting are all terms that can be used to describe shares. Details of all pension plans, stock plans, insurance plans and other employee pension plans. The buyer wants the representatives and warranty catalog to cover as many issues as possible, while the seller would prefer to limit to none.
Therefore, this section of the share purchase agreement is usually subject to intensive negotiations. In some cases, a buyer may want the flexibility of indemnification as a non-exclusive remedy that allows them to pursue other remedies or remedies to ensure that it can be done in its entirety. This is desirable if there is a risk that the indemnification provisions will not adequately protect the buyer in the event of unforeseeable damage and allow him to use all the protective and legal remedies provided for by the applicable law, without being limited to the remedies provided for by the SPA. Sellers may prefer exclusive remedies because they believe that without them, a buyer could circumvent the negotiated terms and compromise the primary purpose of the indemnification provisions. Exclusive remedies may also serve as an upper limit for indemnification liability. An SPA usually contains language that indicates that the terms of the SPA itself, including its existence, are considered confidential information and cannot be disclosed to third parties. However, such language should include and explicitly refer to any prior non-disclosure agreement (“NDA”) entered into (and should have been concluded) between Buyer and Seller during an earlier stage of the transaction, such as the term sheet or SD phase, and emphasize that such agreement will remain in full force and effect until such agreement terminates or is superseded. Each NDA language in the SPA may reflect additions to previous NDAs and incorporate the language of the previous NDA into the SPA by reference, replace those previous NDAs in their entirety, or claim that only the language of the previous NDA that is incompatible with the SPA will be replaced. Earn-outs typically consist of conditional and additional payments that can be made upon completion of certain steps related to future performance and expire at a certain time. Earn-outs mitigate the acquisition risk for a buyer and offer a better price to the seller if they meet their earn-out goals. Earn-outs can be financial (for example. B, the achievement of future revenue targets) or non-financial (e.B.key.
will keep the target company`s customers after the transaction) and can help manage disagreements about the target`s value if, among other things: there is uncertainty about its future prospects, it is a start-up with limited financial results but has growth potential, or if the seller will continue to lead the business and the buyer wants to motivate the seller`s future performance. There are risks associated with misrepresentation of results or simply non-aligned accounting policies; Therefore, earn-out provisions should be carefully drafted and should include very specific milestones, a clear earn-out period, a clear formula or method for determining earn-out, a method to secure earn-out payment (such as an escrow account or guarantee), and earn-out-specific post-closing clauses. Thus, an earn-out can be considered as an additional payment for the achievement of the agreed goals after closing. To prevent the seller and management of the target company from affecting the company, a buyer will typically use pre-closing clauses to prohibit the target company, its shareholders, directors and management from doing the following: Shares (or shares) are units of ownership of a company that are divided among shareholders (also called shareholders). The National Venture Capital Association states that the main points of a stock purchase agreement are the names of the buyer and seller, as well as the price and number of shares. Pages of legal language often accompany these articles, which specify how the price is determined, how shares are paid and delivered, the transfer of ownership and expressly exempt buyers and sellers from any other liability to each other. Completion mechanisms can be difficult as the parties must agree on timelines, where to complete, what to deliver in the end. The latter generally includes all post-completion formalities (i.e., share transfer forms, share certificates, board approvals, and the corporation`s statutory books). The representations, guarantees and commitments made in an SPA are expected to last longer than the execution and delivery of the SPA and the closing of the transaction and thus extend beyond the closing of the transaction. It is possible that certain false statements and warranty violations may not be discovered until after completion. The persistence of representations, warranties and representations (as well as indemnification terms) beyond the closing of the transaction will protect the buyer if it receives less than it has negotiated. However, the parties should carefully consider the applicable law of the SPA to determine how that jurisdiction interprets and applies the limitation periods.
Some jurisdictions prohibit infringement claims that go beyond the court`s statute of limitations, even if the parties to an SPA expressly agree to survival language that allows a claim for infringement to extend beyond the court`s statute of limitations. If a corporation consists of several shareholders, there is usually a shareholders` agreement. These agreements set out the rights and obligations of shareholders. In most cases, they contain certain rights related to the resignation of a shareholder. If this is the case, lawyers must take these rights into account in the share purchase agreement of the transaction. It would be rare for a choice of law provision to be excluded from an SPA (or other cross-border agreement). The absence of a choice of law clause in an SPA would expose the parties to unnecessary costs and complex rules in determining which law to apply, including by examining where the parties are located and where their obligations must be fulfilled. In the context of cross-border mergers and acquisitions, failure to indicate which law governs the SPA could be a disaster when it comes to litigation, especially if the buyer is located in one jurisdiction and the seller is located in another jurisdiction with subsidiaries and assets in several other jurisdictions. Over the years, the scope of collateral that buyers need has steadily expanded, and modern stock purchase agreements are generally very extensive, much of it being in the nature of collateral. .
