A typical stock purchase agreement addresses the following issues: A share purchase may be the easiest option because the only transfer of assets is the share capital of the target company. Therefore, the following applies to a share purchase: Legal due diligence is part of the due diligence phase prior to the submission of the firm offer. It is a comprehensive review of a company`s external and internal legal relationships. All essential contacts, such as supplier and customer agreements, employment contracts as well as ongoing disputes and litigation, are analysed in detail. In an asset purchase transaction, the buyer takes over the operations of the target company by acquiring a set of certain assets and rights, and sometimes assuming responsibility for certain liabilities that together constitute the target business. When buying assets, the parties can control what is transferred, which means that the buyer can select the assets or liabilities they want to acquire. When buying shares, the buyer does not have this luxury because the company owns all the assets. The buyer inherits the seller`s business, which means that he also inherits any problems (for example.B. unpaid tax bills) that exist at the time of the sale. In principle, a distinction should be made between the purchase of shares and the purchase of securities. An asset transaction involves the purchase or sale of some or all of a company`s assets, such as. B equipment, inventory, real estate, contracts or leases.
A purchase of securities can be beneficial because it allows a buyer to be selective about the assets they acquire. In addition, an asset acquisition allows a buyer to acquire a company`s assets without the liabilities that would accompany the assets when purchasing shares. In the case of an asset acquisition, a full SD is always required, including ownership of those assets and privileges over those assets. The completion of an acquisition of shares or assets depends on many considerations and the objectives of the acquirer. An escrow account is an agreement by which a third party (for example. B, a law firm or bank) temporarily holds the assets associated with a transaction and is responsible for them until it is closed to provide security to the parties. In the event of mergers and acquisitions, all or part of the purchase price may be deposited in trust to secure the interests of the parties. Escrow is particularly useful for holdbacks, earn-outs and purchase price adjustments, as well as a benchmark for compensation funds (if necessary). Escrow is the subject of a separate agreement and sets out the conditions under which the trustee may distribute the deposited funds or property held by the trustee on behalf of the parties. An escrow contract must be carefully and specifically designed to capture the key elements that determine whether funds should be paid or withheld in relation to its purpose.
When a company acquires all or a substantial part of the shares of a target company, that investor also acquires its liabilities. Therefore, a merger and acquisition transaction is usually accompanied by full due diligence (”DD”) to understand not only what liabilities the acquirer will be exposed to, but also to clarify important information about the seller, such as.B. its actual asset base (fixed assets, contracts, finance, personnel and customers, among others). DD is the fundamental review or investigation of a target company conducted by a buyer to compile and evaluate information that directly affects the decision to acquire. From a legal point of view, DD is usually conducted in relation to company records, general legal claims and disputes relating to the target company, intellectual property (”IP”) and trade secrets, labor, anti-money laundering, anti-corruption, data protection, environment and other regulations that may be relevant to the specific sector of the target company. DD is also performed in relation to the finances of the target company by accountants and auditors. For cross-border mergers and acquisitions where the target has assets and transactions in different countries, DD must be conducted in multiple jurisdictions and carefully coordinated to verify the target company`s actual assets and liabilities against the laws and practices of each site. Because the buyer has less care to take when selling assets (due to the selection of assets and liabilities they want to acquire), the transaction can often be completed more quickly. Definitions – Here you add the definitions of the terms used in the document, including the types of applicable laws that are used. As a general rule, the terms defined in this section are capitalized throughout the Agreement in order to clarify their meaning. These terms are not made alone, but are used throughout the contract to have a common language between ”seller” and ”buyer”.
It is important to note that in a stock transaction, the buyer also takes possession of all assets and liabilities. Compare this to an asset transaction, the other method of acquisition where the buyer acquires an agreed set of assets and liabilities. In cases where both the buyer and seller are C companies, the transaction may also qualify for tax treatment as a tax-exempt reorganization. Share purchase agreements can also be useful in cases where the buyer demands tax depreciation. There are usually two types of classes and actions that define actions. The most important have the right to vote, not to vote. Voting shares allow the shareholder to give an opinion on the decisions of the Board of Directors and on the company`s policy. Non-voting shareholders cannot vote on changes to the board of directors or company policies. A share purchase agreement (SPA) is a contract that sets out the terms and conditions of the sale and purchase of shares in a company. The parties may set out certain conditions in an informal letter of intent. If they are interested in continuing the transaction, they prepare the main transaction agreement. This can be a share purchase agreement, an asset purchase agreement, or a merger agreement.
The buyer can exercise due diligence, and if this is the case, it could result in an adjustment to the purchase price if it proceeds with the SPA. There are two ways for a buyer to acquire a business, either through a share purchase or an asset purchase. Although both structures are able to achieve broadly the same economic objective, there are advantages and disadvantages for both, as well as fundamental differences in legal effect and tax treatment. In general, the effects of the General Data Protection Regulation (GDPR) will be limited even if you buy shares, as customer data will not have to be transferred. The labelling clause, on the other hand, does not regulate an obligation for the minority shareholder, but a right. If the majority shareholder sells his shares, he has the right to ”follow”. They therefore have the right to sell their stake on the same terms as the majority shareholder. Since an investor only wants to buy a certain number of shares, the minority shareholder can conclude the transaction on a pro rata basis, i.e. the percentage of the stake before the sale. The interpretation is dealt with in the share purchase agreement, which contains definitions of all the terms used in the agreement. The sale and purchase of shares are also listed, which covers purchase price adjustments, lists the purchase price and how disputes can be resolved. The warranties and representations of the buyer and the seller give all the statements that the buyer and the seller sign and claim to be true.
Everything related to employees is also covered, including the terms of their benefits and how accrued premiums are managed. SPAs also contain detailed information about the buyer and seller. The agreement records all deposits made in the run-up to the negotiations and notes parts of the agreement that have already been completed. The agreement also specifies when the final sale is to take place. An asset purchase agreement (APA) can benefit a buyer who wants to exclude liabilities or redundant assets. For example, a target may have bad debts. All assets and liabilities bought and sold must be broken down in the APA. .