Preconditions or closing conditions are provisions that must be agreed upon by the parties before the acquisition can be completed. Previous conditions are usually assigned to a particular party, but some may be mutually applicable. When a closing condition is not met, the consideration generally has the right to abandon the transaction without any liability. This protects the parties from not getting what they negotiated for. In the case of a deferred conclusion, events may occur after the execution of the G.S.O., which require a party to terminate the G.S.O. before closing (by mutual agreement or due to the occurrence – or absence of events – of certain events). This is explained in more detail in the next section, but the seller`s guarantees are usually set out in a separate schedule of the share purchase agreement. If a warranty proves to be false, the buyer will claim a default action against the seller to recover part of the purchase price. A buyer cannot claim a breach of the warranty if the seller has already informed him of the problem. This is why the seller will make a series of “disclosures” to the buyer at the time of the sale, so that the buyer can assess the nature of the risk and change the purchase price to reflect that.
Over the years, the volume of warranties requested has continued to increase and modern share purchase contracts are generally very important, much of which is of the type of guarantees. After the stock seller concludes, the seller is not responsible for the company`s debts, which are the responsibility of the new owners. A company has its own legal personality on the part of its boards of directors and shareholders. In comparison, when selling assets, with a few exceptions (for example. B employees), the seller retains all of the company`s current liabilities, unless he can negotiate with the buyer to take care of them with the company. This clause is usually very short, but it protects the buyer`s interests, namely that he obtains good and good ownership of the shares he buys. A share purchase agreement is probably long and consists of a main document and different calendars or annexes containing specific information and details of the transaction. While a SPA can be in any format, the following are the most important clauses, and those that should ideally be designed by an experienced legal expert. Buyers also provide insurance and guarantees in a SPA.
As a general rule, a seller wants to ensure that the buyer can legally acquire the destination, close and have the means to pay the purchase price. Typical representations and guarantees of buyers include: 3. reverse triangular mergers – the buyer`s subsidiary merges for the purpose (the target survives and the buyer`s subsidiary ceases to exist). The share purchase agreement is an agreement in which all conditions are concluded when it comes to selling and buying the company`s shares. This is not the same as an Asset Purchase contract in which assets are bought and sold in place of shares.