We often talk about a tax agreement, tax exemption or tax act, but its purpose is always the same, it offers protection to the buyer for any tax liability that may not have been discovered by due diligence. 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”), not only to understand 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, human resources and customers, among others). DD is the fundamental audit 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 perspective, DD is typically conducted in relation to company records, general legal claims and disputes related to the target company, intellectual property (“IP”) and trade secrets, labor, anti-money laundering, anti-corruption, data protection, environment and other regulatory compliances 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. In the case of 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 actual assets and liabilities of the target company against the laws and practices of each site. In order to prevent the seller and management of the target company from interfering with the company, a buyer will generally use pre-closing clauses to prohibit the target company, its shareholders, directors and management from doing the following: A share purchase agreement defines the conditions under which the sale and purchase of the target shares will take place and is therefore the most important transaction document in a share purchase. Private. The complexity of a share purchase agreement varies depending on the nature and circumstances of the transaction, but it will usually be a lengthy document, half (or sometimes more) of which can be devoted to a guarantee plan. The forms of share purchase agreements used in England and Wales are broadly similar to those used 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.
Seller`s parent company or other independent person may be required as a party to guarantee warranties and undertakings made on Seller`s behalf. Buyer will “return” or seek recourse against a company that has the means to respond to claims such as the parent company or another material company. If a seller or buyer is part of a group of companies whose parent company is listed on the London Stock Exchange, the listing rules may require the consent of the parent shareholders to sell. If your business is unable to issue shares (p.B if you are a sole proprietor or member of a partnership) or if you intend to sell all of your company`s shares, you should consider using a purchase agreement. In the case of a sale of shares between two parties, a draft SPA is usually prepared by the buyer`s legal representatives, since the buyer is most concerned that the SPA will protect them from any liability after the sale. When a business is sold at auction, the seller`s lawyers usually prepare a draft share purchase agreement and make it available to interested bidders for inspection. After negotiating the terms of the SPA and the due diligence process, the parties each sign the SPA, the buyer pays the purchase price and the shares are officially transferred to the buyer using a share transfer form. As a rule, this takes place on the same day. 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 fundamental purpose of the indemnification provisions. .