Sale and Purchase Agreements – The Commercial Issues- Negotiating the contentious topics in SPAs

Course Content:

Structure of a Sale & Purchase Agreement

• Letters of Intent & Heads of Agreement
  • agreements leading up to the SPA
• Definitions – remove complexity from the body of the document
• Exchange & Completion
  • two separate exercises, preferably contemporaneous
• Pre-Conditions
  • allow the buyer to slide out of the deal
• Covenants
  • negative or positive promises
• Boilerplate Clauses
  • non contentious regulation of the contract
• Schedules
  • details at the back of the document
• Comfort Letters & Side Letters
  • useful to oil the wheels of the deal

Representations, Warranties & Indemnities

• Drafting Objectives
  • what do the parties wish to achieve?
• Purpose of Warranties
  • retrospective alteration of the price & extracting disclosure
• Transfer & Retransfer of Risk
  • a game of tennis where the risk is the ball
• Long & Short Form Warranties
  • What is the difference, if any?
• Warranties Given by the Seller
  • to ensure that the buyer gets what is promised
• Warranties Given by the Buyer
  • to underpin the value of consideration shares
• Indemnities Given by the Seller
  • to counteract the effect of a buyer’s knowledge

Completion Meetings

• Management of the Meeting
  • importance of forward planning & a clear agenda
• Solicitors’ Undertakings
  • smoothing the Way
• Timing Problems
  • remove any sand from the machine before starting the meeting
• Release of Charges
  • deed of release & letter of non-crystallisation
• Money Transfers & Funding the Buyer
  • are the formalities in place?
• Consideration to be Paid in Shares
  • do they exist and are they to be listed?
• Completion in Escrow
  • only if completion almost certain with negligible time delay

Who Should Give Warranties?

• Dual Purpose of Warranties
  • to extract information & impose liability
• Executive Shareholders
  • should passive shareholders give warranties?
• Management Buyouts
  • should selling shareholders give warranties?
• Receivers & Administrators
  • vague assurances or something better?
• Listed Companies
  • the ultimate caveat emptor deal

What is Disclosure?

• Reasons for Disclosure
  • limitation of seller’s liability
• Warrant the Disclosure Letter and/or Due Diligence Reports?
  • the buyer will ask
• Defective Disclosure by the Seller’s Management
  • sue them for negligence?
• General Disclosures
  • negotiation surrounding example clauses
• Fair Disclosure
  • vague & ambiguous disclosures will be ineffective
• Deliberate Non-Disclosure
  • tell the lawyers?

Effect of the Warranties

• Breach of Warranty
  • when the nature of assets or liabilities don’t match expectations
• Misrepresentation
  • innocent, non-contractual, negligent or fraudulent?
• Rescission
  • when can a buyer tear up the contract?
• Damages
  • different quantum under contract and tort
• Buyer Extends Seller’s Liability
  • casting a wider net over the seller
• Widening the Definition
  • extending the meaning of a warranty
• Management Accounts
  • will the seller warrant them?
• Security for Warranties and Joint & Several Liability
  • aim for the best target
• Full Title Guarantee
  • tightening the provisions of the Law of Property Act
• Seller Limits Liability
  • reduce the effect of inducements given to the buyer
• Narrowing the Exposure
  • the effect of an ‘Entire Agreement’ clause
• Unexpected Benefits
  • achieve a level playing field
• Limitation Periods
  • seller’s liability does not continue for ever
• Floors & Ceilings
  • thresholds, baskets & caps
• Debt Collection & Pursuit of Debtors
  • make the buyer behave responsibly
• Conduct of Claims
  • different attitude to commercial claims & tax claims
• Insurance Against Warranty Claims
  • worthwhile but usually considered too late
• Date of Application
  • when do warranties bite?
• Interregnum Provisions
  • what happens between exchange and completion?
• Taxation Warranties & Indemnities
  • the Tax Deed
• Warranty Payments
  • agree the tax treatment before completion

Completion Accounts

• Comparison to Audited Accounts
  • contentious rather than consensual
• Mechanisms
  • net assets or cash free/debt free normal to actual working capital
• Limiting Areas of Potential Dispute
  • cash, debt, stock, WIP, fixed assets, debtors
• Locked Box Transactions as an Alternative
  • when and how is the box locked?

What clients are saying about the course

“The examples and anecdotes were very helpful and brought the training to life”

“Covered the key points in SPAs & what they mean”

“The trainer has both thorough knowledge & practical experience on the subject. It was one of the best courses I have attended”