When someone sells their shares in a business, they often hope for a clean break. However, as some of the company`s liabilities – particularly the tax – are not disclosed until after the transaction, buyers must ensure that outgoing owners remain on the hook, and this is one of the main objectives of the main sales document, the share purchase contract. At the beginning of the GSO, the identity of the seller and buyer, including their addresses and your statutory headquarters, is described if it is a company or other legal body. If the business is owned by more than one shareholder, it is important for the buyer to ensure that each seller is responsible for the total amount of debt (joint and several liability) or, if not, as the distribution of liability is distributed among the individual sellers. A G.S.O. generally contains a language that indicates that the terms of the SSG itself, including its existence, are considered confidential information and are not disclosed to third parties. However, this language should contain all previous confidentiality agreements (“NOAs”) and in particular mention the agreements reached between the buyer and the seller during an earlier phase of the transaction (and which should have been concluded), such. B as the roadmap or the DD phase, and stress that such an agreement will remain fully in force until the end or after this agreement. Any NDA language in the BSG may reflect additions to previous NOAs and integrate the language of the previous NOA by reference to the BSG, replace these old AND in their entirety or claim that only the language of the previous NDA incompatible with the BSG will be replaced. The finished selling price of the shares may be flexible depending on the performance of the target company after the sale. If this is the case, a number of financial statement accounts will be established to show the actual value of the business at the point of sale. In this way, the share price can be adjusted if the transaction does not go as planned. For most of the transactions, the purchase price is generally determined against the last financial statements of a target.
Purchase price adjustments generally protect a buyer from any change in the value of the target between the value of the target and the transaction. In this context, the buyer and seller must agree on an evaluation method and have similar or coordinated accounting methods in place. Previous conditions are the preconditions for sale. They normally have to be completed before the obligation to purchase. As a general rule, there will be a limited period during which the conditions will have to be met. The conclusion of a transaction of AM generally makes a successful SD investigation and the underlying provision of complete and accurate documents a critical condition at the conclusion of the transaction. The conclusion of a robust SD survey cannot be sufficiently emphasized in most R and D. Target companies generally have a heavy burden to make all the materials requested in this regard available to an investor. Even a seemingly simple ATM, with a small business with limited assets and operations, can be accompanied by large hidden debts. In the past, data rooms were the norm and were located on the premises of the target company or its lawyers, where all categories of requested documents would be filed for consultation.
Today, data spaces are generally digital and law firms and other third parties offer internal platforms based on the server or cloud, on which all DD documents are downloaded as much as possible by the seller and his advisors for sorting and inspection by a buyer and his professional advisors (usually lawyers and accountants). Access to this information is generally subject to strict confidentiality obligations and it should therefore be made clear who has access to this information in order to avoid any possible violation of these restrictions.