An Examination of a Share Purchase Agreement. Part 3
SPA Ancillaries and Post Completion
In our last post, we outlined the main provisions when it comes to drafting a Share Purchase Agreement (SPA). However, once the main terms of the SPA have been drafted, there will be a number of other steps that are required, and in this last post of this series, we take a quick look at the main points to keep in mind.
Ancillary terms and documents
There are nearly always a large number of ancillary documents that should be listed in a schedule and appended to the SPA. These include stock transfer forms, indemnity letters, resignation and discharge letters and various board minutes and resolutions. Once again, this is not an exhaustive list and what documents are necessary will vary according to each SPA.
Miscellaneous provisions are common and an often-important element of a SPA. It can be tempting to pay scant attention to these, but they should cover a myriad of areas which include:
- Severability as to illegal or unenforceable terms and rectification
- Force Majeure
- Dispute Resolution and Arbitration
As always, this is not an exhaustive list, and care and attention will be required in respect of each aspect. For example, the jurisdiction chosen to govern the SPA and any subsequent disputes can have considerable ramifications when it comes to the remedies available, time limitations and recoverable damages.
Confidentiality and non-disclosure
Confidentiality is very important, especially when parties exchange confidential information. Therefore, all data exchanged during the transaction should normally be stated as confidential.
There should usually be very specific non-disclosure terms negotiated and agreed in advance of the SPA, and the intention behind these should be reflected in the SPA itself. Non-compete and non-solicitation provisions may often be included.
Similarly, the parties may require a provision that the SPA itself is confidential until a certain time, as well as clear provision about what is agreed in respect of press or marketing communications.
Once the SPA has been agreed and executed there will inevitably be further steps that are required. These include:
- Payment of stamp duty
- Appropriate notices, directors’, secretaries’ and auditors’ appointments and resignations filed at Companies House
- Signed transfer form and receipt of the consideration received
- A letter of resignation if appropriate from seller to buyer
- Integration of the target company into the buyer’s group (including VAT, payroll, etc.)
We stated at the outset of this series that it’s not possible to provide a comprehensive guide to reviewing or preparing a SPA because each one will be different. However, it is hoped that this series of posts on An Examination of a SPA will help those involved in the sale process to identify those areas they need to address and to plan according, as well as offering an insight as to why such exercises can often seem time-consuming and costly. Finally, it’s worth restating that time spent on the detail at this stage can make the difference between both parties successfully achieving their respective objectives, and the SPA resulting in future litigation, costs or losses.
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