M&A Lawyers

The amount and calculation of the sale consideration payable under a share sale agreement (locked-box v cash/debt-free mechanisms) and the terms and conditions applying to future deferred consideration and earn-outs.

Company and business sellers under a share sale/purchase agreement also need to limit their liability for warranty claims, indemnity claims, claims under the tax covenant or tax indemnity, make appropriate disclosures about the company/business being sold and fully understand the terms of any restrictive covenants preventing them from running competing businesses following the sale.

Where there is more than one seller, they usually agree to a contribution agreement to agree on the split of responsibility for any future claims against the sellers.

Ensuring in the share sale agreement and tax covenant or tax indemnity you are buying/getting the assets you wish to acquire without picking up/being compensated for liabilities you haven’t agreed to assume.

Undertaking and reporting on legal, due diligence dove-tailed with appropriate warranties, a tax covenant or tax indemnity, completion accounts/stock-takes, restrictions, indemnities, retentions and rights to set-off/withhold sums in respect of claims against earn-outs and deferred consideration.

A special purchase whereby existing company managers acquire a company from its owners, often via a new company (NewCo).

After agreeing on terms of confidentiality, responsibility for warranties and indemnities must be agreed upon in a share sale agreement and tax covenant or tax indemnity, as that can be different than in a typical sale and purchase transaction (as detailed above), together with funding arrangements and shareholder governance arrangements (which are set out in Shareholders Agreement and Articles of Association).

A company or business purchase is undertaken by a specialist (incoming) management team.

As well as undertaking all the usual acquisition work, appropriate Directors’ Service Agreements and a Shareholders’ Agreement and Articles of Association must be put in place.

Typically structured by shareholders of two companies swapping their shares in a new holding company under a share exchange agreement or by a transfer of assets under an asset transfer agreement from one to the other in return for shares in the other (or by both of them to a Newco in return for shares).

After the relative values of the entities to be merged and the resulting shareholdings/loan accounts have been agreed upon and documented, the basis upon which the new group of shareholders will together manage the combined business going forwards needs to be documented in an appropriate Shareholders’ Agreement and Articles of Association.

We are members of MSI Global with independent legal and accountancy members ready to assist our clients and us with foreign companies and assets involved in any corporate transaction.

We assist in examining if any UK competition law or the National Security and Investment Act will apply to your transaction and whether you will need clearance from the Competition and Markets Authority or the Government.

On a sale of an “undertaking” (normally business assets and not a share sale), TUPE may apply concerning employees – our Employment Department will assist on all consultation and responsibility/liability issues arising from TUPE.

Our Commercial Property Department works with our M&A Lawyers to look after all freehold and leasehold property matters and issues.

Sometimes a property may be retained by a seller or needs to be transferred before the sale or, in the case of leasehold property, the lease extended or re-negotiated. Existing dilapidations may also need to be considered.

A share exchange is when a shareholder sells their existing shares for a new issue of shares in the buyer.

A share exchange is quite common in group reorganisations; it is also used in mergers and acquisitions where there is non-cash consideration.

A share exchange is usually documented through a share-for-share exchange agreement and ancillary documents such as minutes, resolutions, stock transfer forms and new share certificates.

A contribution agreement is a legal document that sets out the terms and conditions under which an individual or organisation contributes certain assets or services (often intellectual property, like software code, writings, or other creations) to a project or another entity.

They're often used in the context of open-source projects but can be relevant in other settings too.

In a share transaction with multiple sellers, a contribution agreement enables the sellers to apportion liability between themselves regarding the warranties, indemnities and the tax covenant in the main transaction documentation.

A contribution agreement is especially important where liability is stated in such documentation to be 'joint and several' between the sellers, as a buyer then has the discretion to pursue all the sellers or an individual seller due to the breach of any warranty or other transactional claims.

A contribution agreement enables the sellers to agree (independently from the main transaction documentation) to the apportioned liability between each other and enables the sellers to address the conduct and management of any claims.

A business purchase agreement is a legal contract detailing the terms of a business sale, including price, assets, liabilities, and warranties.

It often contains clauses preventing the seller from competing or soliciting customers and employees post-sale.

This agreement ensures clarity for both parties, safeguards against disputes, and typically facilitates the seamless continuation of the business by the buyer.

Essentially, it governs the transfer of business ownership and associated assets.

A tax covenant is a contractual provision that ensures that one party will compensate the other for specific tax liabilities or changes in tax circumstances, often arising after the conclusion of a transaction, such as the sale of a business.

It helps allocate tax risks between the buyer and seller.

A tax covenant often provides better compensation for a buyer compared to a breach of tax warranty claim. This is because it allows for direct, pound-for-pound recovery.

In contrast, damages from warranty breaches only cover the difference between the share's market value at acquisition and its value if the warranty had been accurate.

Such damages are also bound by mitigation and the test of remoteness.

While tax covenants are typically part of the share sale agreement's schedule, they can also be found in a separate document.

A share purchase agreement (SPA), sometimes called a sale and purchase agreement or a share sale agreement is a contract negotiated between the company's buyer and seller of shares to record and implement the transaction terms. It will typically include some or all of the following terms: 

• Purchase price and payment terms, including any adjustment to the purchase price following completion (for example, using completion accounts which may measure cash, debt and working capital). 
• Warranties provided by a seller in favour of a buyer relating to various aspects of the company and its business, including legal compliance, commercial arrangements, accounts, tax, employment matters and property (amongst others).
• A tax covenant is an indemnity from a seller in favour of a buyer concerning the company's tax liabilities before completion.
• Restrictions that seek to prevent a seller from competing with the company for an agreed period following the sale and prevent solicitation of staff, customers or suppliers. 

SPAs are often detailed and complex contracts and take a significant time to negotiate and finalise.