Sale & Purchase

Warranties

Warranties There are no implied terms and conditions on the sale of shares so that in effect, all risk would lie with the buyer. In the absence of a specific misrepresentation, the buyer takes the company as is.… Read the rest

Tax Due Diligence

Tax Due Diligence A due diligence on the tax liabilities and position of the target company is essential in a share purchase. The target company may have hidden tax liabilities arising from the previous trading. It may be subject to contingent liabilities due to past transactions.… Read the rest

Tax Deed

Deed of Tax Indemnity A Tax Deed is customarily entered in conjunction with the share purchase agreement. The Deed is usually an unconditional indemnity in respect of tax liabilities not provided for and factored into the purchase price.… Read the rest

Some SPA Issues

Defining the Company in Sale The definition of the company in sale is critical. The share purchase agreement must define the shares in sale. Generally, there is a definition of the shares with reference to which the agreement takes effect.… Read the rest

Shareholder Tax

Tax on Sale of Shares The sale of shares by an individual is generally subject to capital gains tax. In broad terms, the gain is the difference between the acquisition cost and disposal price or value.… Read the rest

Purchase Agreements

Sellers and Shares Issues may arise regarding the authority of the selling entity. In the usual way, it is necessary to ensure that authority for the sale comes from the appropriate entities. Minutes and resolution should be entered by the selling company authorising particular directors to execute the relevant transfers, indemnities etc.… Read the rest

Initial Issues

Heads of Agreement It is common for “heads of agreement” or “heads of terms” to be entered at an early stage in a share purchase or asset purchase transaction. The expressions mean much the same thing and refer to a non-binding agreement in principle.… Read the rest

Finance

Consideration / Price The method of financing the purchase may depend on tax, financial and other factors relevant to the particular buyer. It some instances, the buyer may have a choice as to funding. In these instances, taxation and other considerations may make one form of finance preferable or more cost-efficient than another.… Read the rest

Due Diligence Process

Legal Due Diligence Process An agreement in principle or “memorandum of understanding / MOU” document may be entered once the commercial terms are agreed. It is usually legally binding only in relation to the mechanics of the due diligence process, confidentiality, and other collateral issues.… Read the rest

Due Diligence

Need for Due Diligence The general principle in purchasing an asset is that the buyer must beware. The default position is that no implied warranties, covenants or conditions whatsoever apply to the purchase of shares in a company.… Read the rest