Clauses in Share Purchase Agreement

Holdbacks can be very useful in bridging the gap between the target`s diverging ratings and allowing these notices to prove themselves for a certain period of time after closing (the hold period) and even protecting a buyer`s access to compensation payments for post-closing risks so that they are secured (usually by escrow) and do not depend on a subsequent refund from the seller. However, it should be noted that if indemnification is the exclusive remedy, this method could serve as a compensation cap by limiting the buyer`s collection options to what is available in that pool of guaranteed funds. Indemnification clauses are hotly debated, in particular the lower and upper thresholds of claims, the time, subject matter and procedure between the parties to deal with disputes, including tax disputes, concerning claims. They also represent the procedure for refunding claims and are often the most scrutinized clause in the event of a dispute, so special care must be taken to ensure that the buyer is properly covered in case of questions concerning the company before the transaction but occurring after closing. This is also the reason why a buyer needs a significant part of the seller`s side to act as a guarantor of compensation. The representations, warranties and representations given in an SPA should last longer than the execution and delivery of the SPA and the completion of the transaction and thus extend beyond the completion of the transaction. Some misrepresentations and warranty violations may not be detectable until after completion. The persistence of representations, warranties and representations (as well as indemnification terms) beyond the closing of the transaction will protect the buyer if it receives less than it has negotiated. However, parties should carefully examine the applicable law of the SPA to determine how that jurisdiction interprets and applies the limitation periods.

Some jurisdictions prohibit infringement claims that go beyond the court`s statute of limitations, even if the parties to an SPA expressly agree to survival language that allows a claim for infringement to extend beyond the court`s statute of limitations. Pre-closing covenants generally limit what a seller can do before closing. Typically, the seller`s commitments are heavier than the buyer`s, as the seller usually retains control of the target until the transaction is completed. Since certain things are promised to do or not to do, pre-closing covenants are common in deferred closing transactions to protect and maintain the value of the acquired company between the execution of the PPS and the closing of the acquisition. An SPA generally contains language that states that the terms of the SPA itself, including its existence, are considered confidential information and cannot be disclosed to third parties. However, this formulation should include all prior non-disclosure agreements («NDAs») entered into (and should have been concluded) between buyer and seller at an earlier stage of the transaction, such as.B. contain the term sheet or the DD phase, and expressly refer to and emphasize that this agreement will remain in force and in full effect until this agreement terminates or is replaced. Each NDA language in the SPA may reflect additions to previous NDAs and incorporate the language of the previous NDA into the SPA by reference, replace those earlier NDAs in their entirety, or claim that only the language of the previous NDA that is incompatible with the SPA will be replaced. Finally, and as an example, we list below two types of clauses that are usually included in the contract for the purchase and sale of shares as representations and guarantees, as they are usually of great relevance: a SPA is subject to intense negotiations and nuances and will usually include a indemnification clause dealing with liability for losses, arising from misrepresentation and breach of warranties. Commitments and other agreements. The indemnification clause may be formulated as an exclusive remedy or as a non-exclusive remedy to assert such claims. As an exclusive remedy, the indemnification provisions should specify when and how claims are to be made, processed and paid, as well as any limitations or limitations on payment and liability.

Agreeing to an exclusive remedy would normally constitute a waiver by the parties of any remedy that would otherwise be available under applicable law (applicable laws). However, there are exceptions to this exclusivity in cases of fraud, intentional infringement, wilful misconduct and fair remedies […].