Pre-Acquisition Agreement

Posted by Admin on Dec 14, 2020 in Uncategorized |

The tax. For almost all share sales, there will be a tax compensation declaration (also known from a tax point of view). It may be a separate document or a timetable for the sales contract. It requires sellers to compensate the purchaser before entering into the target company any tax debts that are not generated in the course of an ordinary activity or that are otherwise disclosed in their accounts. Compensation imposes a pound for an obligation to pay in pounds, as opposed to a right to compensation as part of the guarantees. In the case of a business sale, there will be no tax notice because the buyer does not assume the tax position of the target company. Parties to future cross-border transactions must also ensure that factors other than private confidentiality agreements may be disclosed by the target company. Depending on the host country of the potential buyer. B, the state`s licensing requirements may apply if certain technical information is disclosed.

In addition, if the U.S. target company is a defense contractor or subcontractor, the requirements of the U.S. Department of Defense`s National Industrial Security Program, which limits access to certain classified information of the U.S. Department of Defense, must be met. Once the parties have agreed on the price, it may be desirable to stop the exchange of sensitive competition information during the pre-acquisition phase. The potential buyer should also avoid sharing their price or other data with the target company, although there may be legitimate reasons to do so in the event of a merger of the equals. In the event of a share sale, only ownership of the company`s shares is transferred. As the company`s shareholders change, their assets (including business contracts, agreements and licenses) will remain with the company.

From the outside, it seems that very little has changed and that customers and suppliers will generally be happy to continue working with the company as before. However, some contracts (for example. B financing contracts and other long-term contracts) may require the agreement of the other party when a change of ownership of the business is contemplated. It is important to identify these contracts at an early stage. The buyer must therefore choose between complete diligence, on the one hand, and legal risk, on the other. A similar dilemma arises from confidentiality agreements for the hiring of target company staff by the potential buyer. Initius` declaration risks forming a binding agreement between the parties. This risk is often not fully recognized when the parties impose their agreement in principle on paper, sometimes without the benefit of a lawyer. The competition problem takes another turn when the target company is auctioned. Are confidentiality agreements that require potential competitors of the target company to limit their access to sensitive competition information restrictive enough that potential buyers who are not competitors do not restrict the bidding process? It has been suggested that it could and the problem should be addressed by the target company and its advisors. In 1995, the American Bar Association`s Section of Business Law`s Committee on Trade Acquisitions developed and published a Model Confidentiality Agreement for the use of mergers and acquisitions.

The standard agreement of trust, which is, it is true, seller-oriented, illustrates the tendency to a very broad definition of what constitutes confidential information and contains to this end: a detailed examination of the issues posed by status quo agreements goes beyond the scope of this article. However, authorities and their clients should be aware that these issues may include issues of applicability and compatibility of such agreements with the duties of the company`s board of directors.

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