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380 Pages
380 Pages
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This book analyses share purchase agreements governed by Belgian law used for company acquisitions, whereby a purchaser acquires control over a Belgian target company through the acquisition of a controlling shareholding. The object of such sale and purchase agreements is not a static, inanimate object, but consists of a shareholding in a company whose business and balance sheet evolve while the parties negotiate its acquisition. Such share purchase agreements and the negotiations leading up to them create a particular triangular interaction and relationship between the seller, the purchaser and the target company. These aspects make share purchase agreements different from, and often more complex than, sale and purchase agreements relating to other objects. The analysis set out in this book is written from a practitioner''s perspective and focuses on the application of classic civil and corporate law concepts in the particular context of share purchase agreements. The theoretical background of all legal concepts is discussed and analysed, with due consideration for the practical relevance of the analysis. The reader is guided through the successive stages of a share purchase agreement. Each chapter includes a section containing sample clauses and concludes with an overview of relevant legislation, case law, legal doctrine and other sources of law. The book concludes with an index of the concepts used and a separate lexicon of the corresponding Belgian law terms in Dutch and French. [Subject: Belgium Law, Company Law]
CONTENTS Acknowledgements ... v Glossary ... xxi INTRODUCTION ... 1 PART 1. GENERAL CHARACTERISTICS OF THE TR ANSACTION CHAPTER 1. SHARE DEALS AND ASSET DEALS ... 7 1. Share deals vs. asset deals ... 7 2. Legal object of the transaction ... 8 3. Identity of the parties to the acquisition agreement ... 9 4. Transfer formalities ... 9 References ... 10 CHAPTER 2. DIRECT SALE OR CONTROLLED AUCTION ... 13 1. Direct sale ... 13 2. Controlled auction ... 14 References ... 17 PART 2. PR E-CONTR ACTUAL PHASE CHAPTER 1. NON-DISCLOSURE AGREEMENTS... 21 1. Use of non-disclosure agreements ... 21 2. Content of non-disclosure agreements ... 21 3. Sample clauses ... 25 3.1. Definition of "confidential information" (generic description) ... 25 3.2. Confidentiality obligation (in relation to the agreement and the contemplated transaction) ... 26 3.3. Confidentiality obligation (in relation to confidential information) 26 3.4. Use of confidential information ... 27 3.5. Return and destruction of confidential information ... 27 3.6. Inquiries ... 28 3.7. Non-solicitation covenant ... 28 3.8. Liquidated damages ... 28 References ... 29 CHAPTER 2. LETTERS OF INTENT ... 31 1. Use of letters of intent and other pre-contractual documents ... 31 2. Legal value of a letter of intent ... 32 3. Main elements of a letter of intent ... 35 4. Sample clauses ... 37 4.1. Standstill ... 37 4.2. Exclusivity ... 38 4.3. Non-binding nature of letter of intent (1) ... 39 4.4. Non-binding nature of letter of intent (2) ... 39 References ... 40 CHAPTER 3. DUE DILIGENCE ... 43 1. Information obligations in the pre-contractual phase - Purpose and legal relevance of the purchaser's due diligence ... 43 2. Organisation of due diligence - Data room ... 52 3. Q&A ... 54 4. Vendor due diligence ... 55 5. Competition law considerations ... 56 6. Sample clauses ... 57 6.1. Data room rules - Physical data room ... 57 6.1.1. Access to the data room ... 57 6.1.2. Data room documents ... 58 6.1.3. Q&A ... 58 6.2. Data room rules - virtual data room ... 58 6.2.1. Use of the virtual data room... 58 6.2.2. Access to the data room ... 59 6.2.3. Q&A ... 59 6.2.4. Security ... 59 6.2.5. Disclaimer ... 60 References ... 60 PART 3. SHAR E PURCHASE AGR EEMENT CHAPTER 1. IDENTIFICATION AND REPRESENTATION OF THE PARTIES ... 67 1. Identification of the parties ... 67 2. Representation of the parties ... 67 3. Consent of a party's spouse ... 69 4. Sample clauses ... 72 4.1. Identification and representation of the parties ... 72 4.2. Power-of-attorney ... 73 4.3. Consent of spouse ... 74 References ... 75 CHAPTER 2. PREAMBLE ... 77 1. Purpose and legal value of the preamble ... 77 2. Sample clause ... 79 References ... 80 CHAPTER 3. USE OF DEFINED TERMS, INTERPRETATION AND LANGUAGE ... 81 1. Use of defined terms ... 81 2. Interpretation rules ... 81 2.1. General interpretation rules ... 81 2.2. Specific interpretation rules regarding sale and purchase agreements ... 84 2.3. Interpretation clauses included in the share purchase agreement . . 85 3. Use of languages ... 86 4. Sample clauses ... 87 4.1. Use of defined terms ... 87 4.2. Interpretation rules ... 90 4.3. Use of languages ... 91 References ... 91 CHAPTER 4. LEGAL OBJECT AND TRANSFER OF OWNERSHIP ... 93 1. Legal object ... 93 2. Transfer of ownership ... 94 Intersentia 3. Sample clauses ... 96 3.1. Sale and purchase... 96 3.2. Transfer of ownership ... 96 References ... 97 CHAPTER 5. PURCHASE PRICE ... 99 1. Validity requirements ... 99 2. Certain purchase price mechanisms ... 102 2.1. Closing accounts ... 103 2.2. Locked box ... 104 2.3. Earn-out ... 106 3. Payment of the purchase price ... 108 3.1. Payment to the seller ... 108 3.2. Escrow ... 108 4. Sample clauses ... 109 4.1. Payment by bank cheque ... 109 4.2. Payment by wire transfer ... 110 4.3. Deferred payment ... 110 4.4. Payment in instalments (alternative clause) ... 110 4.5. Allocation of the purchase price (multiple sellers) ... 110 4.6. Purchase price adjustment based on closing accounts (adjustment based on changes in net asset value) ... 111 4.7. Purchase price adjustment based on closing accounts (alternative clause - adjustment based only on amount of net cash and working capital as at the closing date) ... 114 4.8. Earn-out ... 116 4.8.1. Payment of earn-out amounts ... 116 4.8.2. Earn-out covenants ... 118 4.8.2.1. Audit right ... 118 4.8.2.2. Consent matters ... 119 4.9. Locked box (leakage covenant) ... 120 References ... 120 CHAPTER 6. CONDITIONS PR ECEDENT... 123 1. Validity requirements ... 123 2. Status of share purchase agreement pending satisfaction of conditions precedent ... 126 3. Consequences of satisfaction of conditions precedent ... 128 4. Consequences in the event conditions precedent are not satisfied ... 128 5. Waiver of conditions precedent ... 129 6. Analysis of certain common conditions precedent ... 130 6.1. Merger clearance ... 130 6.1.1. Concentrations with an EU dimension ... 130 6.1.2. Belgian merger clearance ... 132 6.2. Approval of financial supervisory authorities ... 134 6.3. Prior consent of third parties ... 135 6.3.1. Consent of third parties with pre-emption rights or rights of first refusal ... 135 6.3.2. Consent of target company's contracting partners with agreements containing change-of-control clauses ... 137 6.4. Financing ... 138 7. Material adverse changes between signing and closing ... 138 8. Management of the target company between signing and closing ... 139 9. Sample clauses ... 140 9.1. Conditions precedent (generic introductory wording in conditions precedent clause) ... 140 9.2. EU merger clearance ... 140 9.3. Belgian merger clearance ... 141 9.4. Merger clearance (general) ... 141 9.5. Approval of National Bank of Belgium ... 141 9.6. Consent of third parties (change-of-control) ... 142 9.7. Consent of third parties (share transfer restrictions) ... 142 9.8. Consent of third parties (release of pledge on shares) ... 142 9.9. Bank financing ... 142 9.10. Compliance with covenants between signing and closing ... 143 9.11. Material adverse changes between signing and closing ... 143 9.11.1. Quantified MAC concept ... 143 9.11.2. Unquantified broad and generic MAC concept ... 143 9.11.3. Quantified, limited, company-specific MAC clause with carve-outs ... 144 9.12. Non-satisfaction of conditions precedent (termination) ... 144 9.13. Obligation to use best efforts to satisfy conditions precedent ... 144 9.14. No retroactive effect ... 144 9.15. Covenants between signing and closing ... 145 References ... 147 Intersentia CHAPTER 7. CLOSING ... 151 1. Closing ... 151 2. Closing deliverables ... 151 3. Corporate resolutions ... 152 3.1. Appointment of new directors and statutory auditor ... 152 3.2. Discharge of former directors and statutory auditor ... 155 4. Breach of closing obligations ... 157 5. Sample clauses ... 158 5.1. Seller's closing obligations ... 158 5.2. Purchaser's closing obligations ... 159 5.3. Corporate meetings ... 159 5.3.1. General meeting of shareholders ... 159 5.3.2. Meeting of the Board of Directors ... 160 5.4. Inter-conditionality of closing obligations ... 160 5.5. Explicit rescission clause... 161 References ... 161 CHAPTER 8. REPR ESENTATIONS AND WARR ANTIES ... 163 1. Purpose and scope of the seller's representations and warranties ... 163 2. Legal nature of the seller's representations and warranties ... 169 3. Interpretation of representations and warranties ... 171 4. Certain particular representations and warranties ... 173 4.1. Accounts ... 173 4.2. "Compliance with laws" ... 177 4.3. Full disclosure ... 178 5. Timing of representations and warranties ... 179 6. Common qualifications of representations and warranties ... 179 6.1. Overview of common qualifications ... 179 6.2. Knowledge qualifier ... 180 6.3. Ordinary course of business exceptions... 181 6.4. Materiality thresholds ... 183 7. Exceptions to the seller's representations and warranties ... 184 7.1. Impact of the purchaser's knowledge on the representations and warranties under the law ... 184 7.2. Contractual regulation of the impact of the purchaser's knowledge on the representations and warranties ... 186 7.3. Disclosures ... 187 7.3.1. Contractual practice and concept of disclosures ... 187 7.3.2. Types of disclosures ... 188 7.3.3. Format of disclosures ... 189 7.3.4. Timing of disclosures ... 190 8. Burden of proof ... 190 9. Sample clauses ... 192 9.1. Guarantee obligation ... 192 9.2. Accounts ... 192 9.2.1. General ... 192 9.2.2. Inventories ... 193 9.2.3. Receivables ... 193 9.2.4. Related party transactions / claims ... 193 9.2.5. Absence of undisclosed liabilities ... 194 9.3. Compliance with laws ... 194 9.4. Full disclosure ... 194 9.4.1. Extended version ... 194 9.4.2. Limited version ... 195 9.5. Knowledge qualifiers (anti-sandbagging) ... 195 9.6. Knowledge of the purchaser (pro-sandbagging) ... 195 9.7. Disclosures ... 196 9.8. Repetition of warranties on closing ... 197 9.9. Seller's knowledge ... 197 9.10. Ordinary course of business... 197 9.11. Materiality threshold ... 198 9.12. Burden of proof ... 198 References ... 198 CHAPTER 9. INDEMNIFICATION OBLIGATION OF THE SELLER ... 203 1. Indemnification in case of breach of representations and warranties ... 203 1.1. Indemnification pursuant to a contractual indemnifi cation mechanism ... 203 1.2. Indemnification in the absence of a contractual indemnification mechanism ... 205 1.2.1. Application by analogy of seller's statutory obligation to safeguard the purchaser for hidden defects ... 205 1.2.2. Application of general rules of contractual liability ... 208 1.2.3. Application in practice and conclusion ... 212 2. Duty to mitigate damage ... 214 3. Beneficiary of representations and warranties and seller's indemnification obligation ... 214 4. Procedural rules ... 215 4.1. Notification of a claim and objections ... 215 4.2. Third-party claims ... 218 5. Nature of payments made pursuant to seller's indemnifi cation obligation ... 219 6. Concurrence of contractual and extra-contractual liability ... 220 7. Sample clauses ... 221 7.1. Indemnification obligation... 221 7.1.1. Multiple sellers - Joint liability ... 221 7.1.2. Multiple sellers - Several and pro rata liability ... 221 7.2. Loss... 222 7.2.1. Extended definition (level of Purchaser or Company / euro-for-euro and multiple) ... 222 7.2.2. Short definition (level of Company only / euro-for-euro) . 222 7.2.3. Short definition (reference to contractual damages as defined by the Civil Code) ... 222 7.2.4. Short definition (reference to contractual damages as defined by the Civil Code, except article 1150) ... 222 7.3. Duty to mitigate damage ... 223 7.4. The target company as a third-party beneficiary of the representations and warranties ... 223 7.5. Nature of payments ... 223 7.6. Tax gross-up ... 223 7.7. Claim procedures - Notification of a claim ... 223 7.8. Claim procedures - Third-party claims ... 225 7.8.1. Seller's interest ... 225 7.8.2. Purchaser's interest ... 226 References ... 227 CHAPTER 10. LIMITATIONS TO INDEMNIFICATION OBLIGATION OF THE SELLER ... 231 1. Introduction ... 231 2. Nature of contractual limitations of the seller's indemnifi cation obligation ... 231 3. Limitation in time of the indemnification obligation ... 232 3.1. General time limitation ... 233 3.2. Specific time limitations ... 233 3.2.1. Specific time limitation for tax matters ... 234 3.2.2. Specific time limitation for social security matters ... 235 3.2.3. Specific time limitation for employment matters ... 236 3.2.4. Specific time limitation for environmental matters ... 236 3.2.4.1. Flemish Region ... 237 3.2.4.2. Walloon Region... 239 3.2.4.3. Brussels Region ... 240 3.2.4.4. Civil law damages ... 240 3.2.5. Specific time limitation for title warranties ... 241 4. Limitation of the amount of the indemnification obligation ... 241 5. Sample clauses ... 242 5.1. Limitation in time (fixed term) ... 242 5.2. Limitation in time (variable term with reference to statute of limitations) ... 243 5.3. Limitation in time (combination of fixed and variable terms) ... 243 5.4. Amount limitation - De minimis (individual threshold) ... 243 5.5. Amount limitation - De minimis (aggregate - basket) ... 244 5.6. Cap ... 244 5.7. Other limitations ... 244 5.7.1. Losses covered by insurance ... 244 5.7.2. Net effect ... 245 5.7.3. Single recovery ... 245 5.7.4. Contingent liabilities ... 245 5.7.5. Regulatory changes ... 246 References ... 246 CHAPTER 11. SPECIFIC INDEMNITIES ... 249 1. Concept of specific indemnities ... 249 2. Sample clauses ... 252 2.1. Specific indemnity (framework) ... 252 2.2. Specific indemnity for tax matters ... 252 2.3. Specific indemnity for ongoing litigation ... 253 2.4. Specific indemnity for related party claims ... 254 2.5. Specific indemnity for environmental issues (broad - generic) ... 255 2.6. Specific indemnity for defined environmental matters ... 257 2.7. Alternative specific indemnity for defi ned environmental matters (short) ... 260 2.8. Specific indemnity for leakage ... 260 References ... 260 CHAPTER 12. TER MINATION ... 263 1. Introduction ... 263 2. Rescission ... 263 2.1. Types of rescission ... 263 2.1.1. Judicial rescission (article 1184 of the Civil Code) ... 264 2.1.2. Explicit rescission clause ... 265 2.1.3. Extrajudicial rescission ... 267 2.2. Consequences of rescission ... 269 3. Cancellation ... 270 3.1. Types of cancellation ... 270 3.1.1. Unilateral cancellation based on explicit cancellation clause ... 270 3.1.2. Cancellation by mutual consent ... 272 3.2. Consequences of cancellation ... 272 4. Conditions subsequent ... 273 5. Sample clauses ... 274 5.1. Exclusion of judicial and extra-judicial rescission right ... 274 5.2. Explicit rescission clause... 274 5.3. Cancellation (loss of material business relations / material adverse changes)... 275 5.4. Cancellation (breach or financial distress of a party) ... 276 5.5. Effect of termination ... 276 References ... 277 CHAPTER 13. NON-COMPETE AND NON-SOLICITATION CLAUSES ... 281 1. Non-compete clauses ... 281 1.1. Introduction ... 281 1.2. Limitations ... 283 1.2.1. Duration ... 285 1.2.2. Territorial scope ... 286 1.2.3. Restricted activities ... 287 1.3. Invalid non-compete clauses ... 287 1.4. Sanction in the event of breach ... 289 2. Non-solicitation clauses ... 291 3. Sample clauses ... 292 3.1. Extended version ... 292 3.2. Alternative clause (reduced version) ... 295 3.3. Non-compete clause only (limited version)... 297 References ... 297 CHAPTER 14. OTHER TYPICAL COVENANTS ... 301 1. Overview of other typical covenants ... 301 2. Waiver of the seller's claims against the target company ... 301 3. Exoneration clauses ... 305 4. Share transfer restriction ... 309 5. Further co-operation ... 310 6. Use of name and logo ... 311 7. Confidentiality... 311 8. Sample clauses ... 312 8.1. Seller's waiver of claims against the target company ... 312 8.2. Exoneration clauses ... 312 8.2.1. Exoneration clause excluding the seller's liability on extra-contractual grounds ... 312 8.2.2. Waiver of the purchaser's and the target company's claims against the seller... 313 8.3. Share transfer restriction ... 313 8.4. Use of name and logo (waiver by the seller) ... 314 8.5. Use of name and logo (obligation of the purchaser)... 314 8.6. Further co-operation ... 315 8.7. Confidentiality undertaking (strict) ... 315 8.8. Confidentiality undertaking (alternative clause with additional carve-outs) ... 315 References ... 316 CHAPTER 15. BOILERPLATE ... 321 1. Introduction ... 321 2. Matters typically covered by boilerplate provisions ... 321 2.1. Amendments and waiver ... 321 2.2. Appointment of sellers' or purchasers' representative ... 322 2.3. Assignments ... 323 2.4. Confidentiality ... 323 2.5. Costs and expenses ... 324 2.6. Entire agreement ... 324 2.7. Execution in counterparts ... 325 2.8. Interest ... 326 2.9. Notices ... 327 2.10. Rights and remedies of the parties ... 327 2.11. Sellers' and purchasers' liability ... 328 2.12. Severability ... 330 3. Sample clauses ... 331 3.1. Amendments and waiver ... 331 3.2. Appointment of a sellers' representative ... 331 3.2.1. Limited delegation of authority ... 331 3.2.2. Comprehensive delegation of authority ... 332 3.3. Assignment ... 333 3.4. Confidentiality ... 334 3.5. Costs and expenses ... 334 3.6. Entire agreement ... 334 3.7. Execution in counterparts ... 334 3.8. Interest ... 334 3.9. Notices ... 335 3.9.1. Restrictive clause ... 335 3.9.2. Alternative clause ... 335 3.10. Rights and remedies of the parties ... 336 3.10.1. Not excluding other rights and remedies ... 336 3.10.2. Waiver of termination right for breaches of warranties... 336 3.10.3. Exclusion of other rights and remedies of the seller and the purchaser ... 336 3.11. Sellers' and purchasers' liability ... 337 3.11.1. Joint liability ... 337 3.11.2. Several liability only ... 337 3.12. Severability ... 337 References ... 337 CHAPTER 16. GOVERNING LAW AND DISPUTE RESOLUTION ... 341 1. Governing law ... 341 2. Dispute resolution ... 342 2.1. Ordinary courts ... 342 2.2. Arbitration ... 343 2.3. Mediation ... 345 3. Sample clauses ... 346 3.1. Governing law ... 346 3.2. Dispute resolution ... 346 3.2.1. Ordinary courts ... 346 3.2.2. Ad hoc arbitration ... 346 3.2.3. Arbitration Cepani... 346 3.2.4. Arbitration ICC ... 347 3.2.5. Prior internal mediation and escalation procedure ... 347 3.2.6. Mediation Cepani ... 347 3.2.7. Mediation ICC (optional) ... 348 3.2.8. Mediation ICC (obligation to consider ICC mediation rules)... 348 3.2.9. Mediation ICC (obligation to refer dispute to ICC mediation rules while permitting parallel arbitration proceedings if required) ... 348 3.2.10. Mediation ICC (obligation to refer dispute to ICC mediation rules, followed by arbitration if required) ... 348 References ... 349 CHAPTER 17. SIGNING OF THE SHARE PURCHASE AGREEMENT ... 351 1. Formal requirements for valid execution ... 351 2. Number of originals ... 353 3. Sample clauses ... 354 3.1. Two signatories ... 354 3.2. Multiple signatories and waiver of article 1325 of the Civil Code . 355 3.3. Intervention of the target company as third-party beneficiary ... 355 References ... 356 Index... 357 Lexicon... 365
ISBN: 9781780683782
ISBN-10: 1780683782
Published: 25th February 2016
Format: Hardcover
Language: English
Number of Pages: 380
Audience: Professional and Scholarly
Publisher: Intersentia Ltd
Country of Publication: GB
Dimensions (cm): 16.8 x 24.6 x 3.0
Weight (kg): 0.79
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