Reading for Lecture 11.

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Legal documentation and the art of closing

i) Types of Buy/Sell Agreements;

ii) Share Purchase Agreement (SPA);

iii) Subscription Agreement;

iv) Shareholder Agreements.

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Types of buy/sell agreements

When negotiations on a proposed acquisition reach the point of binding agreement, the lawyers face an elaborate process of document drafting to reflect the terms of the transaction.
Herein below a list of fundamental Buy/Sell Agreements:

Share Purchase Agreement (SPA)

Share Subscription Agreement

Shareholders' Agreement.
These basic agreements may be completed with complex annexes or additional separate agreements may be included in the whole package of Transaction Documents (such as Put/Call option agreements, off-take agreements, supply agreements, etc..) Please note that for convenience we are using types of agreements and wording commonly in use within the English law.
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Share Purchase Agreement (SPA)

The SPA is the basic document with respect to an acquisition (generally assets or pre-existing shares). The document spells out all the conditions that must be met before a closing/payment can take place. Moreover the agreement deals with various representations and warranties.
The SPA generally contains: A Statement of the purpose of the transaction;

A list of definition of terms in the agreement;

A description of the assets or shares to be sold and the selling price;

Representation, warranties, and agreements of both the buyer and the seller; Provisions on the conduct of the target business between the agreement and closing dates; Conditions precedents to the payment of the price/consideration;
Indemnification provisions, Covenants, and Miscellaneous.
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Subscription Agreement
This agreement is employed by a buyer to subscribe for new shares issued by the Target. The subscription agreement generally contains: Details about the subscription (quantity of shares, % of capital subscribed, voting rights etc.); Representation, warranties, and agreements of both the buyer and the seller; Suspension and cancellation; Conditions precedents (CPs); Company undertakings; Miscellaneous. Parties to the SA are not only the main shareholders but also the Target itself as it is the Company which is issuing the new shares.

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Shareholders Agreement
A shareholders' agreement is an agreement amongst the shareholders of a company (some or all of them). Generally the agreement has the following contents: Undertakings of the Shareholders (corporate governance, management appointments and business plan or post-acquisition plan); Agreements regarding the General Meeting of Shareholders; Board of directors (member numbers, appointment, etc.); Transfer or restriction on transfer of shares; Right of First Offer/Refusal; Pre-emptive Rights; Tad and drag along clause; Other exit arrangements such as Put or Call Options, IPO commitments etc...
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Closing
When the acquisition agreement is signed some important tasks must be completed before the transaction can close: Reporting the News Dealing with the Regulators Testing the warranties; Monitoring the covenants; Obtaining Consents (from various stakeholders); Completing financing arrangements; Prepare the Proxy statements; Arranging the Shareholder Meeting; Transfer documents and payments; transfer of shares.
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