Our corporate team recently acted for an EU-based Data Centre in the sale of its entire issued share capital to another EU company. The transaction was high value and  also involved the sale of a single plot of land. Our brief was to:

• Conduct a high-level review of due diligence documents in the data room
• Liaise with multiple international parties
• Negotiate the Share Purchase Agreement and ancillaries with the buyer’s legal advisors in multiple jurisdictions
• Deal with the property law aspects of the transaction
• Deal with the complex IP and GDPR and data issues
• Ensure smooth completion of the sale.

What should be included in a Share Purchase Agreement?

• Sale and Purchase of Shares – this section typically specifies the number of shares to be acquired. It also states the rights, title and interest acquired in the shares by the purchaser as well as the nominal value of the shares.
• Purchase Price – this section states the total consideration for the purchase of the shares
• Completion – this section specifies when the purchase of the shares will be completed. I.e simultaneously on completion or otherwise. Both the Seller’s and the Buyers completion obligations will also be set out under this section.
• Representations and Warranties – this section is for the protection of the buyer and specifies the basis upon which warranties are given by the sellers in relation to the business and the transaction and what remedies are available to the buyer for any breach of those warranties.
• Limitations on Claims – those providing warranties will want to ensure part of their liability is limited, this will be covered in this section. There are also some statutory exceptions to what can be limited within Contract.
• Indemnities – this section acts as an express obligation to compensate the beneficiary of the indemnity for some defined loss or damage arising from a particular cause.
• Post Completion Restrictions – this section specifies any restrictions the buyer would like to place on the seller, such as ‘restraint of trade’, for example.
• Confidentiality and non-disclosure – it is common for both parties to want to oblige the other to keep information in relation to each other’s businesses, and the transaction, confidential.
• Miscellaneous Provisions – miscellaneous provisions are an essential component of any well-drafted agreement. They include information in relation to Governing Law and Jurisdiction, terms of Variation, Waiver and Severance, how Disputes are to be handled and how and where notices should be sent amongst other things.

What other legal documents are needed on a business sale?

• Board Minutes;
• Stock Transfer forms;
• Resolutions;
• SH01 / SH07 forms;
• Share Certificates; and
• PSC Notices.

In some cases, Shareholders Agreements, Loan Notes, Employment contracts, Escrow Deeds and Non-disclosure Agreements may be necessary.

What issues tend to be most difficult when dealing with the legal aspects of a business sale?

Over the course of the transaction, we had to focus on the detailed due diligence exercise and extensive negotiation of warranties, representations, indemnities and the tax covenant.

Warranties, representations, indemnities and tax covenants are major provisions within Share Purchase Agreements. A warranty is a guarantee that something is as promised and a representation is an assertion of fact; these allocate risk between the parties and form the basis for any potential future claims.

Indemnities are contractual obligations of one party to compensate the loss incurred to the other party for any breach of contract (including the warranties and representations). A tax covenant plays a major role in these types of transactions. A tax covenant is a contractual promise by the seller to pay to the buyer an amount equal to any tax liability of the target company – for this reason it is often heavily negotiated and often requires expert financial advice.

Solicitors for selling a business

The deal completed with the client entering into a robust Share Purchase Agreement further to an exhaustive due diligence and disclosure exercise to protect their position against future claims from the buyer. The client was happy with the service provided and continues to work with us.