Buying and Selling a Business
- CHAPTER 1 SALE OF SHARES OR ASSETS - OVERVIEW
- 1.1 THE SALE AND PURCHASE OF A PRIVATE LIMITED LIABILITY COMPANY
- 1.1.1 Engagement Letter / Appointment Letter
- 1.1.2 Letter Under Section 68 of the Solicitors (Amendment) Act, 1994
- 1.1.3 The Information Memorandum
- 1.1.4 The Confidentiality Agreement
- 1.1.5 Heads of Agreement / Letter of Intent / Memoranda of Understanding
- 1.1.6 Financial and Legal Due Diligence
- 1.1.7 Preparation and Negotiation of the Share Purchase Agreement and Tax Indemnity
- 1.1.8 Execution of Sale and Purchase Agreement and Completion
- 1.2 THE SALE OF ASSETS FORMING PART OF A BUSINESS
- 1.3 THE TAKEOVER OF A PUBLIC LIMITED LIABILITY COMPANY THE SHARES OF WHICH ARE LISTED ON THE IRISH STOCK EXCHANGE
- 1.4 TERMINATION OF NEGOTIATIONS PRIOR TO ENTERING INTO ACQUISITION AGREEMENT
- CHAPTER 3 TAX CONSIDERATIONS IN SHARE SALES
- 3.1 INTRODUCTION
- 3.2 WHAT ARE THE FUNDAMENTAL TERMS OF THE DEAL?
- 3.3 IS THE SELLING PARTY WITHIN THE CHARGE TO IRISH TAX?
- 3.4 TAX IMPLICATIONS OF SHARE SALES
- 3.4.1 Sale of Shares for Cash Consideration
- 3.4.2 Exchange of Shares in Target Company for Shares in Acquiring Company
- 3.4.3 Sale of Shares for Debt Consideration (e.g. Loan Notes)
- 3.4.4 Contingent Consideration (Earn-Outs and Working Capital Adjustments)
- 3.4.5 Assumption of Liabilities of the seller
- 3.5 TREATMENT OF SHARE OPTIONS IN TARGET COMPANY
- 3.5.1 Acceleration of the Exercise of Existing Share Options in the Target Company
- 3.5.2 Release or Cancellation of Existing Share Options for Cash, or Shares or Debt in the Acquiring Company
- 3.5.3 Exchange or Assumption of Existing Share Options in Target Company
- 3.6 PURCHASE OR RELEASE OF SHAREHOLDER DEBT IN TARGET COMPANY
- 3.7 CG50 CLEARANCE CERTIFICATES IN SHARE SALES
- 3.8 VAT ON EXPENSES INCURRED IN CONNECTION WITH SHARE SALES AND SHARE PURCHASES
- 3.9 OTHER CONSIDERATIONS
- CHAPTER 4 SHARE PURCHASE AGREEMENT
- 4.1 PREPARATION OF THE SHARE PURCHASE AGREEMENT
- 4.2 THE NECESSITY FOR A WRITTEN SHARE PURCHASE AGREEMENT
- 4.3 FORM OF SHARE PURCHASE AGREEMENT
- 4.4 THE PARTIES TO THE SHARE PURCHASE AGREEMENT
- 4.4.1 The Shareholders in the Target Company
- 4.4.2 The Purchaser
- 4.4.3 Parent Companies and the Persons having Ultimate Control of the Target Company
- 4.4.4 Whether the Target Company should be joined as a party to the Share Purchase Agreement
- 4.5 RECITALS
- 4.6 INTERPRETATION AND CONSTRUCTION
- 4.7 AGREEMENT FOR SALE AND PURCHASE
- 4.8 CONDITIONAL AGREEMENTS
- 4.8.1 Introduction
- 4.8.2 Conditions Subsequent and Conditions Precedent
- 4.8.3 Ownership of the Company Pending Satisfaction of the Conditions
- 4.8.4 Issues usually addressed in the Conditions
- 4.8.5 Period between Execution of Share Purchase Agreement and Completion
- 4.9 THE PURCHASE CONSIDERATION
- 4.9.1 Cash
- 4.9.2 Issue of Shares by the Purchaser or a member of the Purchaser's Group
- 4.9.3 Loan Notes/Debt Securities
- 4.9.4 Variable Consideration and Completion Accounts
- 4.9.5 Contingent Consideration
- 4.9.6 Deferred Consideration
- 4.9.7 Withholding Taxes Applicable to the Payment of the Consideration
- 4.10 COMPLETION
- 4.11 WARRANTIES AND INDEMNITIES
- 4.11.1 Introduction
- 4.11.2 The Purpose of Warranties
- 4.11.3 The Distinction between Warranties and Indemnities
- 4.11.4 Damages and Rescission
- 4.11.5 Substantive Warranty Provisions
- 4.11.6 The Schedule of Warranties
- 4.11.7 Limiting the Sellers/Warrantors' Liability under the Warranties
- 4.11.8 Purchaser's Warranties
- 4.12 RESTRICTIVE AND NON SOLICITATION COVENANTS
- 4.12.1 Introduction
- 4.12.2 The Validity of Restrictive and Non Solicitation Covenants at Common Law
- 4.12.3 The Validity of Restrictive and Non-Solicitation Covenants under the Competition Act, 2002
- 4.12.4 The Validity of Restrictions on the Disclosure of Confidential Information Under the Competition Act, 2002
- 4.12.5 The Validity of Restrictive Covenants and Non Solicitation Clauses Under Article 81 of the EC Treaty
- 4.13 CONFIDENTIALITY
- 4.14 ASSIGNMENT
- 4.15 MISCELLANEOUS CLAUSES
- 4.16 THE SCHEDULES
- CHAPTER 5 LEGAL DUE DILIGENCE
- 5.1 INTRODUCTION
- 5.2 THE EVOLUTION AND MEANING OF LEGAL DUE DILIGENCE
- 5.3 THE ADVANTAGES OF UNDERTAKING LEGAL DUE DILIGENCE
- 5.4 PROJECT MANAGEMENT AND THE ROLE OF PROFESSIONAL ADVISERS IN THE LEGAL DUE DILIGENCE PROCESS
- 5.5 ASCERTAINING THE PURCHASER'S OBJECTIVES
- 5.6 CLARIFICATION OF INSTRUCTIONS
- 5.7 THE LEGAL DUE DILIGENCE TIMETABLE
- 5.8 EXTERNAL AIDS TO LEGAL DUE DILIGENCE
- 5.9 THE LEGAL DUE DILIGENCE QUESTIONNAIRE
- 5.10 LEGAL DUE DILIGENCE IN A DATA ROOM
- 5.10.1 Time Limitations
- 5.10.2 Limitations in Number
- 5.10.3 Cost Implications
- 5.10.4 Photocopying/Dictaphones/Computers/Telephones
- 5.10.5 Location
- 5.11 INCOMPLETE LEGAL DUE DILIGENCE
- 5.12 THE LEGAL DUE DILIGENCE REPORT
- 5.13 STRUCTURE AND CONTENTS OF A LEGAL DUE DILIGENCE REPORT
- 5.13.1 Introduction
- 5.13.2 Executive Summary
- 5.13.3 Specific Sections
- 5.13.4 List of Documents Received
- 5.13.5 The Legal Due Diligence Questionnaire and requests for clarification and additional information and documentation
- 5.13.6 If applicable, a list of any areas in respect of which information is still awaited
- 5.14 INTERIM DRAFT LEGAL DUE DILIGENCE REPORT
- 5.15 LEGAL DUE DILIGENCE REVIEW OF TARGET COMPANY'S CONTRACTS
- 5.15.1 Names of Parties
- 5.15.2 Date and Commencement
- 5.15.3 Description of Contract
- 5.15.4 Governing Law
- 5.15.5 Term
- 5.15.6 Termination
- 5.15.7 Change of Control
- 5.15.8 Assignment
- 5.15.9 Competition Law
- 5.16 LEGAL DUE DILIGENCE WARRANTIES
- 5.17 ACHIEVING EFFECTIVE DUE DILIGENCE FROM A SELLER'S PERSPECTIVE
- CHAPTER 7 LEGAL AGREEMENTS - TAX ISSUES
- 7.1 INTRODUCTION
- 7.2 OVERVIEW OF THE LEGAL AGREEMENT PROCESS
- 7.3 CONTENTS OF THE SHARE PURCHASE AGREEMENT
- 7.4 TAX WARRANTIES
- 7.5 TAX DEED OF INDEMNITY
- 7.6 DISCLOSURE LETTER
- 7.7 TAX MATTERS TO CONSIDER IN A SHARE PURCHASE AGREEMENT
- 7.8 TAX CLEARANCE ON SALE OF SHARES
- 7.9 TAX CLEARANCE ON SALE OF ASSETS
- 7.10 CONCLUSIONS
- CHAPTER 8 THE DISCLOSURE LETTER
- 8.1 INTRODUCTION
- 8.2 PREPARATION OF THE DISCLOSURE LETTER
- 8.3 CONTENTS AND STRUCTURE OF THE DISCLOSURE LETTER
- 8.3.1 Introduction and Interpretation of the Disclosure Letter
- 8.3.2 The General Section of the Disclosure Letter
- 8.3.3 The Specific Section of the Disclosure Letter
- 8.4 RULES OF CONSTRUCTION APPLICABLE TO THE DISCLOSURE LETTER
- 8.4.1 Disclosure is a matter of construction of the language used to convey the disclosure
- 8.4.2 Achieving Effective Disclosure Through the use of Attachments to the Disclosure Letter
- 8.4.3 The Four Principal Rules of Construction
- 8.4.4 Burden on Purchaser to Require Clarification if it cannot Decipher the Disclosure
- 8.4.5 Disclosure by Reference to External Sources of Information
- 8.5 PURCHASER'S KNOWLEDGE OF SELLER'S BREACH OF WARRANTY WHERE KNOWLEDGE IS DERIVED INDEPENDENTLY OF THE DISCLOSURE LETTER.
- 8.6 CONCEALMENT OF INFORMATION FROM THE DISCLOSURE LETTER
- CHAPTER 9 TAX CONSIDERATIONS IN ASSET SALES
- 9.1 INTRODUCTION
- 9.2 WHAT ARE THE FUNDAMENTAL TERMS OF THE DEAL?
- 9.3 IS THE SELLING COMPANY WITHIN THE CHARGE TO IRISH TAX?
- 9.4 TAX IMPLICATIONS OF ASSET SALES
- 9.4.1 Sale of Assets for Cash Consideration
- 9.4.2 Sale of Assets for Share Consideration
- 9.4.3 Sale of Assets for Debt Consideration (e.g. Loan Notes
- 9.4.4 Contingent Consideration (Earn-Outs and Working Capital Adjustments
- 9.4.5 Assumption of Liabilities of the Seller
- 9.5 VAT ON SALES OF ASSETS COMPRISING A BUSINESS
- 9.6 CG50 CLEARANCE CERTIFICATES IN ASSET SALES
- CHAPTER 10 THE ASSET PURCHASE AGREEMENT
- 10.1 INTRODUCTION
- 10.2 PREPARATION OF THE ASSET PURCHASE AGREEMENT
- 10.3 THE NECESSITY FOR A WRITTEN ASSET PURCHASE AGREEMENT
- 10.3.1 The Legal Requirements
- 10.3.2 Minimising Liability to Ad Valorem Stamp Duty by Avoiding Written Asset Purchase Agreement and other Chargeable Instruments
- 10.4 FORM OF ASSET PURCHASE AGREEMENT
- 10.5 THE PARTIES TO THE ASSET PURCHASE AGREEMENT
- 10.6 RECITALS
- 10.7 INTERPRETATION AND CONSTRUCTION
- 10.8 AGREEMENT FOR SALE AND PURCHASE OF THE ASSETS.
- 10.8.1 Sale of a Business as a Going Concern
- 10.8.2 Sale of Assets on a Break-up Basis
- 10.8.3 Sale of Part of a Business
- 10.8.4 Identification of the Assets in Sale
- 10.8.5 Seller sells the Assets as Beneficial Owner
- 10.8.6 Excluded Assets
- 10.8.7 Liabilities
- 10.8.8 Contracts of Insurance
- 10.9 CONDITIONAL AGREEMENTS
- 10.9.1 Introduction
- 10.9.2 Conditions Subsequent and Conditions Precedent
- 10.9.3 Ownership of the Assets Pending Satisfaction of the Conditions
- 10.9.4 Issues usually addressed in the Conditions
- 10.9.5 Period between Execution of Asset Purchase Agreement and Completion
- 10.10 THE PURCHASE CONSIDERATION
- 10.10.1 A Fixed Amount of Consideration Apportioned Amongst the Assets and Ad Valorem Stamp Duty Considerations
- 10.10.2 Variable Consideration and Completion Accounts
- 10.10.3 Contingent Consideration
- 10.10.4 Deferred Consideration
- 10.10.5 Withholding Taxes Applicable to the Payment of the Consideration
- 10.11 COMPLETION AND THE TRANSFER OF LEGAL TITLE TO THE ASSETS
- 10.11.1 Freehold and Leasehold Properties
- 10.11.2 Fixed and Movable Property
- 10.11.3 Intellectual Property (General
- 10.11.4 Copyright
- 10.11.5 Trademarks
- 10.11.6 Patents
- 10.11.7 Intellectual Property Licences
- 10.11.8 Goodwill and Seller's Name
- 10.11.9 The Benefit of Contracts, Leases and Hire Purchase Agreements with Customers, Suppliers and other Third Parties
- 10.11.10 Stock and Work-In-Progress
- 10.11.11 Prepayments and Apportionments
- 10.12 WARRANTIES AND INDEMNITIES
- 10.12.1 Introduction
- 10.12.2 Substantive Warranty Provisions
- 10.12.3 The Schedule of Warranties
- 10.12.4 Limiting the Seller's Liability under the Warranties
- 10.12.5 Purchaser's Warranties
- 10.13 EMPLOYEES
- 10.14 RESTRICTIVE AND NON SOLICITATION COVENANTS
- 10.15 CONFIDENTIALITY
- 10.16 ASSIGNMENT
- 10.17 VALUE ADDED TAX
- 10.18 ANNOUNCEMENTS TO CUSTOMERS
- 10.19 MISCELLANEOUS CLAUSES
- 10.20 THE SCHEDULES
- CHAPTER 12 EMPLOYMENT ISSUES
- 12.1 INTRODUCTION
- 12.2 OBJECTIVES
- 12.3 TUPE or not TUPE?
- 12.4 THE TRANSFER OF UNDERTAKINGS LEGISLATION
- 12.4.1 Source of Legislation
- 12.4.2 Summary of the Regulations
- 12.4.3 Application of the Regulations
- 12.4.4 Do the Regulations apply to this type of transaction?
- 12.4.5 Do the Regulations apply to this particular transaction?
- 12.4.6 If the Regulations apply, which employees are protected by them?
- 12.4.7 What are the effects of the Regulations?
- 12.4.8 Terms and Conditions of Employment
- 12.4.9 Variation of Terms and Conditions of Employment
- 12.4.10 Remedies for Unlawful Change to Terms and Conditions of Employment
- 12.4.11 Transfer of Collective Agreements/Union Recognition.
- 12.4.12 Special Protection against Dismissal
- 12.4.13 The ETO Defence and the Unfair Dismissals Legislation
- 12.4.14 Remedies for Unfair Dismissals
- 12.4.15 Obigation to Inform and Consult with Employees
- 12.4.16 Practical Considerations
- 12.4.17 Enforcement of Employees' Rights under the Regulations
- 12.5 EMPLOYMENT LAW ISSUES WHERE THE TRANSFER OF UNDERTAKINGS LEGISLATION DOES NOT APPLY
- 12.5.1 Workforce Reduction/Redundancies
- 12.5.2 Government Loans/Grants
- 12.5.3 Changes to Terms and Conditions of Employment
- 12.5.4 Non-Compete Covenants
- 12.6 PRACTICAL CONSIDERATIONS
- 12.6.1 Share Sale or Asset Sale?
- 12.6.2 Alternative Methods of Structuring Business Transfers
- 12.6.3 Due Diligence
- 12.6.4 Pensions
- 12.6.5 Seller and Purchaser Indemnities if the Regulations Apply
- 12.6.6 Warranties
- 12.7 CONCLUSION
- CHAPTER 13 OTHER LEGAL ISSUES
- 13.1 STATUTORY CONTROL OF MERGERS AND ACQUISITIONS OF COMPANIES AND BUSINESSES
- 13.1.1 Control of Mergers and Acquisitions under Part 3 of the Competition Act, 2002
- 13.1.2 Merger Control Under Council Regulation (EEC) No. 4064/89 (as amended by Council Regulation (EEC) No. 1310/97)
- 13.1.3 Statutory Control of Acquisitions and Disposals of Interests in Banks, Stock Exchanges, Stock Broking Firms and Credit Institutions
- 13.2 FINANCIAL ASSISTANCE
- 13.3 REMOVAL OF DIRECTORS (EXECUTIVE AND NON EXECUTIVE) FOLLOWING ACQUISITION
- 13.4 CROSS BORDER AND INWARD INVESTMENT CONSIDERATIONS
- 13.4.1 Governing Law and Jurisdiction
- 13.4.2 Incentives to Inward Investment in Ireland
- 13.4.3 Restrictions on Foreign Investments in Irish Businesses
- 13.4.4 The Requirement for an Irish Resident Director or Security Bond
- 13.5 SECURITY FOR SELLERS/WARRANTORS' LIABILITY
- 13.5.1 Guarantees, Mortgages, Pledges
- 13.5.2 Escrow and Deferred Payment Arrangements
- 13.5.3 Security where consideration is paid in shares
- 13.6 INSURING SELLERS/WARRANTORS' LIABILITY
- 13.7 REDUCING RISK BETWEEN EXECUTION AND COMPLETION