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What preliminary agreements are commonly drafted?
It is common for heads of terms and non-binding offer letters to be drafted in order to outline the basic terms of a proposed M&A transaction. It is also common for exclusivity, non-disclosure or similar confidentiality agreements to be prepared and entered into at the start of an M&A transaction.
What documents are required?
In a sale by private treaty, typical documents include:
- the sale and purchase agreement;
- a disclosure letter qualifying the warranties (produced by the seller);
- a tax deed of covenant under which the seller agrees to pay to the buyer amounts in respect of pre-closing tax liabilities of the target;
- the target’s board minutes in relation to the change of director, change of auditors and approval of share transfers on completion;
- stock transfer forms;
- any applicable change of control consents; and
- any applicable release of security documents.
On a recommended bid (takeover offer), the target's shareholders will, at a minimum, receive:
- the circular summarising the terms and conditions of the offer (and a copy of the Rule 2.7 announcement to shareholders);
- the offer document, which contains extensive information on the bid, the bidder and the target and, in a recommended bid, the target board's recommendation to its shareholders to accept the bid;
- an acceptance form; and
- the prospectus or equivalent document (if required).
In addition to the above, the target's shareholders will receive the following on a hostile bid:
- defence documents; and
- a revised offer document.
For a scheme of arrangement, a scheme document (prepared by the target with some input from the bidder) must be prepared.
Which side normally prepares the first drafts?
Private treaty sale – in an auction, the first drafts are usually prepared by the seller (and commented on by the bidder as part of the offer process); in a bilateral arrangement, the first drafts are sometimes produced by the buyer.
Takeover offer – the bidder prepares the offer document.
Scheme of arrangement – the target prepares the scheme document.
What are the substantive clauses that comprise an acquisition agreement?
In a sale and purchase agreement, typical provisions include:
- a general obligation to sell and purchase the shares;
- conditions and closing requirements;
- limitations on the seller's liabilities with respect to the sale;
- specific indemnities (the tax deed and certain other indemnities may be contained in separate deeds of indemnity);
- non-compete restrictions;
- a parent company guarantee (usually in respect of the seller);
- confidentiality restrictions;
- boilerplate clauses relating to announcements, costs, interests, notices, assignments, third-party rights, entire agreement and further assurance; and
- governing law and jurisdiction clauses.
What provisions are made for deal protection?
Break fees were traditionally commonplace in larger cross-border transaction. However, the general prohibition on deal protection measures (including inducement fee agreements) which were set out in the UK City Code on Takeovers and Mergers in September 2011 apply to relevant transactions involving Jersey companies.
Otherwise, deal protection measures have not historically featured as a significant part of local M&A transactions.
What documents are normally executed at signing and closing?
If signing and closing are not contemporaneous, the sale and purchase agreement (and any applicable covenant or indemnity) and the disclosure letter are signed at signing. Other documents are usually in agreed form. Corporate authorisations of the target approving the documentation that is being entered into and the transaction overall are also signed at this stage.
In a share sale, the following are produced and executed on closing:
- stock transfer form(s);
- any waivers or consents to give full and legal beneficial title;
- resignation letters from officers and appointment letters for new officers;
- new bank mandate forms; and
- board meetings and minutes to record the formal transfer and resignations and appointments.
Are there formalities for the execution of documents by foreign companies?
Under Jersey law, there are no formalities for the execution of documents by foreign companies.
Are digital signatures binding and enforceable?
The Electronic Communications (Jersey) Law 2000 provides that the requirement in an enactment to provide a signature may be satisfied by an electronic communication. Further, electronic signatures can be used as a means of identifying a person by a computer-generated code rather than a handwritten signature.
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