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Documentation

Preliminary agreements

What preliminary agreements are commonly drafted?

Letters of intent

As a rule, a letter of intent is entered into when a proposed transaction appears to be complex. In such cases, the process from the beginning of the due diligence until the signing of the acquisition agreement will likely take some time and will result in costs for both parties.

A typical letter of intent provides the key points of the intended transaction – namely:

  • the agreed structure (eg, a share deal, an asset deal or a pre-closing restructuring);
  • the purchase price or the formula for calculating the purchase price and mechanism of payment (eg, payment in instalments, earn-out, escrow payments, holdback);
  • the schedule for the completion of the due diligence, negotiation, signing and closing; and
  • the cost bearing.

Letters of intent are usually agreed as non-binding. However, some of the provisions are often agreed as binding (eg, break-up fees, confidentiality obligations, exclusivity and dispute resolution).

Further, the general obligation in a letter of intent to negotiate in good faith requires the parties to inform each other of all matters that they should be aware of in relation to the proposed transaction (eg, that a specific financing solution for the transactions has yet to be guaranteed by a bank or that the transaction requires the board and/or shareholders' approval). A violation of this obligation constitutes culpa in contrahendo liability and may result in compensation payments. 

Exclusivity agreements

Letters of intent usually include exclusivity obligations. However, parties often wish to have an exclusivity obligation even when a letter of intent is unnecessary or during the early stages of a transaction when such a letter cannot yet be negotiated and entered into.

Confidentiality and non-disclosure agreements

Letter of intent usually include confidentiality obligations. However, if, for instance, an exchange of information and documents is required or desired at an early stage, it might be reasonable to agree such obligations before a letter of intent is negotiated and executed. Further, a confidentially and non-disclosure agreement is advisable even if no letter of intent will be concluded. Therefore, separate confidentiality and non-disclosure agreements are often entered into at the beginning of an acquisition.

Principal documentation

What documents are required?

The principal documents in a Swiss acquisition are:

  • a purchase agreement (a share or asset purchase agreement); and
  • a disclosure letter that qualifies the seller’s representations and warranties.

Which side normally prepares the first drafts?

Normally, the buyer prepares the first draft of the purchase agreement and the seller prepares the first draft of the disclosure letter.

However, in a tender sale, the seller usually prepares the first draft of the purchase agreement so that the bidders can provide a mark-up with their offers.

What are the substantive clauses that comprise an acquisition agreement?

The substantive clauses in a share purchase agreement are:

  • the definitions;
  • the sale and purchase of the shares;
  • the purchase price (including adjustments and the payment mechanism);
  • closing (including conditions precedent and closing actions);
  • representations and warranties;
  • remedies;
  • special indemnifications;
  • further obligations (eg, non-compete, announcement and confidentiality obligations);
  • miscellaneous provisions (including costs, taxes, amendments and notices); and
  • the applicable law and jurisdiction or arbitration clause.

 

The substantive clauses in an asset purchase agreement are:

  • the definitions;
  • the sale’s object (the assets and liabilities are usually specified in annexes);
  • the purchase price (including adjustments and the payment mechanism);
  • closing (including conditions precedent and closing actions);
  • representations and warranties;
  • remedies;
  • employees;
  • further obligations (eg, non-compete, confidentiality and announcement obligations and transition agreements);
  • miscellaneous provisions (including costs, taxes (particularly value added tax handling), amendments and notices); and
  • the applicable law and jurisdiction or arbitration clause.

What provisions are made for deal protection?

Typical deal protection measures are:

  • confidentiality or non-disclosure obligations (often stipulated in a separate agreement);
  • limited termination rights after the signing of the transaction agreement; and
  • break-up fees, including the other party's advisory costs.

Closing documentation

What documents are normally executed at signing and closing?

Signing

Upon signing, the following documents are usually executed:

  • the share or asset purchase agreement; and
  • the disclosure letter, if applicable.

Closing

At the closing of a share purchase agreement, the following documents are usually executed:

  • the endorsement of the share certificates or assignment declarations (in order to effectuate the transfer of the shares);
  • a resolution of the board of directors approving the share transfer, if applicable;
  • the updated share register (in which the buyer is entered as a new shareholder);
  • letters of resignation from the board members, if applicable;
  • confirmation from the buyer’s bank confirming the transfer of the purchase price
  • an escrow agreement, if applicable;
  • other agreements (eg, consulting and employment agreements), if applicable;
  • the Anti-money Laundering and Terrorist Financing documentation (ie, notification of the buyer’s beneficial owners and the updated register of beneficial owners); and
  • the closing minutes.

At the closing of an asset purchase agreement, the following documents are usually executed:

  • the documents and instruments required to complete the transfer of the assets and liabilities;
  • confirmation from the buyer’s bank of the transfer of the purchase price;
  • an escrow agreement, if applicable;
  • other agreements (eg, transitional agreements); and
  • the closing minutes, if applicable.

Are there formalities for the execution of documents by foreign companies?

In general, there are no specific formality requirements to adhere to with regard to transaction agreements. However, if the transaction entails registrations with or amendments to the commercial or land register, notarised and legalised documents may be required.

Are digital signatures binding and enforceable?

Under Swiss law, digital signatures are binding and enforceable, provided that they are an authenticated electronic signature based on an authenticated certificate issued by a provider of certification services within the meaning of the Federal Act on Electronic Signatures.