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Documentation

Preliminary agreements

What preliminary agreements are commonly drafted?

It is common for heads of terms and memoranda of understanding to be signed as preliminary agreements in proposed M&A transactions. The parties also commonly enter into exclusivity and non-disclosure agreements before beginning negotiations on an M&A transaction. 

Principal documentation

What documents are required?

In the case of an acquisition of a private company by way of share purchase, the following are typical transaction documents:

  • the share purchase agreement (SPA);
  • a letter of disclosure by the seller addressing the warranties in the SPA;
  • the target’s board minutes in relation to the change of director, bank signatories, change of auditors and approval of share transfers on completion; and
  • instruments of transfer and share certificates for the shares being sold.  

In the case of a public takeover bid, the following are required:

  • an announcement of the intent to make a public offer or confirming the decision to make a public offer;
  • the offer document must include confirmation by a credit institution or other organisation that sufficient funds are available to satisfy full acceptance of the offer;
  • an acceptance and transfer form, issued by the offeror and sent to all of the target’s shareholders;
  • the reasoned opinion by the target’s board of directors sent to the target’s security holders accompanied by an independent expert report;
  • a revised offer document, where applicable; and
  • the final result of the offer announced and published in two daily national newspapers.

Which side normally prepares the first drafts?

In relation to the acquisition of private companies, in the context of an auction process, the first drafts are usually prepared by the seller (and commented on by the bidder as part of the offer process). In other cases, the first drafts are sometimes produced by the buyer.

In a takeover offer, the bidder prepares the offer document.

What are the substantive clauses that comprise an acquisition agreement?

A standard acquisition agreement typically contains the following substantive clauses:

  • conditions precedent to the transaction;
  • an obligation to sell and purchase the shares;
  • closing requirements;
  • representations and warranties;
  • limitations on the seller's liabilities with respect to the sale;
  • specific indemnities and guarantees;
  • specific provisions regulating tax and allocation of burden between the parties;
  • confidentiality restrictions;
  • boilerplate clauses relating to costs, notices, assignment, entire agreement and severance; and
  • governing law and jurisdiction clauses.

What provisions are made for deal protection?

Deal protection measures are uncommon in local M&A transactions. 

Closing documentation

What documents are normally executed at signing and closing?

On transactions where there is a period between signing and closing typically the following documents are signed:

  • the SPA;
  • disclosure letter; and
  • relevant corporate authorisations of the target approving the documentation being entered into and the transaction overall.

In a share acquisition, the following are executed on closing:

  • instrument of transfer;
  • waivers of pre-emption rights and any requisite consents;
  • resignation letters from officers and appointment letters for new officers;
  • updated disclosure letter;
  • new bank mandate forms; and
  • closing board minutes to record the closing of the transaction, the transfer of shares and closing actions.    

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

No specific formalities for the execution of documents by foreign companies exist in Cyprus.

Are digital signatures binding and enforceable?

Digital signatures are binding and enforceable in Cyprus under the Legal Framework for Electronic Signatures and Associated Matters Law (188(I)/2004), which transposes Directive 1999/93/EC on electronic signatures. Digital signatures are not widely used on M&A transactions.

It is standard practice in local M&A for fully conformed original documents to be exchanged at signing and completion. Scanned counterparts are often exchanged initially in cross-border transactions, with original documents subsequently being sent to the parties. 

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