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Preliminary agreements

What preliminary agreements are commonly drafted?

Commonly prepared preliminary agreements include confidentiality agreements and letters of intent (under a variety of names). As part of these documents or as a separate agreement, exclusivity arrangements are also commonly entered into.

Principal documentation

What documents are required?

In addition to the acquisition agreement itself, the transfer of legal ownership of shares requires a notarial deed of transfer executed by a civil law notary and the parties in the Netherlands.

In case of an asset transaction, the transfer of legal ownership of each individual asset should be assessed and may require additional documentation.

Which side normally prepares the first drafts?

In contrast to an auction process where the seller typically provides a draft acquisition agreement, the first draft acquisition agreement is generally prepared by the buyer.

What are the substantive clauses that comprise an acquisition agreement?

The acquisition agreement commonly includes the following substantive provisions:

  • the parties;
  • the object to the transaction (ie, a description of the target company or assets);
  • the purchase price and effective date of the transaction;
  • any conditions precedent (eg, merger clearance);
  • the pre-closing covenants;
  • the closing mechanics;
  • warranties and limitations of liability;
  • specific indemnities (if any);
  • post-closing covenants (eg, non-compete and access to information); and
  • miscellaneous provisions (eg, confidentiality, assignment, cost allocation, governing law and dispute resolution).

What provisions are made for deal protection?

In case of an acquisition of a non-listed company, exclusivity arrangements are commonly entered into as part of a letter of intent or separately. Generally, break fees are not agreed as part of an exclusivity agreement, although a breach of the exclusivity can lead to liability. Acquisition agreements generally do not contain break fee or fiduciary out arrangements.

In case of an acquisition of a listed company, deal protection is generally agreed in the form of break fees, matching rights and non-solicitation obligations. As a counterbalance, a fiduciary out for the target is generally agreed.

Closing documentation

What documents are normally executed at signing and closing?

The acquisition agreement is signed at signing. In addition, other documents agreed to be entered into in connection with the transaction may be signed at signing. However, these documents are typically signed only at closing.

At closing, the documents required to transfer legal ownership of the shares or assets are executed, together with other documents agreed to be entered into in connection with the transaction (eg, transitional services agreements).

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

The requirements for foreign companies when executing documents are the same as those regarding Dutch companies. However, counterparties may request confirmation that the foreign company is duly represented when executing the transaction documents (eg, through extracts from commercial registers or legal opinions).

Civil law notaries are subject to specific and strict regulations concerning the execution of documents. Consequently, notaries typically ask that any powers of attorney are notarised, apostilled and accompanied by confirmation from a local lawyer (or other person with similar standing) that the power of attorney has been signed by an authorised representative.

Are digital signatures binding and enforceable?

Most agreements can be entered into without any formal requirements (although a signed document is preferable from an evidentiary perspective) and agreements can be (and regularly are) entered into through exchanging scans of signed signature pages.

Agreements can also be entered into by means of a true digital signature as long as certain requirements are met, including with respect to the uniqueness of the digital signature.

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