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Where is the method by which completion takes place usually included?
In a clause of the sale and purchase agreement
In an acquisition - when does completion normally take place
At the same time as, or straight after, exchange of contracts
Name one reason why completion may not be at the same time as exchange? What happens when this occurs?
Because obtaining the necessary consents and apporovals may take time and parties may not wish to delay exchange.
The sale and purchase agreement may be made conditional
If an agreement is made conditional, name 3 things which must be clearly stated in it
- 1. Each party's obligations in respect of each condition
- 2. The date by which each condition must be met
- 3. Any right to terminate the agreement prior to completion
If there is a conditional contract, will the buyer want a contractual right to withdraw from the purchase is a major problem occurs prior to completion?
Why might the seller be unwilling to agree to this?
The amount of protection given to the buyer depends on the original reason for imposing the condition. If the condition is a requirement of the buyer, e.g. buyer's shareholder approval, then the seller may argue that the buyer should assume the risk of any delay
Name 3 common conditions precedent in a conditional sale and purchase agreement
1. An obligation on one party to take all reasonable steps to try to procure the satisfaction of the condition as early as possible (or on both parties to co-operate in taking such steps)
2. A long-stop date by which the conditions must be satisfied/waived by the party for whose benefit they were included
3. If conditions are fulfilled prior to the long-stop date a provision for completion to take place within a certain number of days of this
When does the buyer take control of the business?
Why might this be a problem if there is a long period of time between exchange and completion?
What can be done to resolve this problem? (3 things)
The buyer will be contractually bound following exchange. The seller may neglect the business during the period between exchange and completion.
1. The buyer will require the seller to give undertakings about how the business will be run during this period
2. The buyer may also require that warranties and representations in the SPA are repeated at completion.
3. The buyer may also try to include a right to terminate in the event of a material adverse change
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