28 August 2020

How share purchase agreements can help you avoid friction after selling your business

Selling your business is exciting both in terms of financial reward and the opportunities for future development. A sigh of relief is often felt on completion of the deal, but this is often premature as it is usually after completion that disputes begin to evolve.

A share purchase agreement is a bespoke document which is intricately drafted to deliver a smooth completion for the sale of a business – it can be vital in helping you resolve any issues or disputes with your buyer. Post completion pitfalls can result from missed deadlines, completion accounts and additional consideration provisions, such as earn outs. Early involvement of dispute resolution lawyers can be beneficial as an amicable resolution can often be achieved without the need for the involvement of experts.

Deadlines in a share purchase agreement are strict and must be adhered to. There is usually no recourse available to a buyer or a seller for a missed deadline following completion. It is very important to check the service provisions for written notices in the share purchase agreement to ensure that notices and completion accounts are both validly served on time and on the correct party or representative. Usually service is not effected by email and many disputes have arisen in this regard. There is no excuse for failing to adhere to the service provisions in a share purchase agreement and even the Covid-19 pandemic will not enable a party to bypass service timescales and methods.

Inevitably there are occasions where completion accounts and earn out figures are unable to be amicably agreed between the parties. Share purchase agreements will contain detailed provisions governing the appointment of an expert determiner to oversee such disputes. Using an expert determiner can be a quick and effective process and the share purchase agreement will govern how an expert can be appointed and in what circumstances.

If you’re considering selling or buying a business we can help by providing guidance on the application and interpretation of the share purchase agreement, or by representing you through an expert determination process.

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About the Author
Claire Holford, Partner

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