A company acquisition is a complex matter. As a result, various steps are usually necessary for a company acquisition to be carried out successfully:
After a preliminary phase, the parties often agree on a contract which, in addition to the subject matter of the contract, usually contains conditions under which it is to be executed. By signing the contract, both parties enter into obligations under the law of obligations. If the conditions stipulated in the contract are fulfilled, the contract is then executed accordingly (known as "closing").
The agreement of conditions always makes sense if the buyer or seller have an interest in the occurrence of an event or explicitly want to prevent such an event from occurring. These conditions can be agreed as conditions precedent or conditions subsequent.
A condition precedent exists if the effectiveness of the legal transaction is made dependent on the occurrence of a future uncertain event.
Conditions precedent could be, for example, the obtaining of approvals, the consent of third parties (landlords, suppliers, etc.), the transfer of material contracts, the release from liability of the company, the shareholders or the buyer, the dismissal or reappointment of managing directors, the payment of the purchase price or antitrust approvals.
Conditions subsequent are agreed less frequently. In the case of a condition subsequent, an existing legal transaction is terminated upon the occurrence of an event that is also in the future and uncertain at the time the contract is concluded. A condition subsequent could, for example, be agreed in the event that antitrust clearance has not been granted by a certain date.
The agreement of conditions can be particularly advantageous for the buyer. This is because the buyer often has to obtain numerous consents and fulfill numerous requirements in order for the company purchase to be completed in rem. However, the seller can also benefit from the agreement of certain conditions and obtain security. It is also possible for the contracting parties to mutually bind themselves to certain conditions.
However, which resolutory or suspensive conditions should be agreed for the specific company acquisition depends on the individual case. Not only the choice of conditions, but also the wording of these conditions is decisive for the successful conclusion of a company acquisition. It is therefore highly advisable to seek legal advice when acquiring a company in order to be able to assert your own interests in the best possible way.
Author:
Dr. Dominic John Patrick Porta, LL.M.
Attorney at Law (Düsseldorf Bar Association n° 52954)
Abogado (ICAIB n° 6645)
dominic.porta@anwaltmallorca.eu
www.anwaltmallorca.eu
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