I am going to buy or sell a company: how the deal works
Buying or selling a company is not a single signature: it means reviewing the company (due diligence), negotiating the price and the warranties, and structuring the share or quota purchase agreement (SPA) with its closing conditions. A mistake at this stage is costly.
The deal may be a share deal (buying shares/quotas, i.e. acquiring the company with its history and liabilities) or an asset deal (buying assets, without the company). Each has different legal and tax consequences.
- Sign a confidentiality agreement and, where appropriate, a letter of intent
- Carry out legal, accounting and tax due diligence
- Decide on a share deal or an asset deal
- Negotiate price, adjustments and warranties (reps & warranties)
- Check that the holdings are paid in and any transfer clauses
- Structure the closing and the conditions precedent
Due diligence: knowing what you buy
Before buying, you must review the title to the holdings, contracts, debts, litigation, regulatory compliance and labour and tax contingencies. The findings affect the price and the warranties.
The contract and the warranties
The purchase agreement (SPA) sets the price and its adjustments, the seller's representations and warranties, the indemnities and the closing conditions. Checking that the quotas or shares are paid in avoids triggering liabilities (secs. 150 and 210 CA).
Closing and registration
In a share deal, the transfer of shares is perfected by entry in the share register (sec. 215 CA); the transfer of quotas, by notice to the management and registry filing (sec. 152). Closing is usually subject to conditions (approvals, no material adverse change).
Common mistakes
- Buying without due diligence and inheriting hidden liabilities
- Not agreeing seller warranties or indemnities
- Ignoring statutory pre-emption or consent clauses
- Not checking that the holdings are paid in
- Overlooking regulatory approvals (e.g. merger control)
Applicable rules
- Sec. 215 CA — transfer of shares.
- Sec. 152 CA — transfer of quotas.
- Sec. 153 CA — limits on transfer.
Frequently asked questions
What is due diligence?
Share deal or asset deal?
What are reps & warranties?
When do I own the shares I bought?
Buying or selling a company?
We assist with due diligence, the agreement and the closing of the deal.
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