November 2016

Contract Drafting
Assignment num. 2

ASSIGNMENT NUM. 2

Exercise to be delivered before the session of 15 November 2016 through the Moodle system.
The solution to this assignment needs to be typewritten. Please indicate your full name in the
header of the document you deliver. The answer to each of the questions should not exceed
one page. The answers to these questions will be discussed and debated in class on the 15
November 2016.

QUESTIONS

Taking into account the share purchase agreement posted under session 8 of the Contract
Drafting class website, please analyse and comment on the following questions:

1. Three months after the execution of the share purchase agreement, an individual steals
the personal details of the CEO of the Company, assumes his identity and under such
identity sends emails to a finance controller of the Company instructing her to make
several wire transfers to a bank located in China. The financer controller wires a total
amount of 10,000,000. Once the fraud is discovered, the Company is not able to
recover such amount. Can the Buyer, under the share purchase agreement, claim an
indemnification to the Sellers? and to the Founding Sellers?

2. Six months after the execution of the share purchase agreement, the Brazilian tax
authorities carried out an inspection in connection with a tax issue arising from the
Brazilian subsidiary of the Company. Such issue was disclosed under the disclosure
letter provided to the Buyer upon the execution of the share purchase agreement. The
disclosure letter also states that the potential consequences to the above tax matter
would be a fine amounting to 5,000,000. The Brazilian tax authorities have imposed
a fine amounting to 2,750,000 and have requested the repayment of all related due
tax obligations amounting to 300,000. Are the Sellers under the share purchase
agreement liable to the Buyer? and the Founding Sellers? If yes, please describe the
procedure the Buyer has to follow in order to claim such liability.

3. One of the Sellers, under the share purchase agreement, is a venture capital entity.
Such Seller incorporated a special purpose vehicle (SPV) in Luxembourg with the
only purpose of investing in the Company. The SPV had no other assets besides the
relevant stake in the Company. After the execution of the share purchase agreement,
given the SPV has fulfilled its purpose, the shareholders of the SPV have decided to

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 November 2016
Contract Drafting
Assignment num. 2

wind up the SPV in order to distribute the proceeds arising from the sale of the
Company in a tax efficient manner to the ultimate investors of the venture capital
entity. Please analyse how the assignment provision under the share purchase
agreement plays in this situation. Describe not only whether such winding up is
possible or not under the share purchase agreement, but also its potential
consequences.

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