UNIVERSITATEA OVIDIUS DIN CONSTANȚA

FACULTATEA DE DREPT ȘI ȘTIINȚE ADMINISTRATIVE

SPECIALIZARE: ADMINISTRAȚIE PUBLICĂ, ANUL I
DISCIPLINA: LIMBA ENGLEZĂ

SEMINAR PROJECT
"The legal features of the sale-purchase
contract"

Profesori coordonatori, Studenți,

Prof. Univ. Dr. Lavinia- Florin Crețu
Alexandra Istratie -Macarov Chirița Marian-Liviu
"The Sale and Purchase Agreement (SPA) is a legally binding contract
outlining the agreed conditions of the buyer and seller of a property (e.g.
corporation). It is the main legal document in any sale process. In essence, it
sets out the agreed elements of the deal, includes a number of important
protections to all the parties involved and provides the legal framework to
complete the sale of a property. The SPA is therefore of critical importance to
both sellers and buyers."(Source: www.corporatefinanceinstitute.com)
"Essentially, the sale and purchase agreement spells out all the details of the
transaction so that both parties share the same understanding. Terms typically
included in this agreement include the purchase price, the closing date, and the
amount of earnest money that the buyer must submit as a deposit and the list
of items that are and are not included in the sale." (Source:
www.wikipedia.org)
"The sale and purchase agreement is possibly the most important document
in an owner’s business life. For this reason, it should be approached carefully
and rigorously, with legal experts guiding both the seller and the
buyer."(Source: www.klassing-associates.com)

Common features and provisions of a Sale and

Purchase Agreement (SPA)

#1 Parties to the agreement

"In the simplest form of a sale where the company being sold is wholly
owned by a single person or parent company and is being bought by a single
buyer, there are only two parties to the agreement. However, additional
parties will be involved where, for example, there are multiple shareholders
in the company being sold. In these cases, each of the shareholders will need
to enter into the SPA agreement to sell their shares."
#2 Agreement to sell and purchase
"This is often the shortest and simplest provision in the SPA. However, it is
one of the most important as it ensures that full legal ownership to the shares
(also known as “title”) is properly transferred together with all the relevant
rights that attach to the shares (e.g. rights to dividends). The provision will
also normally state that the shares are free from any encumbrances, giving the
buyer comfort that the seller has not pledged any of the shares to a bank or
other lender."
#3 Consideration
"Consideration for an acquired company is paid by buyers to a seller in the
form of cash, debt (such as a loan note issued by the buyer), shares in the
buyer, or a combination of these."
#4 Restrictive covenants
"The buyer will want to prevent the seller from establishing any new
competitive business that will impair the value of the company being sold.
The SPA will, therefore, contain restrictive covenants that prevent the seller
(for a specified period and within specified geographic regions) from
soliciting existing customers, suppliers or employees and from competing
generally with the company being sold. These restrictive covenants must be
reasonable in geography, scope and duration otherwise they may contravene
competition law."
#5 Warranties and indemnities
"Warranties are statements of facts made by a seller in the SPA relating to the
condition of the company being sold. If a warranty subsequently proves to be
untrue and the value of the company is reduced, the buyer may have a claim
for breach of warranty. Warranties will cover all areas of the company
including its assets, accounts, material contracts, litigation, employees,
property, insolvency, intellectual property and debt.
If more specific risks are identified during due diligence, it is likely that these
will be covered by an appropriate indemnity in the SPA under which the
seller promises to reimburse the buyer on a pound for pound basis for the
indemnified liability."
#6 Conditions precedent
"Simultaneous signing and completion of a deal (where the parties sign the
SPA and complete the sale on the same day) is the preferred and simplest
way of concluding a deal. Sometimes, however, there is a need for a time gap
between signing and completion in order to satisfy certain final outstanding
conditions. These are known as “conditions precedent” and commonly
include tax authority clearances, merger approval by authorities, and consent
from third parties (for example, where a change of control provision exists in
a material contract of the company being sold).
Unless the parties agree otherwise, the sale agreement falls away if all of the
conditions present are not satisfied by an agreed date (the “longstop date”). It
is therefore critical that the SPA sets out how to determine when the
conditions precedent have been satisfied, and when they are no longer
capable of being satisfied. It should also specify which of the parties is
responsible for satisfying each particular condition precedent. The relevant
party will be obliged to use its reasonable endeavors to satisfy the relevant
conditions precedent by the longstop date."
#7 Completion
"Completion is when legal ownership of the shares transfers to the buyer,
resulting in the buyer owning the target company. A completion schedule in
the SPA will normally list all of the documents to be signed and other actions
necessary for completion to affect the deal."
#8 Post Completion
"Following completion, the SPA continues to be an important document for
reference as it covers how any earn-out is to work and contains restrictive
covenants, confidentially obligations, warranties, and indemnities, all of
which will remain very relevant."
Source: www.legeaz.net; www.corporatefinanceinstitute.com
 BIBLIOGRAPHY

1. www.corporatefinanceinstitute.com
2. www.klasing-associates.com
3. www.wikipedia.org
4. www.legeaz.net