Don’t follow precedents blindly
In M&A transactions, whenever I see the following in a draft transaction document, I guess the person preparing the draft has been copying from precedents without checking: 1. The draft refers to authorised share capital although the concept of authorised share capital for a Malaysian company has been abolished since the …
Have clear definitions in M&A agreements
In M&A transactions, the following terms are open to interpretation if used in transaction agreements without being defined: 1. Family Does “family” mean immediate family or extended family? Do the parties to the agreements intend for the term “family” to include adopted children, spouses of siblings and grandparents? 2. Affiliate …
Due Diligence for M&A transactions
𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝘄𝗵𝗶𝗰𝗵 𝗯𝘂𝘆𝗲𝗿 𝗰𝗮𝗻 𝗴𝗲𝘁 𝗳𝗿𝗼𝗺 𝗱𝗶𝗿𝗲𝗰𝘁𝗼𝗿𝘀’ 𝗮𝗻𝗱 𝘀𝗵𝗮𝗿𝗲𝗵𝗼𝗹𝗱𝗲𝗿𝘀’ 𝗺𝗶𝗻𝘂𝘁𝗲𝘀/𝗿𝗲𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻𝘀 𝗼𝗳 𝘁𝗮𝗿𝗴𝗲𝘁 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 • Whether shares have been properly issued with shareholders’ approval? • Has the target company circulated annual financial statements to shareholders? • Have the directors approved any unusual dividends? • Where a director is interested in a …
Lord of the Rings and lawyering
“𝘞𝘩𝘦𝘳𝘦 𝘥𝘪𝘥 𝘺𝘰𝘶 𝘨𝘰 𝘵𝘰, 𝘪𝘧 𝘐 𝘮𝘢𝘺 𝘢𝘴𝘬?’ 𝘴𝘢𝘪𝘥 𝘛𝘩𝘰𝘳𝘪𝘯 𝘵𝘰 𝘎𝘢𝘯𝘥𝘢𝘭𝘧 𝘢𝘴 𝘵𝘩𝘦𝘺 𝘳𝘰𝘥𝘦 𝘢𝘭𝘰𝘯𝘨. 𝘛𝘰 𝘭𝘰𝘰𝘬 𝘢𝘩𝘦𝘢𝘥,’ 𝘴𝘢𝘪𝘥 𝘩𝘦. 𝘈𝘯𝘥 𝘸𝘩𝘢𝘵 𝘣𝘳𝘰𝘶𝘨𝘩𝘵 𝘺𝘰𝘶 𝘣𝘢𝘤𝘬 𝘪𝘯 𝘵𝘩𝘦 𝘯𝘪𝘤𝘬 𝘰𝘧 𝘵𝘪𝘮𝘦?’ 𝘓𝘰𝘰𝘬𝘪𝘯𝘨 𝘣𝘦𝘩𝘪𝘯𝘥,’ 𝘴𝘢𝘪𝘥 𝘩𝘦.” I have always liked the exchange above between Thorin and Gandalf from J.R.R. Tolkien’s …
Binding clauses for term sheet
The first document that I usually draft for an M&A transaction is the term sheet (sometimes referred to as the letter of intent/ heads of agreement/ memorandum of understanding). The purpose of a term sheet is to serve as a framework for drafting the definitive sale and purchase agreement. A …
M&A: What to include in condition precedent clause
In a sale and purchase agreement for an M&A transaction, a condition precedent is a condition which must be fulfilled in order for the sale and purchase to proceed. A clearly drafted condition precedent clause should include the following: 1. What is the desired outcome/condition precedent to be fulfilled? 2. …
Lawyering
I sighed inwardly when I was greeted with three forms to fill when I attended my dental appointment. There was a form to fill in personal data, a privacy consent form and a questionnaire about medical history. The last form was a two-page questionnaire with ‘answer yes/no’ questions squeezed into …
M&A: Safeguards for buyers
In an M&A transaction, a purchaser may find that well-drafted representations, warranties and indemnities provided by the seller are not particularly helpful if the seller does not have the financial means to pay damages or honour the indemnities. Four ways to avoid this: 1. The seller to provide bank guarantee …
Nominee director’s duty
In an M&A transaction where the sale and purchase of shares is not for the entire issued share capital of a company, it is prudent for shareholders to enter into a shareholders’ agreement to govern their relationship. The shareholders would typically want the right to nominate their representatives to be …
Corporate law: More than just business
I decided early in my career that I would not go into practice areas which are more “personal”. Corporate laws seemed to be a more neutral choice. I probably got this wrong. *** One of the transactions I was involved in gave me a different insight. The vendors sold their …