How to Draft Clear and Effective Conditions Precedent in M&A Transactions
The fulfilment of conditions precedent in an M&A transaction signifies that a sale and purchase agreement has become unconditional and the parties are obliged to complete the transaction. Failure by any party to complete the transaction after conditions precedent are fulfilled usually results in that party being liable to compensate …
Why should a company adopt a constitution?
In the context of an M&A transaction, why can’t shareholders solely rely on a shareholders’ agreement after completion of the transaction? Where there is more than one shareholder after completion, the next step after execution of a shareholders’ agreement is to either amend or adopt a constitution that is consistent …
Consistency in drafting
Consistency. Consistency matters a lot when drafting agreements. I was half amused and half exasperated when I saw an amended draft shareholders’ agreement which stated that shareholders may exercise certain rights by giving notice to the other shareholders. The next clause stated that the shareholders shall give notice to the …
M&A: Certainty of terms
It drives me a bit crazy sometimes when parties to transaction agreements request for ambiguous provisions to be included into agreements. By that I mean provisions which beg one or a combination of the following questions: -What needs to be done to achieve the desired result? -Who is responsible? -How …
Drafting reminder
Before you send out an amended draft agreement to your supervising partners, clients or counterparties’ counsels, do this: 1. Make sure you have made consequential amendments. It’s understandable if you miss out a few consequential amendments once in a while but it gets tiring if it happens in every draft. …
Beware of drafting error
A simple error in drafting could create a problem in the future. Consider the following scenario. A shareholders’ agreement sets out board composition and right of shareholders to nominate directors. A shareholder who holds majority of the shares in the company would usually have the right to nominate more directors …
Key issues to consider for a term sheet for joint venture
1. Parties Who are the parties to the joint venture? 2. Objective What is the objective of the joint venture? What business is the joint venture undertaking? 3. Structure What form/legal entity is the joint venture? 4. Shareholding What is the shareholding proportion of each party? What class of shares …
Three things to take note of in shareholders’ agreement
Shareholders’ agreement is a common agreement in an M&A transaction where there is more than one shareholder in the target company after completion of the transaction. The following are three requirements under the Companies Act 2016 of Malaysia (“𝗖𝗔”) to take note of when preparing a shareholders’ agreement: 1. Save …
The word “from” in contracts
Early in my career, an investment banker asked me how to calculate the number of days specified in a sale and purchase agreement for an M&A transaction. The agreement required Party A to do something not later 30 days from [specified date]. Does the 30 days include the specified date …
Drafting boilerplate clauses
Boilerplate clauses usually appear towards the end of an agreement. They are usually not contentious, although I have come across counterparties’ counsels who wanted to amend boilerplate clauses at the eleventh hour of negotiation. When asked for the rationale for the proposed amendments, none was given, and they retracted their …