Conflicts

A share transfer or asset/liability transaction is generally a complex process and has many pitfalls. It goes without saying that good advice on such a takeover contract is necessary, in which the agreements between the parties are clearly and correctly recorded.

Despite all the best intentions of the parties at the time of entering into the agreements, it may well be that a dispute arises regarding the meaning of certain wording in the sale and purchase agreement or related agreements. It could also be that certain aspects have not been covered at all in the share transfer agreement or not sufficiently. In these instances it is very important to seek legal advice in order to settle these matters by amending the agreement or by implementing the escalation procedure in the agreement. The latter should only be used when parties have tried their best to find a solution as going to court may not give you the answer that you are hoping for.

Post-acquisition disputes

We often have to deal with disputes that arise after an acquisition has taken place. For example, if the parties agree on what should be understood by different terms included in the agreement. Or when there is a disappointing turnover or goodwill. We often speak of an error; the agreement would not have been concluded – or would not have been concluded under the same conditions – if the facts had been correctly presented. It is important to be aware of the obligation of the buyer or seller to investigate and provide information.

In addition, a sale and purchase agreement is often accompanied by a subordinated loan or payment in instalments. It often happens that part of the purchase price is paid by the buyer in the form of a subordinated loan or in instalments and that the buyer is granted a right of suspension in respect of the obligations under that subordinated loan or instalment. In the event of an alleged breach of a provision of the takeover contract, this right of suspension shall then be exercised swiftly. Disputes often arise as to whether the buyer can invoke the right of suspension.

Other post-acquisition disputes may consist of:

• Violation of guarantees; in the case of a guarantee, the seller guarantees that certain facts, which relate to, for example, the shares, or (parts of) the business operations, do or do not occur.
• Infringement of warranties; in the case of an indemnification clause, the buyer is often fully compensated for the matters regulated in the indemnification clause. An indemnification generally relates to foreseeable risks of facts (communicated by the seller or resulting from, for example, a due diligence investigation) that are known or to be expected.
• Infringement of non-competition clauses; if the vendor undertakes vis-à-vis the purchaser not to engage in competitive activities with the transferred company.

Legal possibilities

In the case of post-acquisition disputes, we often see that compliance, dissolution and damages are claimed. Destruction of the agreement, with an invocation of error, may be one of the possibilities, but in practice we often see that this may be excluded. However, this does not alter the fact that in some cases annulment can nevertheless be invoked.

The above points are some of the various disputes that can arise from a readmission agreement. If you, as a buyer or seller of shares or of an asset/liability transaction, are involved in a takeover dispute, please submit it to us. We will make a process analysis for you and act on your behalf if the case is brought to court.