What services does a law firm offer in a business sale process?
We will describe below the main tasks that are often required of our advisory team for the sale of companies and other corporate operations.
However, our firm offers an additional service to what other law firms specialized in M&A ordinarily offer, since we take care of locating potential buyers of your company .
In our article How can I sell my company< /a> We explain the different phases that we approach when we receive a sales mandate from a client. Our objective is to locate potential buyers, get the best possible price, and guarantee the contractual conditions agreed between the parties.
The knowledge and experience in the search for buyers offers us a differential fact and positions us with better skills to defend the interests of those who want to sell or buy a business.
However, the objective of this article is to explain the more legal aspect of our work in a commercial operation of this nature, and that it coincides with the most common work offered by a law firm specialized in M&A.
It should be specified that the relevance of undertaking one or more of the following works will depend on the specific case, the client’s needs, and the type of operation under study:
Non Disclosure Agreement (NDA)
In the negotiation phases, the selling party is required to provide interested buyers with access to sensitive information, elements that somehow affect trade secrets, know how, and other confidential content.
In order for the operation to take place under the utmost privacy, and given the possibility that the operation may not end successfully, it is in the interest of the parties sign a confidentiality agreement or NDA (Non-Disclosure Agreement) to prevent the shared information from being made public by any of the parties.
The confidentiality required varies depending on the case, and the mere negotiation process for the sale is frequently included as reserved information.
Signature of agreement of intent
A relatively common figure is the letter of intent, as part of the so-called “preliminary deals”. It consists of the expression in a written document of the will of both parties to begin negotiations, with the aim of reaching an agreement on the sale of the company. It may even contain price offers, either binding or non-binding on the part of the potential buyer.
Generally, these agreements include an action program to organize the course of the negotiations, as well as the confidentiality commitment or the calendar of the different phases.
For more information, see our article < strong>Letter of intent or Letter of intent in business purchase and sale operations.
It consists of the most exhaustive study that those interested in buying a company will carry out. The documentation that investors will require will always depend on the company in question; but frequently they will include contracts with customers, contracts with suppliers, employee payrolls, or fiscal and accounting documentation; among others. For this reason, it will be advisable to always use confidentiality contracts before providing information of this nature.
The buying party usually uses the conclusions obtained in the due diligence process to improve its purchasing conditions. Alleging possible tax or labor contingencies is usually common to reduce the acquisition price. It is equally common for withholdings to be made on the purchase price until the contingencies have prescribed or until the causes thereof have disappeared.
Negotiation of the share purchase agreement, also known as SPA (“Share Purchase Agreement”)
The main element of the operation is the contract where the agreements for the sale of the company are reflected, commonly known by the acronym SPA from its abbreviation into English.
This document must include all the essential elements: price, form of payment, guarantees, commitments made by the parties, contingencies, etc.< /p>
Signature before a notary
After signing the private document, the contract is usually made public by signing a public deed before a notary.
The resolutions adopted at the general meeting for changes in administrator positions, revocation of powers of representation, etc. must also be made public. These types of decisions are common when the shareholding of a company changes.
The elevation to public is essential for the registration of the new positions in the Mercantile Registry.
Compliance with fiscal commitments
The sale of shares or participations generates an increase in wealth that has its tax repercussions. It is important to have taken this circumstance into account when designing the operation.
Term contract of the seller
Usually, better sales conditions and a higher price are obtained when the seller agrees to maintain his relationship with the company for a few years. To this end, a management contract, of a labor nature, or of commercial advice with exclusive dedication that regulates said agreement can be agreed.
Defense against breaches by the other party
Our intervention goes beyond advising on corporate operations. We defend in court breaches of the commitments made between the parties.
At JL Casajuana Abogados we have experience advising from the point of view of From a legal point of view in business buying and selling processes, we cover all the legal needs of the client, whether buyer or seller, in the different sensitive matters of the operation: commercial, fiscal, labor, etc. We have a team of specialized lawyers for each of these matters, which allow us to address each M&A process considering all relevant aspects.
Our intervention includes advice in all phases of the sale, from the previous analysis of the company and possible preliminary agreements, the different stages of negotiation, the completion of due diligence that are considered appropriate (fiscal, labor, contractual, etc.), drafting of the purchase and sale agreement and public deed, complete monitoring of the operation and execution of the agreements reached.