Business Law

LETTER OF INTENT (ASSET AND STOCK SALE)

The documentation for a stock or asset purchase/sale agreement should begin with a letter of intent between the parties. The letter highlights big-picture items that will be further defined in the various agreements and other documents to memorialize the transaction, and is often the first written record of the desired outcome of the transaction.

LEGAL DUE DILIGENCE CHECKLIST

Your clients need your counsel if they ever seek to acquire another company or merge another business into theirs. The legal due diligence checklist helps you spot issues and assist your client in gathering the information you need to help your clients make informed decisions in business acquisition. The checklist is comprehensive, so you will want to review and redact it as necessary depending on your client’s needs. And like many other documents in BusinessDocx, the checklist is a good tool to keep in the client’s file so you and your team can track which information is received during your representation in the matter.

STOCK PURCHASE AGREEMENT

Like the asset purchase agreement, the BusinessDocx stock purchase agreement is quite comprehensive and is worthy of your review and examination to ensure that it meets your client’s needs. Remember that unlike an asset sale, the buyer generally assumes all of the selling company’s liabilities. You will want to counsel your client carefully and help your client through the due diligence process to identify particularly troubling liabilities that should be negotiated in the transaction and memorialized in the agreement.

NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT (ASSET AND STOCK SALE)

When a business acquisition is complete, the last thing the buyer wants is for the seller to open up shop across the street and go into competition with the buyer. The noncompetition, nondisclosure, and non-solicitation agreement helps you protect the buyer’s interests by memorializing an agreement that the seller will not go into competition with the buyer, will not disclose material information about the transaction, and will not solicit employees or vendors away from the buyer to a new enterprise the seller pursues.

SPOUSAL CONSENT (STOCK SALE)

If your client is married it is a best practice – and mandatory in some jurisdictions – to document their spouse’s consent to a business acquisition. Failure to document spousal consent may result in lengthy litigation if the transaction doesn’t live up to the buyer’s – or their spouse’s – expectations.

OPINION LETTERS OF COUNSEL (ASSET AND STOCK SALE)

Your clients should count on you to help them through the due diligence process as they assess any company acquisition. Most often, an acquisition will take the form of an asset purchase to minimize any of the seller’s liabilities. Stock purchases are trickier because they involve acquisition of liabilities, so your client will lean on you even more in those matters.

BusinessDocx provides assemblies to help capture your analysis as you provide advice to your clients through an asset or stock purchase. Because every acquisition will be different, and because assumption of legal obligations is part of a stock purchase transaction, make sure you carefully edit the assembled document to reflect your client’s unique needs.

PLEDGE AGREEMENT (STOCK SALE)

Like the security agreement for an asset purchase, the pledge agreement, or stock pledge agreement, is often coupled with a stock purchase agreement. If the buyer borrows money from a third party lender, that lender will seek a security interest backed by the stock of the company. Again, like the security agreement for an asset purchase, the pledge agreement can be particularly helpful in documenting arms-length transactions when a buyer borrows money from a trust or other wealth preservation tool to acquire stock in another company.

SECURITY AGREEMENT (ASSET SALE)

The security agreement is often coupled with an asset purchase agreement. If the buyer borrows money from a third party lender, that lender will seek a security interest backed by the acquired assets. The security agreement can be particularly helpful in documenting arms-length transactions when a buyer borrows money from a trust or other wealth preservation tool to acquire assets of another company.

CLOSING CERTIFICATES (ASSET AND STOCK SALE)

The closing certificate accompanies an executed (and performed) stock or asset purchase agreement and states that the seller has complied with all the obligations under the agreement to fully close the transaction. This is an important part of the paper trail to fully consummate an asset or stock purchase transaction.