20: Company law sales of shares and assets Flashcards
what is the difference in a share sale vs an asset sale
a share sale consists of the sale of shares of a company, of which the purchaser will become the new shareholder
an asset sale is the sale of the individual assets to the purchaser. the orginal shareholder still owns the company, but there are no longer any assets (shell company)
which types of sales apply to different business vehicles?
share sales can only apply to a company
asset sales can apply to companies, sole traders and partnerships
what is a restrictive convenant?
it may be a term entered in the contract to protect the goodwill of the company, stating that the vendor cannot compete with the company purchased for a certain period of time, or within a certain area
what is the difference between a warranty and an indemnity?
a warranty is a statement of fact about the affairs of the company. if there is breach of the warranty, the courts may award damages to the purchaser. in less common circumstances, they may rescind the contract
an indemnity is a promise from the vendor to say that they will pay money if the purchases comes across any liabilities they were unaware of.
what happens to redundancies made after the purchase of the company
the purchaser can look at splitting costs with the vendor, however the warranty for employment may have to be looked at
what are the three typical clauses in a Heads of Agreement document?
- Confidentiality
- Exclusivity
- Costs
is a Heads of Agreement document compulsory?
no
is a Heads of Agreement document legally binding?
generally no
on the sale agreement, from all different types of indemnities, which is the one that the purchaser is least likely to accept on the initial negotiations?
tax indemnity
do TUPE regulations apply in a share sale?
no they do not apply
do TUPE regulations apply where a company’s employees are being transferred as part of a going concern? (asset sale)
yes they apply
are warranties and indemnities extensive in an asset sale?
no
