Acquisitions (SGSs 20,21)

Question 1

The elements of Financial Assistance are

Answer 1

1. There is an acquisition of shares, and
2. a company to which the prohibition applies
3. gives financial assistance
4. directly or indirectly
5. before or at the same time as the acquisition, for the purpose of the acquisition, or
6. after the acquisition, for the purpose of reducing or discharging a liability incurred for the purpose of the acquisition.

Question 2

Mnemonic for Financial Assistance

Answer 2

TICTAC

Question 3

TICTAC stands for

Answer 3

T – Target company identified
I – Is it prohibited under s.678/679 (read the act)
C – Company prohibited giving direct/indirect financial assistance? (s.677)
T – Timing
A – Any exceptions apply? (s.678-682) (answer will usually be no)
C – Consequences? (Penalty for company and officers s.680, transactions may be void)

Question 4

If the target company is a public company, the prohibition on giving financial assistance applies to:

• The target company itself; and
• any subsidiary of the target company, whether private or public.

Answer 4

s.678 CA 2006

Question 5

If the target company is a private company, the prohibition on giving financial assistance applies to:
- Any public company subsidiary of the target company.

Answer 5

s.679(1) CA 2006

Question 6

Definition of Financial Assistance found in this statute

Answer 6

s.677(1) CA 2006

Question 7

Timing condition for FA

Answer 7

Is FA given:
before or at the same time as the acquisition;
for the purpose of the acquisition; or
after the acquisition for the purpose of reducing or discharging a liability incurred for the purpose of the acquisition.

Question 8

Exceptions for FA

Answer 8

These are found in ss.678-682 CA 2006

The exceptions will not apply though, just need to state that they do not apply to get the marks.

Question 9

Consequences for FA

Answer 9

Penalty for the company and officers and the transaction may be void - s.680 CA 2006

Question 10

Features of Asset Acquisition (in comparison to Share Acquisition)

Answer 10

B - Buyer can cherry pick assets
L - Leave liabilities
A - Asset sale means less due diligence (potentially cheaper)
M - More documentation to deal with
E - Employees transfer under TUPE

Question 11

Points to know about a Share Purchase Agreement (SPA)

Answer 11

It is the document under which shares are sold and bought
It details the mechanics of the sale/purchase
Provides contractual protections

Question 12

Contractual protections for the buyer in an SPA

Answer 12

1. Warranties (contractual promise)
2. Indemnities (assurance from seller that in defined circumstances they will pay a sum of money)
3. Claim for misrepresentation

Question 13

Contractual protections for the seller in an SPA

Answer 13

1. Effectively disclosing everything (usually through disclosure letter)
2. De Minimis/De Maximis (minimum/maximum claim value against them)
3. Time limits

Question 14

CA 1985

Answer 14

Will just need to state that provisions are wider, so FA is likely, and that we will need to check that whitewash procedure was followed (only applies to private company).
Consequences are the same as CA 2006

Question 15

Key Features of Heads of Terms

Answer 15

1. Sets out key terms of transaction and steps for parties
2. HoT is largely non-binding but even those have moral force
3. Exclusivity clause and lock-out clauses can be enforceable