Private Acquisitions Flashcards
Walford & Others v Miles & Another
Agreement attempting to bind the parties to act in good faith (i.e. a lock-in agreement) would be unenforceable; BUT a lock-out agreement is enforceable, provided that it was certain and supported by some consideration (or made under seal)
Aveling Barford v Perion
Where a subsidiary transfers an asset either as a gift or at an undervalue to a sister subsidiary (i.e. a company with the same parent company) this transfer constitutes a deemed distribution in kind to the parent; this makes the recipient a constructive trustee of the asset (liable to return it)
Could be unlawful distribution under s.830 CA if profits of transferor are insufficient
Trego v Hunt
Courts will not imply covenants by the seller of a business to the effect that it will not set up in competition with the business once it has been sold; at common law, the buyer is only awarded minimum protections, i.e. that the seller may not:
- Represent itself as the owner of the same business; or
- Solicit persons who were customers of the business prior to the sale by direct means; or
- Disclose confidential information relating to the business
General Billposting v Atkinson
If an employer dismisses an employee in breach of the employment agreement, employee no longer under an obligation to comply with any restrictive covenants contained in the employment agreement, even if the covenants would otherwise be valid
Marren v Ingles
Shares sold for £750 plus right to more if company was listed and shares were above £750 at that time; shares were listed, for more than £750;
Held: right to receive additional consideration on the happening of a specified event was a ‘contingent right to future consideration’ and that this contingent right was, in effect, a chose in action (i.e. capital asset)
This means that seller deemed to have chargeable gain equal to that contingent right
If, on receipt of the earn-out, they then make a further gain above the deemed value of their gain at completion, this is treated as a capital gain (and vice versa for capital losses, which can be carried back against the previous gain)
Zim Properties v Proctor
Indemnities should be drafted in favour of the BUYER (for tax efficiency); where indemnity payment is paid by the seller to the buyer, the payment is treated as an adjustment to the consideration in the same way as a payment under warranty
Levison v Farin
Fair disclosure = specific notice of the matter the seller wants to disclose – “merely making known the means of knowledge which may enable the other party to work out certain facts and conclusions will be insufficient”
Daniel Reeds Limited
Fair disclosure requires some positive statement of the true position and not just a fortuitous omission from which the buyer may be expected to infer matters of significance
New Hearts Limited v Cosmopolitan Investments Limited
For disclosure, “mere reference to a source of information, which is in itself a complex document, within which the diligent enquirer might find the relevant information, would not satisfy the requirements of a clause providing disclosure”
Infiniteland Limited v Artisan Contracting Limited
The question of whether or not disclosure effectively qualifies the warranties in any acquisition agreement will depend upon the level of disclosure that the buyer has agreed to accept
MAN Nutzfahrzeuge
Seller was vicariously liable in the tort of deceit for fraudulent statements made by the financial controller of the target company during negotiations, because the seller had held him out as having authority to speak about certain financial matters on the seller’s behalf (even though he was not an employee of the seller and the seller was not aware that the statements were fraudulent)
Thomas Witter Limited v TBP Industries Limited
Tortious liability can only be excluded by express agreement, so entire agreement clause should, therefore, contain an express acknowledgement by the parties that they have not relied on, and have no remedy in respect of, any representation not included in the contract;
ALSO – cannot exclude liability for fraud in entire agreement clause
EA Grimstead & Son Limited v McGarrigan (obiter)
Where a buyer has stated it has not relied on any representations not set out in the agreement itself, that buyer may be estopped from later arguing in court that it relied on oral statements which are not reflected in the written contract;
Also, carve-out for fraud was not necessary for entire agreement clause to be effective
Tollhurst v Associated Portland Cement Manufacturers Limited
The benefit of a contract for personal service cannot be assigned
Botzen v Rotterdamsche Droogdok Maatschappij
Test for whether employees are wholly engaged by a business – the business which ‘formed the organisational framework within which their employment relationship took effect’; look to the employee’s function rather than the terms of their contract
