Share sales

Question 1

What are the potential FSMA restrictions on auction sales?

Answer 1

• S19 FSMA - Specified activity

- LIkely to be exempt under art 70 - Sale of shares in a company

Question 2

Will production of an information memorandum breach s21 FSMA?

Answer 2

S21 - In the course of business, communicates, invitation or inducement, investment activity.

Question 3

What are the potential exemptions under s21 FSMA?

Answer 3

Art 19 - Investment professionals
Art 62 - Sale of 50% or more of a body corporate
Art 28- One off non-real time communication

Question 4

What are the disclosure obligations for listed companies in realtion to acquisitions?

Answer 4

• Class 1 25+% but less than 100%
  
  • IRS notified
  • Explanatory circular
  • Shareholder approval
• Class 2 5% but less than 25%
  
  • IRS notified

Question 5

What are the essential elements of a binding confidentiality clause?

Answer 5

• Parties
• States personal and non-assignable
• Definition of confidential information (target/subsidiaries/acquisition itself)
• How long confidentiality agreement should last (indefinitely or x number of years)

Question 6

What is the Enterprise Act 2002 test?

What is the effect of this?

Answer 6

1. Does the Target’s Turnover alone exceed £70m
2. Does the merged entity have at least 25% share in market for goods and services
   * If either of these test are proved then the merged company will be investigated by the OFT and the transaction could be unwound.

Question 7

How does the EU Competition test operate?

Answer 7

• Has higher threshold than the Enterprise Act

- There must be a community element.

Question 8

What are 3 methods of valuing a company?

Answer 8

1. Debt free/cash free
2. Net asset value
3. Locked box mechanism

Question 9

How does a Net-asset value clause work?

Answer 9

The purchase price shall be adjusted as follows:

1. Added an an amount over x
2. Deducted an amount that NAV is below X