The right to profits is transferred to the buyer, either retroactively before the signing or at the time of closing, depending on the mechanism used (case blocked against acquisition account). The share purchase agreement is a legal document that defines the conditions under which the shares are transferred to a company The buyer and seller will generally sign a written sales contract. The agreement defines the terms of the agreement as well as the rights and obligations associated with the transfer of ownership. The contract is referred to as an asset acquisition contract (“APA”) when the transaction involves assets. It is a share purchase agreement (“SPA”) when shares of a company are involved. In a lockdown mechanism, the buyer proposes a purchase price based on a historical balance sheet (the “blocked boxing balance sheet”). This means that the economic transmission of the business – that is, the point at which the buyer is entitled to the profit and loss of the business – is retroactive before signing. Simultaneous signature and closure can be beneficial to both parties as they eliminate the risk of transactions during the interval. For example, the target company may suffer an ecological disaster or lose a major customer contract after signing, but before closing. A simultaneous conclusion not only eliminates these risks, but also saves time and resources, as lengthy negotiations on who should bear the risk of such events are suppressed. However, a simultaneous conclusion may not be possible if the agreement is subordinated. B to obtain financing from the buyer or to the agreement of third parties or shareholders.
Simultaneous closure may also increase the risk to shareholders, as the target entity may have to “go public” through the transaction, seeking shareholder approval and contractual agreement from customers, suppliers and other third parties, without having a binding contract. In these cases, a deferred closing structure allows the parties to determine each party`s rights and remedies if the required consents are not obtained. It is a little different if the transaction follows the final account mechanism. In the case of a financial statement account mechanism, the economic transfer is made at the time of closing and not retroactive to the balance sheet date. If a transaction contains conditions that must be met before the agreement is actually concluded, the signing and conclusion will not take place on the same date. In this case, the financial statements are delayed, and therefore the right to profits. While the signature relates to the agreement of terms of sale, the transaction constitutes the real deed of the sale of the shares or assets. Between the signing and the conclusion, the so-called closing conditions are due to complete the conclusion of the agreement. Only if the conditions are met (or if they are removed) can ownership of the shares be transferred from the seller to the buyer. It is rarely possible to prevent the discrepancy between signature and closure, which can last from a few days to several months in complex cases.
While the release of agreements, in particular, may extend the time between signing and concluding by several months, sales contracts often contain an essential adverse amendment clause (“MAC”).