One of the most important documents in M&A transactions, or the transfer of capital contribution/shares in an enterprise is the sale and purchase agreement. Accordingly, the terms of the agreement must be carefully considered and reviewed, to not only comply with the law but also ensure the clear meaning, limiting risks that may arise.
This article provides readers with an overview of the basic contents required in a share/capital contribution purchase agreement. Thanks to this article, readers will have a clear direction when drafting or reviewing this type of contract.
(i) The beginning section of an agreement
Table of contents: The number of clauses, headings, and appendices of the agreement. This content is not required, but for long agreement, having a table of contents makes it easy to review.
Preamble: Name of the agreement, date, and the parties entering into the agreement. This is mandatory content to determine the legal status of the parties. If the signer does not have authority, the contract will be invalid.
Recitals: Background and purpose of the agreement. This content represents the purpose and basis for the transaction. At the end of this section is the sentence used to connect the beginning and the body of the contract.
(ii) The body section of an agreement
This section includes three main groups of terms: provisions on transaction structure; substantive provisions; and supportive provisions.
Provisions on transaction structure, including:
- Terms describing the transaction structure;
- Transfer value;
- The rights attached to the shares and capital contribution to be transferred (the rights to vote, convene meetings, etc.);
- Conditions precedent for transferring;
- Closing conditions to complete the transaction.
Substantive provisions, including:
- Representations and warranties (of the transferor and the transferee);
- Rights and obligations of the parties;
- Terms of information security;
- Terms of penalty and compensation;
- Terms of termination;
- Terms of dispute resolution and governing law.
Supportive provisions are clauses that make the performance of the contract easy, efficient, and clear, such as:
- Method of notification;
- Adjustment to the agreement;
- The language used in the agreement;
- Force majeure events;
Terms of substantial changes in circumstances.
Disclaimer: This article is for general information only and is not a substitute for legal advice. Apolat Legal is a Vietnamese law firm with experience and capacity to advise on matters related to Contract Drafting and Reviewing. Please click here to learn more about our Contract Drafting and Reviewing services and contact our lawyers in Vietnam for advice via email email@example.com.