A variable price in the acquisition contract – watch out for requalification and manipulation

A variable price in the acquisition contract – watch out for requalification and manipulation

Acquisition agreements may provide for either a fixed or a variable price. A variable price is valid only if it can be determined. Hence the parameters that serve as the basis for establishing the variable price must constitute objective criteria that do not require a new indication of intent from the parties. Acquisition agreements often contain an earn-out clause: (part of) the price is determined based on the profit earned by the company in the years following the acquisition. Usage of the earn-out clause is most common when the selling party retains an important role in the management of the…


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Can a former director sleep in peace if the dismissal included interim discharge of liability?

Can a former director sleep in peace if the dismissal included interim discharge of liability?

In majority shareholding transfers, the acquisition agreement commonly includes the resignation of the board of directors and discharge of liability with respect to their mandate. By granting discharge the company approves the policies conducted by the board and waives its right to hold the directors liable for any management errors. In accordance with the provisions of the Belgian Companies code, the company decides annually – upon approval of the financial statements – whether or not to discharge its board of liability. The discharge granted at the time of a share transfer usually does not coincide with approval of the financial…


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Non-competition clause in acquisition agreements: a necessity?

Non-competition clause in acquisition agreements: a necessity?

Companies may be transferred via asset deals or share deals. As one of their main concerns in such takeovers, buyers will want to have the opportunity – at least for a transitional period – to work towards actively retaining the company’s clients without being obstructed by the transferring party who (immediately) after the takeover, might resume their transferred activities and create a competitive business. The question arises whether under current legislation for sale of goods, buyers find sufficient protection against such actions and whether including a conventional non-competition clause in the acquisition agreement is required to achieve such protection. In…


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Even a 'non-binding' letter of intent may lead to liability – the theory (at last, but strictly) applied by the Antwerp Court of Appeal

Even a ‘non-binding’ letter of intent may lead to liability – the theory (at last, but strictly) applied by the Antwerp Court of Appeal

Acquisition agreements are often preceded by some preliminary agreement (also called a declaration of intent; letter of intent; memorandum of understanding; agreement in principle, etc.) that not seldom is considered as non-binding by the parties. Such initial document aims at describing the status of the negotiations, the agreed principles, and any further steps required to arrive at a final acquisition agreement. Parties who do not yet wish to enter into a binding agreement must make an explicit statement to that effect in the preliminary agreement. If they fail to do so and then reach an agreement on the subject of the…


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