An efficient share sale

An American group with a number of Dutch subsidiaries wished to sell shares back to a fellow shareholder.

As the approval of the American parent company was required, I drafted the share purchase agreement in English, to save time and aid efficient communication. The buyer wished to pay in instalments. To cover this, I included conditions that a pledge would remain in place over the shares that were being sold until the full purchase price was paid and that the two companies holding shares in

the buyer would give guarantees to cover payment of the purchase price. It was also agreed that if any amount were paid late a substantial contractual penalty, which would not be eligible for reduction by a court, would be payable immediately.

The agreement also stated that the buyer would not, in its capacity as shareholder, cooperate with any sale of the company’s shares, activities or assets until the full purchase price had been paid. The aim of this provision was to preserve the value of the pledge over the shares. After all, if this provision were breached, this would be an unlawful act and the ultimate owners would be personally liable for the resulting loss, i.e. any failure to pay the purchase price as a result. I also included a number of other devices to reduce the risk to the seller, who had no option but to accept payments spread over a number of years. This assisted the buyer, who wanted to continue with the company alone but was unable to pay for the shares outright, and gave the seller some peace of mind.