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In this case study, we acted for a shareholder in the acquisition of his business partner’s 50% shareholding in a joint venture trading company following an amicable split.
The challenge was to ensure a smooth transition of ownership, both internally and externally, and specifically the transfer of guarantor obligations in respect of the initial acquisition finance to the purchasing shareholder and the release of the exiting shareholder from the guarantor obligations which was a condition of the transfer without triggering a breach of the existing funding documentation.
The challenges to be addressed included :-
1. Protecting the purchasing shareholder and ensuring value whilst maintaining an amicable position with the exiting shareholder.
2. Dealing with the release of the exiting shareholder from the guarantor obligations in respect of the acquisition finance whilst retaining the existing favourable finance terms.
3. Ensuring that the purchasing shareholder was aware of the additional guarantor obligations that he was adopting.
4. Preparing a suite of transfer documents which were recognizable and familiar to the funders but also provided sufficient protection to our client.
1. Protecting the purchasing shareholder and ensuring value whilst maintaining an amicable position with the exiting shareholder
Review the company’s financial and asset position to ensure that the sale price agreed between shareholders for the sale was fair to the purchasing shareholder given the additional liabilities he was taking on.
2. Dealing with the release of the exiting shareholder from the guarantor obligations in respect of the acquisition finance whilst retaining the existing favourable finance terms.
Negotiating terms with the company’s external funders, including invoice discounting, for the release and transfer of the exiting shareholder’s guarantor obligations to the remaining shareholder without disturbing the existing commercial terms.
3. Ensuring that the purchasing shareholder was aware of the additional guarantor obligations that he was adopting.
Carefully take the purchasing shareholder through the suite of finance documents to ensure that he was fully aware of the conditions and obligations that he would be assuming on the release of the exiting shareholder and that he was confident that the company could continue to trade within those conditions.
4. Preparing a suite of transfer documents which were recognizable and familiar to the funders but also provided sufficient protection to our client.
Utilise standard form and generally accepted industry and institutional wording which was familiar to and accepted by the funders but which would minimise as far as possible our client’s potential exposure and risk.
By careful negotiation and drafting we were able to facilitate the transaction and the exit of one of the shareholders in a manner that maintained continuity and retained the original favourable acquisition terms.
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Partner - Corporate and commercial law
John qualified as a Solicitor in 1986 and has 35 years’ experience of commercial law. Upon qualification John worked in the Commercial Department at the head office of a major Birmingham firm subsequently returning to the Northwest to work for a leadin...
