Change of name for M&A and IPO exercise

IPO

Today’s post is on change of name of a company in M&A and IPO context.

Consider the following scenario.

A shareholder incorporated a few companies with similar names.

Now, the shareholder wants to dispose all shares held in one of the companies (target company) and undertake IPO for the remaining companies.

Where the seller sells all shares held in the target company to a buyer who is unrelated to the seller, the parties should consider setting out the following in the SPA:

• whether the seller is obliged to procure the change of names of other companies owned by the seller, which have similar names as the target company. This may be required if the buyer is acquiring the goodwill attached to the name of the target company.

• whether the seller requires the target company to change its name to avoid being wrongly associated with the seller/other companies owned by the seller after completion of the sale and purchase.

• who will bear the cost for the change of name.

• when must the change of name happen.

• the aggrieved party’s remedies if the change of name does not happen within the agreed period.

In the scenario above, as the target company will not be part of the group undertaking IPO, it is prudent for the target company to change its name to avoid being wrongly associated with the seller/other companies owned by the seller after completion of the sale and purchase.

A delay in the change of name of the target company may delay the IPO process. Therefore it is important that the seller is able to rely on the provisions in the SPA to compel the buyer and the target company to do the necessary to effect the change of name within the agreed period.

#malaysiancorporatelawyer
#mergersandacquisitions
#IPO

This post was first posted on Linkedin on 27 June 2022.

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