Have clear definitions in M&A agreements

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In M&A transactions, the following terms are open to interpretation if used in transaction agreements without being defined:

1. Family
Does “family” mean immediate family or extended family? Do the parties to the agreements intend for the term “family” to include adopted children, spouses of siblings and grandparents?

2. Affiliate
The term “affiliate” is not defined in the Companies Act 2016. It may be interpreted widely or narrowly, depending on what works in favour for each of the parties to the agreements.

3. Control
Does “control” mean 33% or more of voting shares in a party (as referred in the Capital Markets and Services Act 2007), or more than 50% of voting shares, which allow for the passing of an ordinary resolution?

4. Ownership of a company
What exactly constitutes “ownership”? Is it referring to legal ownership or beneficial ownership? Does holding more than 50% or 100% of the shares in a company constitute “ownership”?

5. Personnel
This term is sometimes used loosely in agreements. Does the term “personnel” include contract workers, part time workers and consultants? It may be better to use terms such as “employee”, “officer” or “agent” depending on the context.

Define the terms clearly in transactions agreements to avoid dispute.


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