What are buyers looking for during legal due diligence when acquiring companies?
Buyers don’t expect everything to be perfect, but they do want to know exactly what they are getting. When they bring in lawyers to conduct legal due diligence, they are asking questions such as: ● What contracts have the companies entered into? How do the contracts help or hinder future …
Worried about the sellers’ representations and warranties in an SPA?
Most founders I speak with are not trying to mislead buyers. What they are concerned about is accidentally leaving out something important in the disclosure letter, which is the document that sets out exceptions to the representations and warranties given by sellers (Sellers’ Warranties) in a sale and purchase agreement …
When planning for a sale, founders should sort out their employment or service contracts early.
A buyer acquiring a company may want key personnel to stay on after completion to continue providing their expertise to the company. Sometimes that includes the founder. In many deals, the sale and purchase agreement (SPA) requires the seller to deliver a signed employment or service contract with these key …
When selling your company, this is often the first legal hurdle
One of the first things buyers’ lawyers look at during legal due diligence is whether the business owners or sellers own the shares they say they do. Some sellers provide a Companies Commission of Malaysia (CCM) search to show their ownership. However, from a legal perspective, this is not sufficient. …
The Deal That Didn’t Happen: When the Founder Walked Away
My first encounter with a failed M&A deal happened when the founder refused to provide common representations and warranties. He also declined to fix compliance issues found during due diligence. By the time the founder pulled out, both founder (seller) and buyer had already spent significant time in weekly due …
Get Company Secretary Involved in Legal Due Diligence
Foreign counsels coordinating legal due diligence on Malaysian companies, take note: From my experience conducting legal due diligence on Malaysian companies as part of cross-border M&A co-ordinated by foreign counsels, I’ve realised that the involvement of company secretaries is crucial. In Malaysia, company secretaries are responsible for maintaining statutory records …
Compliance and Legal Due Diligence: An Exercise of Frustration?
Lawyer: Please provide register of members, register of directors, all returns of allotment, all stamped transfer forms… Representative of Target Company: Please refer to company search from the Companies Commission of Malaysia. Lawyer: CCM search is not sufficient. Please provide register of members, register of directors, all returns of allotment, …
Minority Shareholders Have Rights Too
Minority shareholders holding less than 50% of the voting shares in a company have certain rights provided under the Companies Act 2016 including the following rights: Shareholding of at least 5% Shareholder(s) of a private company representing at least 5% of the total voting rights may block reappointment of the …
Hands-on means really hands-on
“Sorry, this is urgent.” A senior manager of a corporate client called. Normally, she would text first to check if it’s convenient to speak, but that day, she called right away. I could sense the anxiety in her voice. She explained that her management had instructed for an announcement on …
What is a “major shareholder” in the context of related party transactions?
A director asked me about the definition of a “major shareholder” when it comes to related party transactions. I thought I would share my response here. “Major shareholder” means a person who has an interest or interests in one or more voting shares in a corporation and the number or …