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Getting The Deal Through

Private M&A

Published: October 2019

Hong Kong


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  • 1.

    Structure
    How are acquisitions and disposals of privately owned companies, businesses or assets structured in your jurisdiction? What might a typical transaction process involve and how long does it usually take?

  • 2.

    Legal regulation
    Which laws regulate private acquisitions and disposals in your jurisdiction? Must the acquisition of shares in a company, a business or assets be governed by local law?

  • 3.

    Legal title
    What legal title to shares in a company, a business or assets does a buyer acquire? Is this legal title prescribed by law or can the level of assurance be negotiated by a buyer? Does legal title to shares in a company, a business or assets transfer automatically by operation of law? Is there a difference between legal and beneficial title?

  • 4.

    Multiple sellers
    Specifically in relation to the acquisition or disposal of shares in a company, where there are multiple sellers, must everyone agree to sell for the buyer to acquire all shares? If not, how can minority sellers that refuse to sell be squeezed out or dragged along by a buyer?

  • 5.

    Exclusion of assets or liabilities
    Specifically in relation to the acquisition or disposal of a business, are there any assets or liabilities that cannot be excluded from the transaction by agreement between the parties? Are there any consents commonly required to be obtained or notifications to be made in order to effect the transfer of assets or liabilities in a business transfer?

  • 6.

    Consents
    Are there any legal, regulatory or governmental restrictions on the transfer of shares in a company, a business or assets in your jurisdiction? Do transactions in particular industries require consent from specific regulators or a governmental body? Are transactions commonly subject to any public or national interest considerations?

  • 7.

    Third-party consents
    Are any other third-party consents commonly required?

  • 8.

    Regulatory filings
    Must regulatory filings be made or registration (or other official) fees paid to acquire shares in a company, a business or assets in your jurisdiction?

  • 9.

    Appointed advisers
    In addition to external lawyers, which advisers might a buyer or a seller customarily appoint to assist with a transaction? Are there any typical terms of appointment of such advisers?

  • 10.

    Duty of good faith
    Is there a duty to negotiate in good faith? Are the parties subject to any other duties when negotiating a transaction?

  • 11.

    Documentation
    What documentation do buyers and sellers customarily enter into when acquiring shares or a business or assets? Are there differences between the documents used for acquiring shares as opposed to a business or assets?

  • 12.

    Formalities
    Are there formalities for executing documents? Are digital signatures enforceable?

  • 13.

    Scope of due diligence
    What is the typical scope of due diligence in your jurisdiction? Do sellers usually provide due diligence reports to prospective buyers? Can buyers usually rely on due diligence reports produced for the seller?

  • 14.

    Liability for statements
    Can a seller be liable for pre-contractual or misleading statements? Can any such liability be excluded by agreement between the parties?

  • 15.

    Publicly available information
    What information is publicly available on private companies and their assets? What searches of such information might a buyer customarily carry out before entering into an agreement?

  • 16.

    Impact of deemed or actual knowledge
    What impact might a buyer’s actual or deemed knowledge have on claims it may seek to bring against a seller relating to a transaction?

  • 17.

    Determining pricing
    How is pricing customarily determined? Is the use of closing accounts or a locked-box structure more common?

  • 18.

    Form of consideration
    What form does consideration normally take? Is there any overriding obligation to pay multiple sellers the same consideration?

  • 19.

    Earn-outs, deposits and escrows
    Are earn-outs, deposits and escrows used?

  • 20.

    Financing
    How are acquisitions financed? How is assurance provided that financing will be available?

  • 21.

    Limitations on financing structure
    Are there any limitations that impact the financing structure? Is a seller restricted from giving financial assistance to a buyer in connection with a transaction?

  • 22.

    Closing conditions
    Are transactions normally subject to closing conditions? Describe those closing conditions that are customarily acceptable to a seller and any other conditions a buyer may seek to include in the agreement.

  • 23.

    Buyer and seller obligations
    What typical obligations are placed on a buyer or a seller to satisfy closing conditions? Does the strength of these obligations customarily vary depending on the subject matter of the condition?

  • 24.

    Pre-closing covenants
    Are pre-closing covenants normally agreed by parties? If so, what is the usual scope of those covenants and the remedy for any breach?

  • 25.

    Termination rights
    Can the parties typically terminate the transaction after signing? If so, in what circumstances?

  • 26.

    Break-up fees and reverse break-up fees
    Are break-up fees and reverse break-up fees common in your jurisdiction? If so, what are the typical terms? Are there any applicable restrictions on paying break-up fees?

  • 27.

    Scope of representations, warranties and indemnities
    Does a seller typically give representations, warranties and indemnities to a buyer? If so, what is the usual scope of those representations, warranties and indemnities? Are there legal distinctions between representations, warranties and indemnities?

  • 28.

    Limitations on liability
    What are the customary limitations on a seller’s liability under a sale and purchase agreement?

  • 29.

    Transaction insurance
    Is transaction insurance in respect of representation, warranty and indemnity claims common in your jurisdiction? If so, does a buyer or a seller customarily put the insurance in place and what are the customary terms?

  • 30.

    Post-closing covenants
    Do parties typically agree to post-closing covenants? If so, what is the usual scope of such covenants?

  • 31.

    Transfer taxes
    Are transfer taxes payable on the transfers of shares in a company, a business or assets? If so, what is the rate of such transfer tax and which party customarily bears the cost?

  • 32.

    Corporate and other taxes
    Are corporate taxes or other taxes payable on transactions involving the transfers of shares in a company, a business or assets? If so, what is the rate of such transfer tax and which party customarily bears the cost?

  • 33.

    Transfer of employees
    Are the employees of a target company automatically transferred when a buyer acquires the shares in the target company? Is the same true when a buyer acquires a business or assets from the target company?

  • 34.

    Notification and consultation of employees
    Are there obligations to notify or consult with employees or employee representatives in connection with an acquisition of shares in a company, a business or assets?

  • 35.

    Transfer of pensions and benefits
    Do pensions and other benefits automatically transfer with the employees of a target company? Must filings be made or consent obtained relating to employee benefits where there is the acquisition of a company or business?

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Hong Kong
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3A Chater Road, 18/F
Hong Kong
Hong Kong
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