Signing
The moment when the parties formally sign the SPA is usually called the signing. Signing is not necessarily the moment of transfer of ownership over the shares (closing). If parties reach an agreement quickly, the moment of signing and closing may coincide, but often a whole period of time elapses between the moment of signing and closing. There can be various reasons for this:
large in size, you may first need permission from the competition authorities. It will be verified that competition is not affected by the fact that two companies are merging. This has to be done before the closing. So it is best to stipulate in a pre-agreement that you agree to the sale, but that the transfer of ownership will only take place when the competition authorities approve the transaction.
Generally, a takeover agreement will only be signed under certain conditions precedent and/or pre-closing commitments. A condition precedent is an obligation that only becomes effective after the occurrence of a pre-defined future and uncertain event. Only when all conditions precedent are fulfilled or waived by the buyer, the transaction will be closed and the ownership of the shares will be transferred in return of payment of the set price. Pre-closing commitments actually means that before the transfer of shares, the seller first puts a few things in order as described above.
The use of resolutory conditions in takeover agreements is rather rare. The obligation will be extinguished ex tunc when a predetermined future and uncertain event has occurred or, depending on how the clause is drafted, has not occurred. For example, a clause that stipulates that in the event of bankruptcy
of the target company, the agreement will be dissolved. If the resolutive condition is fulfilled, the consequence will be that the situation is restored to its original state. A restoration will mean the return of the shares and the repayment of the purchase price. In practice, it is often unrealistic to return to the original situation in the case of a takeover, which explains the rather rare use of resolutive conditions in takeover agreements.
Because the moment of signing and closing do not coincide in most cases, the buyer needs extra protection in the meantime. In the sense that at signing, there is an agreement between price and object and the buyer knows where he stands. But as long as the deal is not closed, so as long as he is not the owner of the shares, anything can happen in that company. The buyer can try to protect himself during that period by: