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LPC Law Notes Private Acquisitions Notes

Allocation Of Risk Notes

Updated Allocation Of Risk Notes

Private Acquisitions Notes

Private Acquisitions

Approximately 339 pages

A collection of the best Mergers and Acquisitions* notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short, these are what we believe to be the strongest set of Mergers and Acquisitions notes available in the UK this year. This collection is f...

The following is a more accessible plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Allocation of Risk

Ws and Is

s.397 FSMA - misleading statements and practices offence (only relevant to share sales, not business sales)

  1. applies to any person who -

  1. makes a statement, promise or forecast which he knows to be false or deceptive in a material particular;

  2. dishonestly conceals any material facts whether in connection w/a statement, promise or forecast made by him or otherwise; or

  3. recklessly makes (dishonestly or otherwise) a statement, promise or forecast which is misleading, false or deceptive in a material particular

  1. a person to whom subsect (1) applies is guilty of an on offence if he makes the statement, rpomise or forecast or conceal the facts for the purpose of inducing, or is reckless to inducing, another person -

  1. to enter or offer or enter into, or to refrain from entering or offering to enter into, a relevant ag; or

  2. to exercise, or refrain from exercising, any rights conferred by a relevant instrument

Basically, caveat emptor. If a d’or is naughty/dishonest, then they may be guilty of an offence under s.397 FSMA. However, B is left out in the dark w/no form of recourse. The law punishes the S but doesn’t help the B so make B needs to make sure they do their DD and get their Ws/DL and Is!

s.393 CA - Accounts to give true and fair view

  1. d’ors of a co must not approve accounts for purposes of this chapter, unless they are satisfied that the give a true and fair view of the assets, liabilities, financial position and profit or less -

  1. in the case of the co’s individual accounts, of the co;

  2. in the case of the co’s group accounts, of the undertaking included in the consolidation as as whole, so far as concerns co’s s’ers

  1. Auditors carrying out their functions under this Act in relation to co’s annual accounts must have regard to d’or’s duty under subsect (1)

Basically - d’ors under duty as S to give true and fair account of co via Ws and Is. In order to avoid breach, d’ors must include statement re accounts saying “info give is a true and fair view in accordance w/s.393 CA” to avoid breach. Nb. never say ‘true and accurate’ because it is a higher standard and there are claims about this kinda stuff all the time. Accurate is too high a standard for anyone to meet as would include being 1p off.


  • primary purpose is disclosure

  • Always come hand in hand w/Disc Letter (‘DL’)

  • contractual statement of fact given by S

  • damages governed by normal contractual principles

  • main purpose is to elicit info

  • given for substantive aspects of T


  • promise by S to reimburse B if a specific liability arises

  • remotes, forseeability, mitigation [ie. normal contractual principles] not relevant

  • purpose is financial redress

  • given for specific areas of possible loss or liability which have been discovered

  • eg. doubtful debts, actual or potential litigation, e’ent or pension liability [if not big]

Categories of W

e’ees, tax, pension, stock, property, IP, corporate governance, contracts, clients, customers, suppliers, compliance, litigation generally, competition, accounts and finance, ownership of shares, ownership of assets, P&M, environmental

Main categories

Those which:

  1. red - related to matters over which the S has no control (and should not give)

  2. amber - the S can give in principle but should amend to limit their effort

  3. green - are vital to the B (and S must give to the deal)

Nb. you always have lots of tax Is

Negotiation/Qualifying Ws

  • striking out or amending Ws if S is required to give a statement in relation to something over which it has no control

  • in other cases, a W may be acceptable in principle but S’s solicitors will want some amendments to drafting to get rid of ambiguity or narrow scope [often to make them easier to disc against]

Limiting Is

  • S’s solicitors should ensure that the Is refer only to specific types of risks

  • S should not accept Is which are general in nature

Tax covenant/Zim

logic of making payments under I directly to T was that if any liability was incurred it was T who would have to pay

Are there any tax consequences of providing for payment to be paid this way?

  • Yes Zim Properties says there could be potential tax consequences if I payment is made to a T. T may be required to pay tax on entire amount of payment when it is received

  • HMRC has agreed that any payment under an I paid by a S to a B will be treated as an adjustment to cons (same as payment under Ws) Effect of this is:

  1. the B will be treated as paying less for T (so T will have a lower base cost if and when it is eventually disposed of by the B) and

  2. the cons received by S will be deemed to have been reduced by the amount paid under the I (so the S’s capital gain on sale of T will be correspondingly reduced and if any tax has already been paid the S may receive a partial tax refund)

Therefore it is v imp for Is to be given in favour of B not T

Split exchange (= signing of AA, parties formally agree to enter into trans usually by delivering and executing SPA) and completion (= closing, essentially formalities to conclude trans are performed)

doesn’t happen in majority of cases. Why might it be needed?

  • s’er approval

  • regulatory approval

  • 3rd party consent ... etc

What contractual provisions might B want to see in acq ag (‘AA’)?

  • exchange usually executed as a deed as no consideration is being given @ exchange so cannot be a contract

  • conditions precedent in AA: details of cond, long-stop date, obligation on B and S, ‘what if’ cl

How should T be run between exchange and compl:

  • clauses re conduct of T, eg restrictions on capital expenditure, disposal of material assets, additional borrowing, issuing shares etc ...

When can Ws be given? @ exchange

Will Ws still be in force @ time completion? B will asked for them to be repeated and will ask for right to rescind if there is material change

Who can bring a breach of W claim?

  • clearly the B

  • in some circs, also a person who is not a party to ag may wish to...

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