Tag archives: Purchase Agreement

Enforcement of restrictive covenants in commercial transactions

Restrictive covenants are often a key mechanism by way of which the buyer of a business is able to protect the value of their purchase. Indeed, in a 2017 review of legal trends in Canadian private M&A, Thomson Reuters has reported that non-competition covenants were found in 52% of the closing conditions of share acquisition transactions.

While such covenants are common, their enforcement has remained an ongoing concern due to the strict reasonableness requirements imposed by the Supreme Court of Canada in JG Collins Insurance Agencies Ltd. v Elsley, [1978] 2 SCR 916 in order to balance the parties’ … Continue Reading

Governing law clauses: “without regard to conflict of law”

Contracting parties will typically consider a “governing law” provision, which identifies the proper law of a contract by express intention. A governing law provision applies to the substantive issues of the contract, provided that it is bona fide, legal and not contrary to public policy. Such provisions will identify the preferred jurisdiction of governing law of a contract (e.g., “the laws of Ontario”, “the federal laws of Canada”, etc.), clarifying the intention of the parties regardless of which court has jurisdiction over a dispute.

Oftentimes, the governing law provision will also include the phrase, “without Continue Reading

Protecting buyers in M&A transactions: trends in the use of indemnification provisions

Allocating liability between buyers and sellers for the business and operating risks of a target company in M&A transactions is key to assessing what might be an appropriate purchase price for the transaction. As a result, the indemnification provisions in a purchase agreement are heavily negotiated with buyers seeking to limit their post-closing damages and sellers seeking to limit their liability for uncertain risks.

Recent trends in the use of indemnities are revealed in the 2016 SRS Acquiom M&A Deal Terms Study (the SRS Acquiom Study) which analyzed 735 private-target acquisitions that closed in 2012 through 2015.

Separate indemnities

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