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(List of articles in English and French relating to various legal issues)

5.5 Control of the Acquired American Business

The America Purchase and Sale Agreement must also address the issue of control of the business acquired. 

The acquisitions of a relatively small American business for under $ 5 to $ 20 million will usually exclude any minority shareholders of the operating entity. If there are to be minority shareholders, a series of additional issues would need to be addressed with legal counsel.

The comments noted below are predicated upon the assumption that there will be no minority shareholders.

If there is to be a stock acquisition, all of the shareholders of the target must sign the Stock Purchase and Sale Agreement and the consent of spouses may also be necessary, an issue to be reviewed by the buyer's legal counsel.

If there is to be an asset acquisition, the validity of the consent of the controlling stockholders is strictly a legal to be dealt with by legal opinions of both the target's legal counsel and the buyer's legal counsel delivered at the closing.

In order to assume management control, it is normal at the closing to take steps to assure that the President of the entity is independent of the ancien régime. If there is to be a stock acquisition, the resignation of the target's President at the closing will be dealt with in the Stock Purchase and Sale Agreement 

Also, to is often prudent to change auditors, as the traditional ("old") auditors of the acquired business may not be prepared to question the correctness of the financial statements used to determine the purchase price. Naturally, if such financial statement prove to have been materially incorrect, the buyer may after the closing invoke the Representations and Warranties of the target and seek to be indemnified. The "old" auditors might find that they have a conflict of interest.