Transmission of company: Negotiate and draft the Memorandum of Understanding with the buyer
Verified 14 November 2023 - Legal and Administrative Information Directorate (Prime Minister)
The negotiation is a crucial step in the company transmission process. In this phase, you will work with the buyer to determine the sale price and the respective obligations of each party. The result of this negotiation is then formalized by the signature of a memorandum of understanding.
The Memorandum of Understanding is a pre-contract that allows to materialize in writing the outcome of the negotiation phase and the details of the transfer.
If we are talking about " memorandum of understanding’ in the case of the sale of securities (shares, shares), we will speak more of ‘assignment compromise’ if it is a question of transferring a goodwill.
The MoU contains basic information and more specific elements.
General information
- Identification of the parties : surname and forenames, contact details, domicile
- Presentation of the company : nature of business, location of head office, details of lease
- Amount of share capital and financial statement
- Turnover
- Purpose of the sale : which fund elements or number of securities transferred
- Disposal price and method of payment : the price must be determined or determinable, i.e. calculable on the day of sale
- Outcome of open contracts : with customers and suppliers
- Trade-in Conditions : you can decide with the buyer to work together after the company is transferred to facilitate recovery for employees, customers, and suppliers
- Timetable of operations
Please note
It is recommended that the name "Memorandum of Understanding" be specified in this document to distinguish it from the final assignment.
Special particulars
- Non-compete clause : it prohibits you from engaging in an activity that is concurrent with that of the company transferred. The geographical scope and duration of this clause against you should be limited.
- Earn-out clause : also called ‘price supplement clause’, it makes it possible to index part of the transfer price to the company's future profit or loss after the transfer.
- Jurisdiction clause : it enables the court competent to decide in advance any dispute that may have arisen in connection with the assignment to be determined. It may also provide for an alternative method of conflict resolution (arbitration or mediation).
- Asset-liability guarantee clause : it commits you to guarantee the accuracy of all information provided to the buyer. The buyer can thus protect himself against the devaluation of the asset (a loss of value) or the discovery of an additional liability after the sale.
The Memorandum of Understanding may also contain suspensive conditions, i.e. essential conditions to be fulfilled (by the seller or the buyer) without which the contract of assignment cannot be definitively concluded.
The Parties may agree, for example, on the following suspensive conditions:
- Performing an Audit of the company: an audit of the accounts
- Securing funding by the purchaser
- Signature of a contract (with a supplier or customer)
- Authorization of creditors holding a pledge (e.g. the bank)
- Administrative authorization (e.g. building permit, drinking outlet license)
The Memorandum of Understanding should set a deadline for the fulfillment of these suspensive conditions.
The parties are responsible for determining themselves in the Memorandum of Understanding the consequences of the withdrawal of the transferor or the transferee.
The Memorandum of Understanding may provide for enforcement and compel one of the parties to sign the act if it decides to renounce the transmission.
Enforcement shall be possible only if the suspensive conditions are fulfilled.
The Memorandum of Understanding may also include a penalty clause by which the parties undertake in advance to pay damages if one of them refuses to sign the definitive deed of assignment.
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