Supreme Court On Share Purchase Agreement

While the decision adopts orthodox principles, it highlights the possibility that the shares “as justified” could be worth much more than the buyer actually agreed to pay for them, meaning that sellers – even with market restrictions and de minimis rules – can be held liable for the entire purchase price if the shares have zero or nominal value “as expected”. Following the introduction of Regulation 2016-1635 and Decree 2017-1094, unlisted companies that were not previously required to disclose the identity of their shareholders and preserve confidentiality through shareholder agreements will now have to disclose their beneficial owners not only when setting up a company, but also permanently. However, the definition of “beneficial owner” remains unclear. The Hamon law introduced a new obligation for small and medium-sized enterprises to provide information to employees in the event of a planned sale of shares or current affairs. The law aims to encourage and encourage the acquisition of businesses by their employees in order to avoid the failure of healthy businesses due to the absence of a buyer. LIMITATION OF FREEDOM OF SALE / ASSIGNMENT – When a shareholder circumvents his obligation and, consequently, reduces / removes the right of pre-emption or any other right of the company`s shareholders` agreement, the principles of contractual interpretation apply and the contract between the shareholder and the company is interpreted objectively. The freedom of negotiation provided for in S.27 of the Indian Contract Act does not apply in cases where the courts have interpreted these restrictions as appropriate. Limiting the right to transfer shares is one of the conditions for the company to be treated as a “private enterprise” in accordance with the Companies Act 2013. Companies set certain restrictions on the right of shareholders to transfer shares. The transfer of shares must be carried out in a manner prescribed by the articles of association (“AOA”) so that the company does not register the transfer and the contemptuous person remains the owner, unless the transfer is registered. Some restrictive covenants are considered as follows: the Supreme Court dismissed an appeal on the importance of set-off in a share purchase agreement and gave guidance on the rules of contract interpretation in its judgment. The judge upheld the orthodox principle that damages for the loss of good business should be judged “as justified” (i.e.

on the basis of guarantees) and the value of shares “as expected” (i.e. given the actual state of affairs). A share purchase agreement usually provides for seller guarantees, with the seller agreeing to exempt the buyer from the possible loss of value of the target business. A recent decision specifies that the parties must explicitly clarify their intentions regarding the possibility or prohibition of assignment of the seller`s guarantees to a third party in the event of a subsequent transfer of the target company`s shares. The Supreme Court recently held that the Court of Appeal had ruled, correctly and on the basis of its sovereignty of interpretation, that the buyer had the right to assert a right under the guarantees when it had failed to comply with some of the contractual provisions and that the amount to be paid by the seller for the loss of chance should be reduced. The Hamon law required small and medium-sized enterprises to inform their employees of the transfer of majority stakes and companies. However, two recent developments – a Constitutional Court ruling and the recent Macron law – have somewhat mitigated the burdens imposed on potential sellers by the Hamon law. . . .

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