Preface
Table of cases
Table of ordinances
PART ONE: ACQUISITION OF SHARES
Chapter 1: Introduction to Share Acquisitions
1.1 Private and public companies - the group structure
1.2 Objectives of an acquisition
1.3 What are "mergers" and “acquisitions”?
1.3.1 By an exchange of shares
1.3.2 By a transfer of business
1.4 Different methods of acquiring shares in a Hong Kong company
1.5 The widespread use of offshore companies
1.6 Factors relevant to the structuring of an acquisition
1. 6.1 Acquisition of business or acquisition of shares?
1.6.2 By subscription or transfer?
Chapter 2: Share Purchase -The Initial Exchanges
2.1 Introduction
2.1.1 Stages in a typical share purchase transaction.
2.1.2 Initial contact between client and lawyer
2.2 Preliminary considerations
2.2.1 The subject matter of the sale and purchase
2.2.2 Is the target company a private company or a public company?
2.2.3 Financing for the purchase
2.3 Initial exchanges between the parties
2.3.1 Heads of agreement
2.3.2 Terms of a heads of agreement
Chapter 3: Share Purchase - Due Diligence
3.1 Introduction
3.1.1 What is due diligence?
3.1.2 Why is due diligence necessary?
3.1.3 Types of due diligence
3.2 How is due diligence carried out?
3.2.1 Publicly available information
3.2.2 The significance of publicly available information
3.2.3 Companies incorporated overseas
3.2.4 Due diligence questionnaire
3.3 Review of due diligence materials
3.4 Due diligence reports and follow-up actions
3.4.1 Seeking clarification from the vendor
3.4.2 Requiring suitable warranties from the vendor
3.4.3 Requiring suitable indemnities from the vendor
3.4.4 Making the purchase conditional
3.4.5 Re-negotiating the purchase price
3.4.6 Requiring a retention of the purchase price
3.5 The role of the vendor's lawyer in due diligence
Chapter 4: Share Purchase – Documentation
4.1 The share purchase agreement
4.1.1 Parties to the agreement
4.1.2 The agreement to sell and to purchase
4.1.3 Consideration
4.1.4 Conditions precedent
4.1.5 Completion
4.1.6 Restrictions between signing and completion
4.1.7 Warranties
4.1.8 Indemnities
4.1.9 Restrictive covenants
4.1.10 Release of vendor's guarantee
4.1.11 Boilerplate provisions
4.2 The disclosure letter
4.2.1 General disclosure
4.2.2 Specific disclosure
4.2.3 Relevance of the purchaser's knowledge
Chapter 5: Share Purchase - Negotiation, Signing and Completion
5.1 Negotiation and revision of the documents
5.2 Signing of the share purchase agreement
5.3 Announcement
5.4 Preparing for completion
5.4.1 Fulfilling conditions precedent
5.4.2 Rationalising the relationship between the vendor and the target company
5.4.3 Completion agenda
5.5 The vendor's role at completion
5.6 The purchaser's role at completion
5.7 Post-completion matters
5.7.1 Payment of stamp duty
5.7.2 Updating the register of members and issue of new certificate
5.1.3 Updating the statutory books and records and fulfilling corporate reporting requirements
5.7.4 Notifying the relevant authorities
5.7.5 Corporate restructuring
5.7.6 Preparation of "bible" of transaction documents
Chapter 6: Share Purchase - Remedies
6.1 Breach of warranty
6.1.1 Rescission and termination
6.1.2 Damages for breach
6.2 Claim under an indemnity
6.3 Misrepresentation
6.3.1 Relationship with breach of warranty
6.3.2 Rescission
6.3.3 Damages
6.3.4 Effect of "entire agreement" and "non-reliance" clauses
6.4 Retention fund
6.5 Set-off against deferred consideration
Chapter 7: Share Subscription
7.1 Introduction
7.2 The share subscription agreement
7.2.1 Parties to the agreement
7.2.2 Agreement by the existing shareholder
7.2.3 Agreement by the investor
7.2.4 Conditions precedent
7.2.5 Warranties
7.3 Completion
7.3.1 Capital reorganisation
7.3.2 Subscription and allotment
7.3.3 Shareholders' agreement
7.3.4 Advance of shareholder's loan
7.3.5 Amendment of articles of association
7.4 Post-completion matters
7.4.1 Updating the statutory books and records
7.4.2 Corporate reporting requirements
7.4.3 Stamp duty
PART TWO: PURCHASE OF BUSINESSES
Chapter 8: Business Purchase - An Overview of the Transaction
8.1 Introduction
8.2 Transfer of Businesses (Protection of Creditors) Ordinance
8.2.1 Imposition of liability on the transferee
8.2.2 Exceptions
8.2.3 What amounts to a "transfer of business"?
8.2.4 Publication of a notice of transfer
8.2.5 Limit and duration of transferee's liability
8.2.6 Right to indemnification
8.2.7 Implications for the purchaser
8.3 Reverse takeover
8.4 Shareholders' approval for the disposal of fixed assets
8.5 Disclosure under the Listing Rules and Part XIV A of the Securities and Futures Ordinance
8.6 Application of foreign law
8.7 Other considerations
8.8 Stages of a typical business purchase transaction
8.8.1 Pre-contract stage
8.8.2 Signing
8.8.3 Completion
Chapter 9: Business Purchase - Due Diligence
9.1 Introduction
9.2 Some matters which require special attention in due diligence
9.2.1 Accounts
9.2.2 Land
9.2.3 Contracts
9.2.4 Book debts and account receivables
9.2.5 Intellectual property
9.2.6 Information technology
9.2.7 Personal data and privacy
Chapter 10: Business Purchase - Documentation
10.1 The business purchase agreement
10.1.1 Parties to the agreement
10.1.2 Subject matter
10.1.3 Consideration
10.1.4 Conditions precedent
10.1.5 Completion
10.1.6 Restrictions between signing and completion
10.1.7 Warranties
10.1.8 Indemnities
10.1.9 Restrictive covenants
10.1.10 Other provisions
10.2 The disclosure letter
10.3 Other documents
10.3.1 Transfer documents
10.3.2 New contracts
10.3.3 Ancillary documents
Chapter 11: Business Purchase - Completion and Post-Completion
11.1 Between signing and completion
11.1.1 Payment of stamp duty
11.1.2 Fulfilling conditions precedent
11.1.3 Obtaining third party consent and negotiating new contracts
11.1.4 Termination of employees
11.1.5 Prepare completion' agenda and completion documents
11.1.6 Corporate authorisations
11.1.7 Financing
11.1.8 Shortly before completion
11.2 What happens at completion?
11.3 Post-completion matters
11.3.1 Post-completion audit
11.3.2 Notify the Business Registration Office
11.3.3 Notify all relevant regulatory or other authorities
11.3.4 Payment of stamp duty and registration at Land Registry
11.3.5 Registration of intellectual property rights
11.3.6 Serve notices of assignment
11.3.7 Enroll employees into mandatory provident fund scheme
11.3.8 Effect insurance cover
11.3.9 Compile transaction "bible"
11.4 Remedies
APPENDICES
Appendix A: Form of Instrument of Transfer
Appendix B: Form of Contract Notes
Appendix C: Form of Due Diligence Questionnaire
Appendix D: Form of Share Purchase Agreement
Appendix E: Form of Disclosure Letter
Appendix F: Form of Notice of Transfer under the TBPCO
Index
