Recent Answers to Acquisitions Law Questions

Jerome L.

Answered Apr 15, 2025

Great question—and smart move getting ahead of this. When you're placing a substantial amount of money into escrow, the agreement becomes critical to protect your investment and ensure all parties are aligned on how the funds will be handled. Here are the key provisions that should be included in a well-drafted Escrow Agreement: Parties to the Agreement Clearly identify the buyer, seller (or contracting parties), and the escrow agent, including their contact details and roles. Purpose of the Escrow Define why the funds are being held—whether it’s for a business acquisition, service milestone, asset transfer, etc. Escrowed Funds or Assets Specify the amount or nature of what is being held in escrow, including how it should be handled (e.g., deposited into an interest-bearing account). Conditions for Release Detail exactly when and how the escrow agent is authorized to release the funds—e.g., upon delivery of services, closing of a deal, receipt of signed documents, etc. Instructions & Disbursement Process Outline how release instructions are communicated, who must approve them, and what form they should take (e.g., written, signed by both parties). Duties & Liabilities of the Escrow Agent Define the escrow agent’s responsibilities, their standard of care, and a liability limitation clause to avoid disputes over unintentional delays or errors. Fees & Expenses Clarify who pays the escrow fees and how those fees will be structured—fixed, hourly, or percentage-based. Dispute Resolution Clause Include a provision on how disputes will be handled if there’s a disagreement about release conditions (e.g., mediation, arbitration, or court jurisdiction). Termination & Expiration Explain when the agreement ends—whether upon release of funds, mutual agreement, or lapse of a set time period—and what happens to the funds if unresolved. Governing Law Identify which state's laws will apply to the agreement, particularly if parties are in different jurisdictions. If you'd like, I can help draft or review your escrow agreement to ensure these provisions are solid and customized to your deal. Happy to help you safeguard your investment and give you peace of mind at every stage.

Phillip Z.

Answered Jan 18, 2025

Entering into a lock-up agreement when selling your business can have significant implications. Depending on the complexity of the transaction, the lock-up period can range from a few months to over a year. A lock-up agreement may limit your ability to negotiate certain aspects of timing and terms. However, it can also help stabilize a potential acquisition and mitigate risk for the buyer. Being unable to sell your interest in the business during the lock-up period can impact liquidity and your ability to manage the tax effects of the eventual sale. Of course, the specific terms within the lock-up agreement will play a crucial role.

Darryl S.

Answered Nov 28, 2023

Yes, you typically can sell an LLC post-formation. Some key points to consider if you may want to sell your LLC in the future: - You retain flexibility to sell membership interests (ownership units) in the LLC rather than the entity itself. This keeps things simpler as transferring formal LLC ownership requires dissolution paperwork. - The operating agreement should clearly outline members' rights and rules around transferring units, such as rights of first refusal and valuation mechanisms. This gives buyers confidence in the process. - Discuss with a lawyer and accountant to set up the appropriate LLC structure for your situation. For example, a single-member vs multi-member LLC may have different implications for a future sale. - Maintain detailed financial records and consistent bookkeeping. This will streamline the due diligence process for prospective buyers. So in short, yes an LLC remains a saleable entity after formation. Consider rules for transfers in the operating agreement, structure properly at the start, and keep excellent records. This gives you maximum flexibility for an ownership exit strategy via selling your LLC interest. Let me know if you need any clarification or have additional questions!

David B.

Answered Nov 25, 2023

The general rule is that contracts may be freely assigned to third parties. However, most agreements have clauses that limit or prohibit assignment unless the non-assigning party agrees to the assignment.

David B.

Answered Nov 25, 2023

It seems that you are thinking of signing a letter of intent. A letter of intent ("LOI") is normally used to summarize the key points of a deal upon which the parties have reached an understanding. It is a prelude to a full set of agreements used to purchase a business. After the LOI is signed, the parties negotiate the minutiae of a deal and prepare the final set of agreement. LOIs usually contain a statement that the LOI does not bind either party to move forward with a deal. For the most part this is true. However, case law is replete with cases where the LOI was enforced against an unwilling party despite the disclaimer in the LOI. Generally speaking, courts will enforce an LOI where one party did not act in good faith after the LOI was signed, refused to negotiate or signed the LOI for nefarious purposes. A person contemplating an LOI should not assume that language saying the agreement is not binding will clear them of all responsibility. There is a duty to negotiate in good faith.

David B.

Answered Nov 21, 2023

The short (but not very helpful) answer is: a person that is authorized by the business to bind the business. So, if the business being acquired in a corporation, it would likely be the CEO. During due diligence, the business being acquired should disclose that information and provide a copy of the minutes of a meeting of the Board of Directors showing that such person has been duly authorized. Occasionally, the CEO will sign an agreement stating that she has been duly authorized and is personally liable, and if she isn't she will be personally responsible for the problems tha arise. That being said, each deal is different depending on the facts. First, what type of entity is being acquired? Is it a corporation or LLC or partnership or something else? Second, what was done by the entity to vest authority in the person that will sign the acquisition agreement? Underlying all of this is the need to ensure that the seller is telling the truth. You may want to contact the department of corporation in your state to ensure that the entity has been duly registered, is current on all of its filing and verify that the person signing the agreement is listed on the paperwork.