Why the client needed our help
Our client, a major independent receivables financier, was asked by an existing customer for its consent to the sale of its shares to a new investor. It was a condition of both the underlying debt purchase agreement and the all asset debenture granted to our client that there could be no change of control of the company, such as a sale of shares, without the prior written consent of our client.
It was intended that under its new ownership, the company would continue as a customer of our client, therefore it was important for our client to be confident that the sale of the shares of its customer would not adversely affect our client before it gave consent for the proposed sale to go ahead. We were asked by our client to review and report to it on the terms of the share sale agreement to ensure that our client would be able to continue to operate its debt purchase facility in accordance with its terms and, further, that the assets of the company would not be used as security for any funds being advanced to meet the purchase price of the shares.
How we helped
Following our review and advice on the relevant terms of the share sale agreement, we drafted a letter of consent from our client to the change of control and appointment of new directors of the company.
In addition, we highlighted the potential impact of the ‘earn-out’ payment terms in the share sale agreement which could impact on liquidity of the company and the delivery of the company’s books and records to the purchaser and how this could affect our client’s ability to collect the debts.
By giving its consent to the sale of the customer company’s shares, our client was able to support the new investment and change of management in the company whilst both retaining the customer as a client and enabling the continuation of the invoice finance facility.