Purchase Agreements (SPA): The Legal Framework of the Deal
The heart of any M&A transaction is the Sale and Purchase Agreement (SPA). This is the main document that regulates the transfer of assets or shares, defines the price, payment terms, and, most importantly, allocates risks between the parties. A well-drafted SPA is not just a template document; it is a tailored instrument that takes into account the results of Due Diligence and protects the buyer from hidden liabilities through Warranties and Indemnities mechanisms. In Georgia, where deals are often drafted in English using English law principles (while respecting mandatory Georgian law norms), preparing an SPA requires specific qualifications.
Legal.ge offers access to experienced corporate lawyers who will assist you in drafting, negotiating, and finalizing the SPA. Our specialists ensure that the agreement accurately reflects your commercial understanding and minimizes the risk of future disputes.
What Does Purchase Agreement Service Cover?
The service involves processing all critical components of the agreement:
- Price Mechanism: Fixed price (Locked Box) or adjustable price (Completion Accounts). Defining Earn-out mechanisms.
- Representations & Warranties (R&W): Promises made by the seller regarding the company's state (taxes, assets, litigation).
- Indemnities: Specific obligation to reimburse losses upon the occurrence of specific risks (e.g., tax fines).
- Conditions Precedent: Conditions that must be met before the deal closes (e.g., Competition Agency approval).
- Restrictive Covenants: Prohibiting the seller from competing (Non-compete) for a certain period after the deal.
- Limitation of Liability: Maximum amount (Cap) and minimum threshold (Basket) within which the seller is liable.
Common Scenarios When SPA Drafting is Necessary
This service is needed for any type of acquisition:
- Share Deal: Buying shares in a company's capital, which automatically implies inheriting all historical liabilities.
- Asset Deal: Buying only specific assets (building, machinery, license) without liabilities.
- Management Buyout (MBO): Management buying the company, requiring specific warranties.
- Joint Venture (JV): Investing in a new company with a partner (in combination with a Shareholders' Agreement).
Georgian Legal Framework
The SPA is regulated by the Civil Code of Georgia and the Law on Entrepreneurs. Georgian law recognizes freedom of contract, allowing parties to use mechanisms accepted in international practice (e.g., Escrow accounts, guarantees). However, mandatory norms exist (e.g., registration of share transfer in the Public Registry) that must be observed. Agreements for the sale of real estate or company shares require a written form and, in many cases, notarization or signing at the registry.
Service Process Stages
The process includes:
- Term Sheet: Agreeing on key commercial terms before writing the SPA.
- First Draft: Preparing the draft agreement (usually by the buyer's lawyer).
- Negotiation: Aligning terms between parties, especially regarding warranties and liability.
- Disclosure Letter: Official acknowledgment by the seller of problems identified during the audit to exempt from liability.
- Signing & Closing: Executing the deal and transferring funds.
Why Legal.ge?
An SPA is not a place for "Copy-Paste." Each transaction is unique, and a template approach often leads to million-dollar losses. Legal.ge connects you with lawyers who have practical experience closing M&A deals. They will protect you from legal pitfalls and ensure you get exactly what you pay for. Close your deal with confidence using Legal.ge.
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