VENTURE FORTHE PAYROLL HOW TO

Review Buyer obligations to achieve earnouts/milestones (ideal minimum obligation of commercially reasonable efforts).Include preemptive conflict waiver so that seller’s counsel can continue to represent the shareholders.Expressly address ownership of the selling company’s attorney-client privilege*.Ensure that the fund could easily assign interest in post-closing economics (escrows, milestones, expense funds) if the fund needs to wind-down before all potential distributions have been made. Review assignment provisions, particularly if a shareholder is a late-stage fund that may be winding-up during the active post-closing period.That can make damages nearly impossible to agree upon for purposes of claim resolution. This kind of provision could inflate claims by the multiple calculated for the deal valuation. Watch for damage calculations based on diminution of value.Determine if a cap on specifically indemnified matters is appropriate.This prevents “claim creep” where the Buyer may start articulating new theories after the survival period has ended. Require that a claim notice be sufficiently specific to identify a claim.Require that the Shareholder Representative must provide written consent to any settlement as a condition to indemnifications.If possible, be sure that if the Sellers have the right to control third-party disputes, they can do so without having to admit indemnification.Ensure at least a 30-day response period for claims and ability to control third-party claims.Review the language around baskets (e.g., overbroad exclusions, does it allow for potential damages?).Review the limit of shareholder liability deriving from post-closing matters, including joint and/or several liability, whether there are caps on liability in the absence of fraud, and the order of liability (i.e., who pays for what, and in what order?).Ask the Shareholder Representative to review draft language (they will be the ones who need to implement/enforce it).Watch for overlap in definitions, circular definitions, or reference to documents outside the four corners of the agreement.

VENTURE FORTHE PAYROLL HOW TO

Accounting arbitrators only know how to address accounting issues.

Watch for non-accounting issues in working capital (e.g., tax compliance, reserves for litigation, capitalization).

Essential drafting considerations to avoid post-closing issues.

Venture forthe payroll