A recent case has demonstrated the importance of spelling out clearly in a share purchase agreement any specific post completion cooperation required from a seller, according to a corporate lawyer. “Share purchase agreements usually contain a generally worded further assurance clause in which a seller covenants to do all things reasonably required to give effect to the agreement,” says Philip Round, a Corporate Partner at George Green LLP. “A purchaser should not, however, view such clauses as an adequate substitute for specifying in detail any particular actions which it requires the seller to take.”

Mr Round continues “the High Court case of Takeda Pharmaceutical Company Ltd –v- Fougera Sweden Holding 2 AB concerned the acquisition of a pharmaceutical company. As there was, at the time of completion, an unresolved dispute with the Danish tax authority regarding the liability of the target to pay Danish withholding tax, the seller agreed to indemnify the purchaser against any such liability, provided the claim was resolved within 6 years of completion, failing which the seller ceased to be liable. The buyer asserted that it could negotiate a satisfactory settlement within the limitation period on condition that the seller cooperated in supplying certain information regarding the seller’s ultimate investors. The seller refused to supply such information on the basis that the share purchase agreement did not expressly or impliedly oblige it to do so.”

According to Mr Round, “the buyer argued that the general further assurance clause imposed such an obligation as the provision of the information was reasonably necessary to give effect to the contract, or alternatively the seller was under an implied duty to cooperate in order to enable the buyer to perfect the contract. The court, however, rejected these arguments. The buyer was unable to establish, as a matter of fact, that the parties understood such information to be necessary to enable the purchaser to negotiate a reduction in the tax liability. Had it done so, however, the buyer’s argument would still have failed, as provision of the information was not strictly necessary to give effect to the agreement or to enable the buyer to perform its obligations. The buyer could still have negotiated with the tax authorities using other arguments, and the only reference in the agreement to the provision of information was in fact an acknowledgement that certain confidential data was being held by tax advisors and could not be disclosed.”

Mr Round concludes “courts are reluctant to imply obligations into an agreement which has been negotiated by commercially sophisticated parties. It is therefore imperative that a purchaser seeks professional legal advice in preparing and negotiating a share purchase agreement, and clearly communicates to its lawyers any specific practical concerns which need to be addressed in the drafting.”