Dec 052020

For some companies, changing ownership is not a problem, but if the agreement is very specific or involves a new product or service, it can be difficult to replace/duplicate it with another company. A company may decide that it does not want to devote time or wants to have the inconvenience of having to know a new management when the other party is acquired or to take the risk that the new management does not correspond well to it or does not correspond to its project team. New managers should not prioritize the project in the same way if they have assessed the company`s assets. Contracts are inherently risky and a number of things can go wrong, which can lead to costly contractual litigation. Of course, this can alter circumstances that are not even dealt with in a treaty, so it is not even possible to challenge such an undesirable change, or perhaps there is only a remote chance of success in the courtroom. A fairly significant change, which is likely to occur and is not often mentioned in contracts, is a change in the structure or ownership of one of the contracting parties. Companies are bought, sold and merged all the time, but contracts are often silent on the impact that such a change should have or will have on the existing contract. This is clearly an error, as a change of ownership may result in deliberate or unintended changes to the existing agreement. For example, a newly created business may change the seller or subcontract with new parties, situations in which the nature, quality or date of contractual obligations are changed. Many agreements do not allow for attribution; However, this does not apply to a change of control. Ultimately, a company must determine the circumstances under which it does not wish to pursue the agreement initially negotiated and developed. One party may try to ensure that the other party seeks the agreement to proceed with the amendment and maintain the agreement, or to provide some form of payment as compensation for the amendment while retaining the right to terminate the contract. In addition to termination, a party may seek reimbursement of certain investments made under the agreement, as the change of control poses a significant threat to its activities.

In the financial sector, a change of control occurs when ownership of a business changes significantly.

 Posted by at 7:59 am

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