12.5 Signing, Conditions Precedent to Closing 417the “organ” through which the acquirer has acted, and fall outside of the “powers
that the law confers or allows to be conferred” on that organ; if this is the case, Ar-
ticle 9 of the First Company Law Directive does not prevent the acquirer from in-
voking the restriction against the acquirer.
12.5 Signing, Conditions Precedent to Closing
The separation of “signing” and “closing” is an Anglo-American technique com-
monly applied in commercial contracts worldwide.
Problems with legal background rules. It is a traditional principle of law in
continental Europe and the Nordic countries that the conclusion of the contract,
the delivery of the object, the passing of risk, and payment of the purchase price
happen more or less simultaneously. However, traditional contract law rules can
cause problems in complicated transactions such as business acquisition contracts:
- Either the vendor or the target will not want to let the prospective acquirer in-
spect the object unless the parties are relatively likely to conclude a binding
contract (there is always the risk that the prospective buyer walks away and
uses the target‘s business secrets for business purposes). - The prospective acquirer will not want to conclude the contract unless it can in-
spect the object first. - The prospective acquirer will not want to conclude the contract unless it is sure
that all necessary permits will be obtained and sufficient funds are available,
and these questions can often be solved only after there is a contract. - In addition, the vendor will not want to hand the object over to the acquirer
unless the acquirer has paid the purchase price, and the acquirer does not want
to pay the purchase price unless the object is handed over to the acquirer.
Separation of signing and closing. These problems can be solved when the signing
of contract documents is separated from payment of the purchase price, delivery
of the object, and the passing over of risk. The separation of signing and closing
enables the parties to apply the traditional Zug-um-Zug principle (also known as
the cash against delivery principle). The Zug-um-Zug principle means that the
seller hands over the goods and the buyer pays the purchase price simultaneously.
In practice, the parties agree on the following procedure:
- The contract documents will be signed when the parties have reached agree-
ment. - The transaction will not become final unless there is a closing.
- There will not be any closing unless conditions precedent to closing are ful-
filled or the party protected by the conditions precedent gives his consent.