Declaration of intent
Are you planning to sell your business? You can make agreements with a potential buyer about the sales process. For example, about how you will negotiate and about confidentiality. This provides clarity and prevents disputes. You can describe these agreements in a declaration of intent. You do not need to visit a civil-law notary for this.
What is in a declaration of intent?
There are no fixed rules regarding the form of a declaration of intent and what exactly it should contain. It can be a single A4 page with a few general agreements or a comprehensive statement with the status of a provisional purchase contract.
The declaration of intent usually contains the following points:
- that the parties intend to sell and buy a company and what exactly they will acquire (shares or assets/liabilities, for example)
- the period for which the statement applies
- that an investigation will be conducted into the state of the business and on which subjects. This is called due diligence.
- that the parties are not permitted to negotiate with others, a so-called exclusivity clause
- the confidentiality agreements
- how payment will be made, for example in one lump sum, partly with an earn-out or a gradual transfer
- the guarantees and what will happen if disputes arise later
- how long the acquisition process will take
- a non-compete clause, such as that the seller may not start a new business within a certain radius of the current business
- the extent to which the agreements are binding (reservations and non-commitment)
- the resolutive conditions, such as when the financing fails
- the dispute resolution and applicable law, for example that disputes will be submitted to the court in Amsterdam and that the Netherlands applies
Further negotiations after the declaration of intent
Once you have finalised the declaration of intent, you continue negotiations. You then fill in the details and resolve any remaining points of dispute. This is often done in the presence of an acquisition advisor, lawyer, and civil-law notary. These negotiations can then lead to an acquisition contract.
Withdrawing from the negotiations
As long as the purchase agreement has not been signed, it is possible for you or the buyer to withdraw from the negotiations. That is, unless the negotiations have reached a stage where the declaration of intent is really a provisionary purchase agreement. If that is the case, the withdrawing party may have to compensate the costs and even lost profits of the other party.