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.
What is in a declaration of intent?
A declaration of intent (intentieverlaring) sets out the key terms for the sales process that is about to start. The buyer and seller usually draw this up before entering into a final sale contract.
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.
Ask for expert advice
You can ask an expert, for instance a lawyer, to help you draw up the declaration of intent. In the case of a share transfer, you will need a civil-law notary.
The declaration of intent can contain the following:
- 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 the parties are not permitted to negotiate with others, a so-called exclusivity clause
- agreements regarding the confidentiality of business information and the progress of the negotiations
- how payment will be made, for example in one lump sum, partly with an earn-out or a gradual transfer
- what guarantees the seller offers and what happens if a dispute arises over this at a later date
- how long the acquisition process will take
- a non-compete clause, such as that the seller may not start a new, competing business
- the extent to which the agreements are binding (reservations and non-commitment)
- conditions of termination, for example, if the buyer cannot get financing
- how the parties deal with disputes and which law applies. For example, the parties bring disputes before the court in Amsterdam, and Dutch law applies.
Further negotiations after the declaration of intent
Once you have finalised the declaration of intent, you continue negotiations with the buyer. You then fill in the details and resolve any remaining points of dispute. This is usually done in the presence of an acquisition advisor, lawyer, and civil-law notary. If you reach an agreement, this may lead to a takeover agreement.
Can you withdraw 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. But, as the negotiations progress, the parties can become more confident that they will conclude a contract. Have you and the buyer now agreed on many details that the sale is effectively finalised? In that case, neither you nor the buyer can simply stop the process. If this does happen, the withdrawing party may have to compensate the costs and even lost profits of the other party.