Closing Deliverables
What are Closing Deliverables? Both parties to the transaction are required to provide certain documents and property to the other side at the Closing. This portion of the Agreement sets out everything that must be delivered, and who is responsible for delivery of each item.
The Middle Ground: The exact deliverables depend on the specifics of the transaction, but typically they include a Closing certificate, necessary consents, deeds for real property, intellectual property assignment agreements, and the money due at Closing.
Purpose: The failure of either side to provide the deliverables listed in this section could completely destroy the deal. One of the Conditions to Closing is that both parties have satisfied their requirements under the Closing Deliverables provision, meaning if one party does not comply with these obligations the other party can walk away from the deal without repercussion. Therefore, this section motivates both sides to promptly address their obligations by setting a deadline for delivery and imposing a severe punishment for a failure to follow through. Even with the option to walk away, most buyers and sellers are willing to move forward with the Closing in the absence of a closing deliverable so long as the deliverable is not a central piece of the transaction (e.g. cash due at Closing). Rather than throw out months of hard work on both sides, generally the parties will agree on how to deal with the missing deliverable and amend the Agreement accordingly.
Buyer Preference: If registered intellectual property is being transferred, the Buyer will prefer to have short-form assignment and assumption agreements in addition to the longer forms so they can use the short-forms for public filings with the US Patent and Trademark Office (generally, neither side wants all the details included in the long forms to become public record). If a deed for real property is part of the transfer, the Buyer will want to seek a deed that, in light of the facts, provides maximum protection against third parties coming in after the sale and claiming the land as their own. A general warranty deed is the ideal choice, but obtaining one may not be feasible in certain situations. Finally, the Buyer wants to obtain a power of attorney from the Seller for all matters related to operation of the Business and any Purchased Assets.
Seller Preference: For transfers of real property, the Seller prefers to provide a deed with little or no warranties, meaning a quitclaim deed is the ideal choice. Whether a deed backed by further warranties is appropriate depends on the Seller’s familiarity with the real estate in question.
Differences in a Stock Sale Transaction Structure: This section is not included in a stock sale, as the only items to be tendered at the time of Closing are the cash due at Closing and the shares being transferred.
Closing
What is the Closing section? Both sides have to agree when and where the Closing will happen; this section is where they put those details in writing.
The Middle Ground: This clause states the procedural details relating to the Closing, including the date, time, and place where the Closing will occur. It also states when the Closing will take effect for legal purposes (often at 11:59 pm on the Closing Date).
Purpose: This section is purely informational and is included mostly for the sake of convenience. Once the parties agree on a Closing Date they are not likely to give a second thought to this section until that date approaches.
Buyer and Seller Preference: Both parties will want the Closing Date to fall on a weekday so wire transfers can be executed and any last-minute approvals or other closing-related items can be obtained.
Differences in a Stock Sale Transaction Structure: None.