Buyers and sellers are generally entitled to enter the financial statement account process; either as the preparer of the draft accounts or as an auditor of these accounts. It is not normal (but occasionally) for final accounts to be verified. In the period following the signing, the GSO and the prior completion, the parties have a lot to fill and the focus may not be on the OSG or the closing accounts. However, this time can be used very effectively to plan the final account process. In practice, warranty applications are rarely brought to justice and the information process is subject to considerable effort to ensure that the buyer is fully informed and that disputes are avoided. When a significant problem is identified by the data, it is usually addressed by price adjustment or compensation in the sales contract. Financial statements, particularly in larger and more complex cases, traditionally involve an official closing meeting involving buyers, sellers, lawyers and other advisors. This can often be a long meeting, as lawyers check that all formalities are available, that purchase funds are available and that all the incidental documents necessary to conclude the sale and purchase are ready to be signed. It is not uncommon for negotiations between buyers and sellers to take place at the beginning of this meeting. If the exchange and conclusion do not take place at the same time, there may be a longer session at each stage. The final accounts are based on an agreed methodology defined in the sales contract.
With respect to share purchases, they are generally used (i) to confirm whether the financial situation of the target entity corresponds to the position in the financial statements on which the purchaser based his initial valuation of the target entity and/or (ii) to test certain assumptions that the buyer may have made to calculate the purchase price – the buyer may, for example, have accepted a certain amount of net assets or operating capital. In terms of asset acquisition, they are simply used to determine the true value of the assets acquired. The rest of this article focuses on the practicalities of accounting accounts. First, we will examine how we can approach the pre-signature process in order to codify the results of due diligence in the pricing mechanism in the GSB. We will also examine the practicalities of managing a well-managed process after signing, in order to prepare or review the final accounts and agree on the final share price. In summary, the use of stock purchase accounts and asset acquisitions can be extremely useful for both buyers and sellers. However, it is important to ensure that an appropriate type of adjustment is sought and that the elements of the financial statement accounting mechanism are carefully reviewed and defined in depth. The involvement of a lawyer and accountant throughout this process is highly recommended. While this may be a useful mechanism for achieving a fair price, buyers and sellers must also ensure that financial statement accounts can also be the source of lengthy and costly litigation if sufficient attention is paid to the relevant clauses of the OSB.
Because this is a complex area that depends on the particular circumstances of the parties (including the availability of exemptions, exemptions and allowances), this guide does not cover the various tax consequences of a deal. But as a general rule, sellers, if they are individuals, probably prefer to sell shares to avoid double tax pressure – an initial tax burden on the company at the time of the sale of assets to the buyer, and an additional tax burden on the company`s shareholders if they withdraw the proceeds from the sale of the company.