Drafting Drag along Triggers in International Shareholders Agreements
Drafting cross-border drag-along triggers requires verifiable voting thresholds, explicit cash valuation floors, and deeded power-of-attorney execution clamp mechanics.
Side-Deal Anti-Leakage
Meaning
Restrictive covenant in an acquisition agreement that prevents the seller from extracting value through private arrangements with specific parties outside the main purchase price. A side-deal anti-leakage provision ensures that the agreed valuation of the business remains intact between the signing and the closing of the deal.
Value Preservation
The buyer uses this clause to block the payment of management bonuses or special dividends that were not disclosed during the due diligence phase. Any transfer of assets or cash to the seller or its affiliates is treated as a breach of the agreement and results in a reduction in the final purchase price.
Payment Restriction
The clause lists specific types of transactions that are prohibited without the express written consent of the buyer. These typically include the forgiveness of debts owed by directors and the entry into new contracts with related parties on non-market terms. By defining these boundaries, the agreement protects the cash position of the target company during the transition period.
The restriction also prevents the seller from selling off equipment or inventory that is needed for the ongoing operation of the business.
Transaction Integrity
Monitoring compliance with these rules requires the seller to provide regular financial updates and access to the books of the company. The buyer relies on these disclosures to verify that the target has been operated in the ordinary course of business.