Change of Control terms in corporate acquisitions

Boilerplate clauses, i.e. the standard basic terms and conditions at the end of contracts, often receive less attention until they emerge during the due diligence phase of a corporate acquisition and require action. Change of Control (CoC) clauses are often found in these sections – and are regularly returned to in exits, when the legal DD must map all CoC risks as part of the transaction process.

Where CoC usually lies:

1. Assignment / Transfer – a classic place where CoC is embedded in a transfer restriction;

2. Termination – sometimes the CoC gives the other party the right to terminate the agreement.

Depending on the size and form of the transaction, the importance of the CoC condition increases.

In a major corporate transaction – whether it is a share or business transaction – CoC or assignment terms may require the consent of a customer or partner to be obtained before the transaction is completed. In practice, critical CoC consents are almost always taken as conditions precedent (CP) to the transaction. This ensures that the key contractual mass is transferred to the buyer when the transaction is completed – without surprises or loss of value. If it is a question of pure notification obligations without a consent requirement, these are typically handled according to an agreed schedule after the transaction is completed. If an exit is ever in the spotlight, map out now: which of your contracts require third-party consent when ownership changes.