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GLOSSARY

Break fee definition

Published by a LexisNexis Commercial expert

What does Break fee mean?

Break fees are generally designed to compensate a party’s legal and professional costs which it may have incurred in due diligence and negotiations at the time the transaction terminates. They may also encourage the parties to remain at the negotiating table rather than take action that may unreasonably cause the transaction not to proceed.

A break fee agreement will be signed by the parties early on in the sale transaction, usually before the buyer commences its due diligence. Break fee provisions (also known as failure costs agreements, inducement, termination or broken deal fees) may be contained in a separate agreement or may be included in heads of terms.

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Competition law and corporate transactions—checklist

Competition law and corporate transactions—checklist This Checklist summarises the competition law considerations relevant to corporate transactions. Preliminary considerations Before you make contact with the other side, it is important to: • Put together a team to work on the transaction and establish communication channels with all relevant parts of the business. It may be necessary to engage specialist advisors, depending on any PR issues or anticipated complexity or regulatory issues, for example: ◦ lobbying/PR specialists ◦ economists ◦ accountants • Exercise caution regarding document creation (both internal and external) and public and internal statements • Manage expectations, including in relation to any potential competition concerns and preliminary timing considerations • Confirm that the contemplated transaction has a legitimate purpose • Consider the maintenance of legal privilege in relation to communications where relevant (see further, Legal privilege in EU competition cases) Issues before and during negotiation There are a number of issues to be aware of as soon as transactions are contemplated and during negotiations, not least to ensure there can...

Exercising break clauses—Scotland—checklist

Exercising break clauses—Scotland—checklist What is a break clause? A lease for a term of years may contain an option for the parties or one of them to terminate the lease before the expiration of the term. This is known as a break option or clause. A break clause allows either (or both) the landlord and/or tenant to bring the lease to an end early on a particular date or on the occurrence of a particular event. Break clauses give the benefitting party flexibility, eg to respond to changing market conditions. Break options are exercised by the service of a break notice. The requirements associated with the break notice, including the form, date and terms for service, mode of service and the identity of parties on whom service is to be effected are often detailed in the break clause. However, they may also be contained in a general clause in the lease, or both. See further: Contents of clause: Stair's Laws of Scotland (Stair Memorial Encyclopaedia). Who may exercise...

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Break fees—share purchase

The nature and purpose of break feesBreak fees are generally designed to compensate one party’s legal and professional costs which it may have incurred in due diligence and negotiations at the time the transaction terminates. They may also encourage the parties to remain at the negotiating table rather than take action that may unreasonably cause the transaction not to proceed.A break fee agreement will be signed by the parties early on in the sale transaction, usually before the buyer commences its due diligence. Break fee provisions (also known as inducement, termination or broken deal fees) may be contained in a separate agreement or may be included in heads of terms.Types of break feesThe most common type of break fee is where the target agrees to pay a fee to the bidder if a specified event occurs, which results in the transaction not completing (for example, if the seller accepts a higher offer from a third party or any required shareholder approval is not obtained). A substantial shareholder of the target...

Exclusivity in contract negotiations

This Practice Note considers exclusivity in the context of contract negotiations. It examines negotiations and agreements to agree, exclusivity or lock-out agreements, the duty to negotiate in good faith, options, rights of first refusal or pre-emption, and break fees.For a template exclusivity agreement, see Precedent: Exclusivity agreement—commercial contracts.Negotiations and agreements to agreeNegotiations between parties to agree and conclude a deal can be long-winded, difficult and with many changes to terms. There is often a significant investment of time and cost, including legal and accounting fees, that may prove to be wasted if the parties are unable to agree and finalise the deal.Conditions can change due to external factors, and the results of investigations may change the value of the subject of the deal as well as the negotiating positions of the parties. Where parties are considering a collaboration or joint venture project or a joint tender situation, there may be a period of due diligence where the parties explore how they may work together and agree roles and responsibilities. This...

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In a 12-month AST is it possible for the tenant to have a break clause allowing them to terminate on one month’s notice within the first six months of the lease or would that mean that the lease would not be an AST?

In a 12-month AST is it possible for the tenant to have a break clause allowing them to terminate on one month’s notice within the first six months of the lease or would that mean that the lease would not be an AST? Compatibility of break clauses with ASTs Section 19A of the Housing Act 1988 (HA 1988) provides that any assured tenancy arising after commencement of section 96 of the Housing Act 1996 (HA 1996) (which was 23 August 1996) is an assured shorthold tenancy (AST) unless it falls within a paragraph of HA 1988, Sch 2A. HA 1988, Sch 2A does not contain any minimum period for an AST. Nor is a tenancy required to have a minimum length to qualify as an assured tenancy under HA 1988, s 1. There is therefore no doubt that a standard residential tenancy granted today on terms that the tenant is to have a right to break the tenancy within the first six months will be an AST. You may...

What are the considerations when taking security from a listed company?

What are the considerations when taking security from a listed company? Can a listed company or AIM company grant security and guarantees? The considerations when taking security from a listed company, ie a company admitted to trading on the Main Market of the London Stock Exchange, or an AIM company, ie a company admitted to trading on AIM are for the most part the same as for any other limited company. Provided the articles of association do not otherwise prevent it, and any necessary steps in terms of resolutions and notifications are adhered to (see below) listed companies and AIM companies are able to provide security and guarantees. For general information about taking security, see: Taking security—overview. Are there any additional considerations when taking security or guarantees from a listed company or an AIM company? Articles of association As with all companies, the articles of association should be reviewed to ensure there are no borrowing or guarantee limits or other restrictions that would be breached by...

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EU Competition law—daily round-up (23/02/2022)

A round-up of EU competition law developments, including (amongst other things) a judgment from the General Court dismissing UPS and ASL Aviation’s damages claim against the Commission’s decision to prohibit the United Parcel Services/TNT Express NV merger.

Lexis®PSL Corporate weekly highlights—1 September 2016

Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 1 September 2016, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features the newly released European Securities and Markets Authority’s (ESMA) risk analysis report on trends, risks and vulnerabilities in EU securities markets and the updated Companies House guidance on confirmation statements. We have also published two new Precedents, a confidentiality and standstill agreement and a cooperation agreement; a new Flowchart outlining when a break fee is permissible on a takeover transaction; and new Training Materials on secondary equity offers.

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170 Scope and nature of general duties

(1) The general duties specified in sections 171 to 177 are owed by a director of a company to the company.(2) A person who ceases to be a director continues to be subject—(a) to the duty in section 175 (duty to avoid conflicts of interest) as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director, and(b) to the duty in section 176 (duty not to accept benefits from third parties) as regards things done

181 Modification of provisions in relation to charitable companies

(1) In their application to a company that is a charity, the provisions of this Chapter have effect subject to this section.(2) Section 175 (duty to avoid conflicts of interest) has effect as if—(a) for subsection (3) (which disapplies the duty to avoid conflicts of interest in the case of a transaction or arrangement with the company) there were substituted—“(3) This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company if or to the extent that the company's

Break fee is referenced 4 in UK Parliament Acts