Private M&A transactions in South Africa typically involve several key dates and terms that play a crucial role in defining the transaction's structure. These include:
• Signature Date: This is the normally the last date when the Sale and Purchase Agreement (SPA) is signed by all parties involved.
• Effective Date: This marks the point at which the SPA takes effect and becomes legally binding between the parties.
• Longstop Date/Fulfilment Date: This is the deadline by which all conditions precedent (CPs) must either be met or waived.
• Closing Date: This is usually the date when the purchase price is paid, and the Sale Asset is delivered by the Seller to the Purchaser.
It is possible for the parties to agree amongst themselves a retrospective Effective Date, i.e., a date before the Signature Date, provided the SPA reflects the economic understanding of the parties as at that date.
In practice, it is common for the parties to agree that the risk and benefit associated with the Sale Asset passes from the Seller to the Purchaser as of the Effective Date. This means that from the Effective Date, all profits and losses related to the Sale Asset are borne by the Purchaser. However, these agreements usually provide that title or ownership of the Sale Asset only transfers to the Purchaser upon full payment of the purchase price, which typically occurs on the Closing Date.
Parties therefore have the ability to strategically set an Effective Date that aligns with their specific economic intentions, influencing the allocation of risks and benefits.