Legal Considerations for Buying a Tech company

For a tech company, a substantial part of its assets would be the intellectual property rights of the technology owned by the company or the rights which the company has been licensed to use.

General scope of due diligence on the purchase of a tech company :

• What are the IP rights of the technology owned by the company
• Whether the rights are subject to any third party’s interest or charge
• How the rights can be assigned to the potential buyer
• Any legal liabilities which may have to be taken on
• Any tax or accounting liabilities which may have to be taken on
• Material contracts entered into between the tech company with third party
• Consent which has to be obtained from the third party for the sale of the business or assets of the tech company
• Disclosure of trade secret and confidential information in the transaction

 

Before the potential buyer can obtain the information and documents for due diligence purposes, the seller would require the buyer to enter into a non-disclosure agreement or confidential agreement. This is to safeguard the interests of the seller in case the transaction has subsequently fallen through or there is any unauthorized or improper disclosure or misuse of information and documents of the tech company.

Apart from the sale and purchase agreement, the buyer would require a deed of indemnity to be given by the director of the tech company for any misrepresentation or untrue statements or information provided to the buyer. The seller would require to limit the liabilities which he may expose to. The scope and extent of the deed of indemnity would be subject to the negotiation between the parties.

 

 

For legal advice or services on corporate and commercial matters, please contact CHOW & CHEUNG, Hong Kong Solicitors & Notary Public. [Tel: +852 2856 3799   Email: cac@ccsn.hk]

www.ccsn.hk

The above contents do not constitute legal advice and it should not be regarded as a substitute for detailed advice in individual cases. Transmission of this information is not intended to create and receipt does not constitute a lawyer-client relationship between Chow & Cheung and the user or browser. Chow & Cheung is not responsible for any third party content which can be accessed through the website.