Fulfillment of conditions precedent
in acquisition contract
Business Contract Drafting
FHUI, April 17th, 2012
Arief Surowidjojo
CONDITIONS PRECEDENT
•
A provision used for ensuring that all pre-conditions of a contract are
agreed upon, and then fulfilled before a contract is declared effective. It
makes such a contract as a conditional one
•
It works as an effective mechanism to determine that all requirements to
make sure the contract is valid and enforceable are agreed and fulfilled
•
It also works as an agreed mechanism to control the process as to
when the parties will be bound by and as such will have to comply with
the contract provisions
•
It also works as an exit clause for one party or both parties when
something gets wrong
CONDITIONS PRECEDENT
The Conditions
• Lapse of time
• Occurrence of events
• Delivery of certain agreed documents
• Third party actions
• Economic, business, political and other environment factors
affecting the transactions
CONDITIONS PRECEDENT
The Conditions
• Regulatory requirements
• Corporate requirements
• Contractual requirements : lenders, suppliers, contractors, joint
venture partners, others
• Reporting and registration requirements
• Non-mandatory social and political environment requirements
• Discretional conditions required by a dominating party
Class work
Global Resources Corp (GRC) plans to merge Inter Pacific Ltd., (IPL) in
their home country in France. Both are investment companies holding
equity in resources companies around the globe. The acquisition
process is a bit complex due to restructuring corporate actions of IPL in
France as required by its lenders. The crisis in Europe hit IPL in a
massive way. IPL has a subsidiary company in Indonesia, PT IPL
Energy Tbk., a company engaged in an integrated mining operations
from coal mining, mining services, logistics and transportation IPLE).
GRC owns a majority (76%) shares in PT Kalimantan Mining Integra
(KMI), a company engaged in mining services and engineering. GRC
and IPL are negotiating the structure of their operations in Indonesia
due to the merger plan in France.
(a) please assist the parties in structuring the transaction for their
Indonesian operations
(b) please prepare a conditions precedent clause in an agreement to be
consummated by such parties
Class work
 This is an individual class work, please work alone; time for completion
is 45 minutes
 Give one or more solutions to both parties re the most efficient structure
under the Indonesian law
 You could choose drafting a condition precedent clause in a transaction
between the parties for GRC or for IPL