assignment by change of control

Don’t Confuse Change of Control and Assignment Terms

David Tollen
September 11, 2020

An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out. But that doesn’t make it a change of control clause. Change of control terms don’t address assignment. They say whether a party can terminate if the other party goes through a merger or other change of control. And they sometimes address other change of control consequences.

Don’t confuse the two. In a contract about software or other IT, you should think through the issues raised by each. (Also, don’t confuse assignment of contracts with assignment of IP .)

Here’s an assignment clause:

Assignment. Neither party may assign this Agreement or any of its rights or obligations hereunder without the other’s express written consent, except that either party may assign this Agreement to the surviving party in a merger of that party into another entity or in an acquisition of all or substantially all its assets. No assignment becomes effective unless and until the assignee agrees in writing to be bound by all the assigning party’s obligations in this Agreement. Except to the extent forbidden in this Section __, this Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

As you can see, that clause says no assignment is allowed, with one exception:

Assignment to Surviving Entity in M&A: Under the clause above, a party can assign the contract to its buyer — the “surviving entity” — if it gets merged into another company or otherwise bought — in other words, if it ceases to exist through an M&A deal (or becomes an irrelevant shell company).

Consider the following additional issues for assignment clauses:

Assignment to Affiliates: Can a party assign the contract to its sister companies, parents, and/or subs — a.k.a. its “Affiliates”?
Assignment to Divested Entities: If a party spins off its key department or other business unit involved in the contract, can it assign the contract to that spun-off company — a.k.a. the “divested entity”? That’s particularly important in technology outsourcing deals and similar contracts. They often leave a customer department highly dependent on the provider’s services. If the customer can’t assign the contract to the divested entity, the spin-off won’t work; the new/divested company won’t be viable.
Assignment to Competitors: If a party does get any assignment rights, can it assign to the other party’s competitors ? (If so, you’ve got to define “Competitor,” since the word alone can refer to almost any company.)
All Assignments or None: The contract should usually say something about assignments. Otherwise, the law might allow all assignments. (Check your jurisdiction.) If so, your contracting partner could assign your agreement to someone totally unacceptable. (Most likely, though, your contracting partner would remain liable.) If none of the assignments suggested above fits, forbid all assignments.

Change of Control

Here’s a change of control clause:

Change of Control. If a party undergoes a Change of Control, the other party may terminate this Agreement on 30 days’ written notice. (“Change of Control” means a transaction or series of transactions by which more than 50% of the outstanding shares of the target company or beneficial ownership thereof are acquired within a 1-year period, other than by a person or entity that owned or had beneficial ownership of more than 50% of such outstanding shares before the close of such transactions(s).)

Contract terminated, due to change of control.

Termination on Change of Control: A party can terminate if controlling ownership of the other party changes hands.

Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist . That party just has new owners (shareholders, etc.).

Consider the following additional issues for change of control clauses:

Smaller Change of Ownership: The clause above defines “Change of Control” as any 50%-plus ownership shift. Does that set the bar too high? Should a 25% change authorize termination by the other party, or even less? In public companies and some private ones, new bosses can take control by acquiring far less than half the stock.
No Right to Terminate: Should a change of control give any right to terminate, and if so, why? (Keep in mind, all that’s changed is the party’s owners — possibly irrelevant shareholders.)
Divested Entity Rights: What if, again, a party spins off the department or business until involved in the deal? If that party can’t assign the contract to the divested entity, per the above, can it at least “sublicense” its rights to products or service, if it’s the customer? Or can it subcontract its performance obligations to the divested entity, if it’s the provider? Or maybe the contract should require that the other party sign an identical contract with the divested entity, at least for a short term.

Some of this text comes from the 3rd edition of The Tech Contracts Handbook , available to order (and review) from Amazon here , or purchase directly from its publisher, the American Bar Association, here.

Want to do tech contracts better, faster, and with more confidence? Check out our training offerings here: https://www.techcontracts.com/training/ . Tech Contracts Academy has options to fit every need and schedule: Comprehensive Tech Contracts M aster Classes™ (four on-line classes, two hours each), topical webinars (typically about an hour), customized in-house training (for just your team). David Tollen is the founder of Tech Contracts Academy and our primary trainer. An attorney and also the founder of Sycamore Legal, P.C. , a boutique IT, IP, and privacy law firm in the San Francisco Bay Area, he also serves as an expert witness in litigation about software licenses, cloud computing agreements, and other IT contracts.

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Change of Control?

What is change of control?

There is no standard definition for “change of control;” however, there are some common transactions in which a change of control may be triggered, including these:

a sale of all or substantially all of a target company’s assets
any “merger” of the target company with another company
the transfer of a certain percentage of the target company’s issued and outstanding shares from the target company to the acquirer

Other events may be included in change-of-control definitions such as reorganizations, consolidations or other transactions in which one of the following occurs:

more than 50% of the board members change
change in shareholders who have the right to elect more than 50% of the board

A transaction where the acquirer of the stock, assets or rights is an “affiliate” of the target company may be an exclusion from the change-of-control definition.

Change of control 2.0

The transactions mentioned above are usually covered in change-of-control provisions in agreements between companies. However, there are other events that may trigger a change of control that you as a party to an agreement might want to guard against.

For instance, a company may change suppliers or subcontract with new parties, which may result in a change in the detail, quality or timing of obligations under the agreement, or a competitor may acquire one of your suppliers and you may no longer wish to do business with that supplier.

If the agreement includes a minimum product purchase requirement for a significant period of time, a change-of-control provision may ensure that a party would not have to meet this commitment. Change of control can also be used to deter a competitor from merging with, or another company wanting to acquire your supplier if the purchase volumes represent a significant portion of their business and your termination would significantly affect the worth of the company.

Change in management = change of control?

For some companies, a change in ownership may not be a concern, but if the agreement is very specific or relates to a novel product or service, it may be difficult to replace/duplicate with another company. A company may decide it doesn’t want to spend the time or have the inconvenience of having to get to know new management if the other party is acquired or take the risk that the new management will not be a good fit with them or their project team. The new managers may not prioritize the project in the same way once they have assessed the company’s assets.

If a company is venture capital funded, it can be important to include a change-of-control provision such that if the funder isn’t seeing the desired growth, it has the option of disposal via merger or sale.

Know what you need when drafting the change of control provision …

A lot of agreements do not allow an assignment; however, this does not cover a change of control. At the end of the day, a company must determine the circumstances under which it would not want to continue the agreement as originally negotiated and drafted. A party may try to ensure that the other party seeks consent to make the change and maintain the agreement, or provide some form of payment as compensation for the change, while retaining the right to terminate the agreement. In addition to termination, a party may seek reimbursement of some investments made pursuant to the agreement due to the fact that the change of control creates a significant threat to its business.

… make sure you have enough time to adapt …

In a change-of-control provision the period a party has in order to decide what action it wants to take in response to the change of control needs to be long enough for it to plan and implement an alternative strategy if required. Without that time limit, change-of-control clauses are inherently uncertain. If a party wishes to terminate an agreement, it is important for it to avoid taking steps whose effect is to affirm the continuance of the agreement after that party becomes aware of the change of control and within the time limit (if applicable) as it may be held to have waived its rights. If a time limit is included, it is important that the expiration of the time to terminate is recorded in a way that the time limit is not missed.

… and cover your back with an adequate termination clause

Any termination should be without liability, as the party who agrees to a merger is doing that voluntarily and it is under that party’s control. If there is an acquisition, from due diligence the acquiring company should know that there is a risk of termination and that the other party could walk away without liability.

It may be, however, that a company is happy with the acquisition or merger (change of control) as it means the other party becomes more skilled in the applicable field, stronger financially or bigger geographically.

A licensee should consider the impact of agreeing to a change-of-control provision or it may reduce the value of the company in the eyes of any potential acquirer. This is especially important for small and medium-size enterprises.

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Private Equity


Few things are more fundamental to M&A due diligence than determining whether any of the material contracts to which the target is a party require a counterparty’s consent as a condition to the proposed acquisition. And that determination is significantly influenced by the specific language set forth in the contract’s anti-assignment/change of control provision, as well as the form the proposed acquisition takes—i.e., whether the transaction is an asset purchase the target, a purchase of equity the target, or a merger the target (and if a merger, whether that merger is direct or triangular, and forward or reverse). A recent Delaware Superior Court decision, , 2020 WL 5554161 (Del. Super. Sept. 16, 2020), is a stark reminder of the importance of carefully analyzing change of control/anti-assignment provisions and taking advantage of all available structuring alternatives to avoid untoward results that can occur from completing an acquisition deemed to require a counterparty’s consent. involved a claim by a successor to a selling party under an acquisition agreement for payment by the buyer of a Conditional Payment owing to the selling party if the mining property sold pursuant to that agreement remained in operation after a date certain. It appears that the requirements for triggering the obligation to make the Conditional Payment were satisfied, but because of some transactions undertaken by the selling party, and the impact of an anti-assignment clause in the acquisition agreement, the buyer claimed that the person actually asserting entitlement to that Conditional Payment was not so entitled (indeed, no one was because the selling party had ceased to exist). Following the acquisition of the mining property by the buyer, the stockholders of the selling party sold all of their shares in the selling party to a third party, but purported to carve out the Conditional Payment Obligation owing to the selling party from the sale of stock of the selling entity. So, when the Conditional Payment came due, the selling party’s former stockholders, rather than the selling party, sued to collect the Conditional Payment when it was not forthcoming from the buyer. In an earlier decision, 2019 WL 3976078 (Del. Super. Aug. 22, 2019), the court held that the selling party’s former stockholders had no standing to claim the Conditional Payment because the only person entitled to that Conditional Payment was the selling party itself, and there really is no such thing as carving out assets of an entity in favor the entity’s stockholders selling the stock of that entity, without the entity itself assigning (by way of a dividend) those assets to its stockholders. And, of course, if an assignment had occurred it was prohibited by the anti-assignment provision in the agreement creating the Conditional Payment Obligation. Thus, the court dismissed the former stockholders’ claim outright. was the second bite at the apple. If the selling entity’s former stockholders, who purported to retain the right to the Conditional Payment, had no standing to pursue collection of the Conditional Payment themselves, then presumably the selling party still could (and one would assume the selling party would then have an obligation to turn over the Conditional Payment to the former stockholders when collected). But alas, it turns out that, following the acquisition of the stock of the selling party by the third party, the third party undertook a number of transactions under Canadian law to amalgamate the selling party into an entirely new entity as the surviving entity of that amalgamation; the selling entity had ceased to exist as a matter of Canadian law. Thus, the plaintiff in this second bite lawsuit to collect what was presumably otherwise owed was not the selling party to the original acquisition agreement, but a successor to that selling party. While the amalgamation was a creature of Canadian law, the original acquisition agreement containing the anti-assignment clause was governed by Delaware law. The parties apparently conceded that the amalgamation was the equivalent of a merger under Delaware law. The buyer argued that the anti-assignment clause in the original acquisition agreement was violated when the amalgamation occurred without the buyer’s consent; and that the successor had no standing to claim the Conditional Payment. However, under Delaware law, a general prohibition on a party transferring or assigning an agreement does not automatically prohibit a merger involving a contracting party, even one in which the contracting party is not the survivor of such merger. As noted by the Delaware Court of Chancery in , 1993 WL 294847, at 8 (Del. Ch. Aug. 2, 1993): Nonetheless, “[w]hen an anti-assignment clause includes language referencing an assignment ‘by operation of law,’ Delaware courts generally agree that the clause applies to mergers in which the contracting company the surviving entity.” Here the anti-assignment clause in the original acquisition agreement did purport to include a prohibition on assignments “by operation of law.” And, although Delaware has recognized that a merger in which the contracting party the survivor (a reverse triangular merger) is not an assignment by operation of law “because the contract rights remain with the contracting party and do not pass to another entity,” the amalgamation here resulted in a new entity acquiring the contract rights of the original selling party and the original selling party ceasing to exist. Thus, the effect of the anti-assignment clause and its applicability to the amalgamation resulted in the buyer having no obligation for the payment of the Conditional Payment to anyone. Although the court appears to acknowledge the seeming “unfairness of allowing [the buyer] to avoid making a payment it allegedly owes[,]” the court nonetheless concludes that “it is not this Court’s function to save sophisticated contracting parties from an unfair or unanticipated result of their own corporate transactions.” After all, “[t]he parties could have avoided this result through careful drafting during contract negotiations or by utilizing a different corporate structure when [the selling party and the surviving new entity] combined.” (↵ returns to text) Glenn West Weil , Weil’s Global Private Equity Watch, April 27, 2020, . , 2019 WL 3976078, at 2. We have previously addressed how these kind of anti-assignment “workarounds” can sometimes work (or not). Glenn West & Maryam Naghavi, , Weil , Weil’s Global Private Equity Watch, May 2, 2018, . 2020 WL 5554161, at 3. 2020 WL 5554161, at 5.

Few things are more fundamental to M&A due diligence than determining whether any of the material contracts to which the target is a party require a counterparty’s consent as a condition to the proposed acquisition. And that determination is significantly influenced by the specific language set forth in the contract’s anti-assignment/change of control provision, as well as the form the proposed acquisition takes—i.e., whether the transaction is an asset purchase the target, a purchase of equity the target, or a merger the target (and if a merger, whether that merger is direct or triangular, and forward or reverse). A recent Delaware Superior Court decision, , 2020 WL 5554161 (Del. Super. Sept. 16, 2020), is a stark reminder of the importance of carefully analyzing change of control/anti-assignment provisions and taking advantage of all available structuring alternatives to avoid untoward results that can occur from completing an acquisition deemed to require a counterparty’s consent.

involved a claim by a successor to a selling party under an acquisition agreement for payment by the buyer of a Conditional Payment owing to the selling party if the mining property sold pursuant to that agreement remained in operation after a date certain. It appears that the requirements for triggering the obligation to make the Conditional Payment were satisfied, but because of some transactions undertaken by the selling party, and the impact of an anti-assignment clause in the acquisition agreement, the buyer claimed that the person actually asserting entitlement to that Conditional Payment was not so entitled (indeed, no one was because the selling party had ceased to exist).

Following the acquisition of the mining property by the buyer, the stockholders of the selling party sold all of their shares in the selling party to a third party, but purported to carve out the Conditional Payment Obligation owing to the selling party from the sale of stock of the selling entity. So, when the Conditional Payment came due, the selling party’s former stockholders, rather than the selling party, sued to collect the Conditional Payment when it was not forthcoming from the buyer. In an earlier decision, 2019 WL 3976078 (Del. Super. Aug. 22, 2019), the court held that the selling party’s former stockholders had no standing to claim the Conditional Payment because the only person entitled to that Conditional Payment was the selling party itself, and there really is no such thing as carving out assets of an entity in favor the entity’s stockholders selling the stock of that entity, without the entity itself assigning (by way of a dividend) those assets to its stockholders. And, of course, if an assignment had occurred it was prohibited by the anti-assignment provision in the agreement creating the Conditional Payment Obligation. Thus, the court dismissed the former stockholders’ claim outright.

was the second bite at the apple. If the selling entity’s former stockholders, who purported to retain the right to the Conditional Payment, had no standing to pursue collection of the Conditional Payment themselves, then presumably the selling party still could (and one would assume the selling party would then have an obligation to turn over the Conditional Payment to the former stockholders when collected). But alas, it turns out that, following the acquisition of the stock of the selling party by the third party, the third party undertook a number of transactions under Canadian law to amalgamate the selling party into an entirely new entity as the surviving entity of that amalgamation; the selling entity had ceased to exist as a matter of Canadian law. Thus, the plaintiff in this second bite lawsuit to collect what was presumably otherwise owed was not the selling party to the original acquisition agreement, but a successor to that selling party.

While the amalgamation was a creature of Canadian law, the original acquisition agreement containing the anti-assignment clause was governed by Delaware law. The parties apparently conceded that the amalgamation was the equivalent of a merger under Delaware law. The buyer argued that the anti-assignment clause in the original acquisition agreement was violated when the amalgamation occurred without the buyer’s consent; and that the successor had no standing to claim the Conditional Payment. However, under Delaware law, a general prohibition on a party transferring or assigning an agreement does not automatically prohibit a merger involving a contracting party, even one in which the contracting party is not the survivor of such merger. As noted by the Delaware Court of Chancery in , 1993 WL 294847, at *8 (Del. Ch. Aug. 2, 1993):

Nonetheless, “[w]hen an anti-assignment clause includes language referencing an assignment ‘by operation of law,’ Delaware courts generally agree that the clause applies to mergers in which the contracting company the surviving entity.” Here the anti-assignment clause in the original acquisition agreement did purport to include a prohibition on assignments “by operation of law.” And, although Delaware has recognized that a merger in which the contracting party the survivor (a reverse triangular merger) is not an assignment by operation of law “because the contract rights remain with the contracting party and do not pass to another entity,” the amalgamation here resulted in a new entity acquiring the contract rights of the original selling party and the original selling party ceasing to exist. Thus, the effect of the anti-assignment clause and its applicability to the amalgamation resulted in the buyer having no obligation for the payment of the Conditional Payment to anyone.

Although the court appears to acknowledge the seeming “unfairness of allowing [the buyer] to avoid making a payment it allegedly owes[,]” the court nonetheless concludes that “it is not this Court’s function to save sophisticated contracting parties from an unfair or unanticipated result of their own corporate transactions.” After all, “[t]he parties could have avoided this result through careful drafting during contract negotiations or by utilizing a different corporate structure when [the selling party and the surviving new entity] combined.”

(↵ returns to text)
Glenn West Weil , Weil’s Global Private Equity Watch, April 27, 2020, . , 2019 WL 3976078, at *2. We have previously addressed how these kind of anti-assignment “workarounds” can sometimes work (or not). Glenn West & Maryam Naghavi, , Weil , Weil’s Global Private Equity Watch, May 2, 2018, . 2020 WL 5554161, at *3. 2020 WL 5554161, at *5.

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Do Change of Control Transactions Constitute an Assignment by Operation of Law?

Commercial l andlords often rely on anti-assignment provisions to restrict the ability of tenants to assign their interest in a lease to a third party . Such provisions will often explicitly restrict assignments by “ operation of law, ” which are generally considered involuntary assignments mandated via a court order. Commercial landlords may assume that a change of control transaction violates a basic anti – assignment cla use, but clear drafting is necessary for Landlords to protect their interests . Landlords wishing to restrict change of control of a tenant entity , should have clear anti-assignment provision s in their leases that expressly restrict such transaction s and characterize such “changes of control” as assignments .

A change of control is a significant change in the equity, ownership, or management of a business entity. This can occur through a merger, consolidation or acquisition.

The general rule is that change of control of a corporate entity is not an assignment by operation of law , and therefore does not violate a basic anti- assignment provision. Courts have reasoned that a landlord entering into a lease with a corporate tenant should be aware that a corporation, or limited liability company, is an entity which exists separate and apart from its ownership, and that a change in ownership of the corporate entity does not change the tenant entity under the lease.

Courts in many states including Florida, New York and Delaware have held that a change of control is not an assignment by operation of law. I n Sears Termite & Pest Control, Inc. v. Arnold , a Florida court held , “ [t] he fact that there is a change in the ownership of corporate stock does not affect the corporation’s existence or its contract rights, or liabilities. ” Further, i n Meso Scale Diagnostics LLC v. Roche Diagnostics GMBH , a Delaware court ruled, “ [ g ] enerally mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be such after the merger.”

Importantly, the rule is different if the tenant entity does not survive the transaction. In MTA Canada Royalty Corp. v. Compania Minera Pangea , a Delaware Superior Court held that a merger in which the contracting entity does not survive may be held to be an assignment by operation of law.

If a l andlord inten d s for a change of control of a tenant to violate the anti-assignment clause in its lease, the landlord should ensure that its lease expressly state s that a change of control constitutes an assignment .

This article is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read here. Please review the full disclaimer for more information. Relying on the information provided in this article or communicating with Lowndes through our website does not create an attorney/client relationship.

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Spotting issues with assignment clauses in M&A Due Diligence

Written by: Kira Systems

January 19, 2016

6 minute read

Although not nearly as complex as change of control provisions , assignment provisions may still present a challenge in due diligence projects. We hope this blog post will help you navigate the ambiguities of assignment clauses with greater ease by explaining some of the common variations. (And, if you like it, please check out our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence. )

What is an Assignment Clause?

First, the basics:

Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non-assigning counterparties, such as employment agreements and consulting agreements.) For all other contracts, parties may want an anti-assignment clause that allows them the opportunity to review and understand the impact of an assignment (or change of control) before deciding whether to continue or terminate the relationship.

In the mergers and acquisitions context, an assignment of a contract from a target company entity to the relevant acquirer entity is needed whenever a contract has to be placed in the name of an entity other than the existing target company entity after consummation of a transaction. This is why reviewing contracts for assignment clauses is so critical.

A simple anti-assignment provision provides that a party may not assign the agreement without the consent of the other party. Assignment provisions may also provide specific exclusions or inclusions to a counterparty’s right to consent to the assignment of a contract. Below are five common occurrences in which assignment provisions may provide exclusions or inclusions.

Common Exclusions and Inclusions

Exclusion for change of control transactions.

In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company. This allows a company to undertake a strategic transaction without worry. If an anti-assignment clause doesn’t exclude change of control transactions, a counterparty might materially affect a strategic transaction through delay and/or refusal of consent. Because there are many types of change of control transactions, there is no standard language for these. An example might be:

In the event of the sale or transfer by [Party B] of all or substantially all of its assets related to this Agreement to an Affiliate or to a third party, whether by sale, merger, or change of control, [Party B] would have the right to assign any or all rights and obligations contained herein and the Agreement to such Affiliate or third party without the consent of [Party A] and the Agreement shall be binding upon such acquirer and would remain in full force and effect, at least until the expiration of the then current Term.

Exclusion for Affiliate Transactions

A typical exclusion is one that allows a target company to assign a contract to an affiliate without needing the consent of the contract counterparty. This is much like an exclusion with respect to change of control, since in affiliate transfers or assignments, the ultimate actors and responsible parties under the contract remain essentially the same even though the nominal parties may change. For example:

Either party may assign its rights under this Agreement, including its right to receive payments hereunder, to a subsidiary, affiliate or any financial institution, but in such case the assigning party shall remain liable to the other party for the assigning party’s obligations hereunder. All or any portion of the rights and obligations of [Party A] under this Agreement may be transferred by [Party A] to any of its Affiliates without the consent of [Party B].

Assignment by Operation of Law

Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions. An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval:

[Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written consent of [Party B].

while an exclusion could be negotiated by a target company to make it clear that it has the right to assign the contract even though it might otherwise have that right as a matter of law:

This Guaranty shall be binding upon the successors and assigns of [Party A]; provided, that no transfer, assignment or delegation by [Party A], other than a transfer, assignment or delegation by operation of law, without the consent of [Party B], shall release [Party A] from its liabilities hereunder.

This helps settle any ambiguity regarding assignments and their effects under mergers statutes (particularly in forward triangular mergers and forward mergers since the target company ceases to exist upon consummation of the merger).

Direct or Indirect Assignment

More ambiguity can arise regarding which actions or transactions require a counterparty’s consent when assignment clauses prohibit both direct and indirect assignments without the consent of a counterparty. Transaction parties will typically choose to err on the side of over-inclusiveness in determining which contracts will require consent when dealing with material contracts. An example clause prohibiting direct or indirect assignment might be:

Except as provided hereunder or under the Merger Agreement, such Shareholder shall not, directly or indirectly, (i) transfer (which term shall include any sale, assignment, gift, pledge, hypothecation or other disposition), or consent to or permit any such transfer of, any or all of its Subject Shares, or any interest therein.

“Transfer” of Agreement vs. “Assignment” of Agreement

In some instances, assignment provisions prohibit “transfers” of agreements in addition to, or instead of, explicitly prohibiting “assignments”. Often, the word “transfer” is not defined in the agreement, in which case the governing law of the contract will determine the meaning of the term and whether prohibition on transfers are meant to prohibit a broader or narrower range of transactions than prohibitions on assignments. Note that the current jurisprudence on the meaning of an assignment is broader and deeper than it is on the meaning of a transfer. In the rarer case where “transfer” is defined, it might look like this:

As used in this Agreement, the term “transfer” includes the Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in…

The examples listed above are only of five common occurrences in which an assignment provision may provide exclusions or inclusions. As you continue with due diligence review, you may find that assignment provisions offer greater variety beyond the factors discussed in this blog post. However, you now have a basic understand of the possible variations of assignment clauses. For a more in-depth discussion of reviewing change of control and assignment provisions in due diligence, please download our full guide on Reviewing Change of Control and Assignment Provisions in Due Diligence.

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Why and How to Add a Change of Control Clause to Contracts

Contracts are inherently risky, and a number of things can go wrong that may result in a costly contract dispute . Of course, there may be a change in circumstances that is not even addressed in a contract, and thus contesting any such unwanted change is not even a possibility, or perhaps there is only a remote chance of success in the courtroom. One rather significant change that is quite likely to occur and yet not often addressed in contracts is a change in the structure or ownership of one of the parties to the contract. Companies are bought, sold, and merged all of the time, but contracts are often silent as to the impact that such a change should or will have on the existing contract. This is obviously a mistake as a change in ownership may cause changes, both intentional or inadvertent, to the established arrangement. For example, a newly formed entity may change vendors or subcontract with new parties, situations in which the nature, quality, or timing of contractual obligations is altered.

But, this potential scenario is easily avoided by simply including a provision in a contract that explicitly details how the contract must be treated in the event of a change in control. For example, a company may wish to render the contract void if the other party to the deal undergoes a change in ownership. This may be an extreme choice, but there has to be predetermined options clearly written into the agreement. Here is how to include a change of control clause in business contracts:

Identify Problematic Changes

The first step is to identify the types of changes that your company may consider problematic to a contract as it stands. For some companies, a change in ownership may not be a big deal. However, in some instances, the contract may be very specific or address a unique product or service, and thus it may be difficult to replicate the terms with a new entity. Of course, some companies simply may not want to deal with the hassle of getting to know new leaders if one of its contracting partners is acquired or take the risk that the new management will not be a good fit. Ultimately, when a company enters into a contract with another firm, it must determine the circumstances under which it would not want to continue the contract as originally negotiated and drafted.

Differentiate Between an Assignment and Change of Control

A lot of contracts forbid an assignment, which prevents one or both parties from assigning its rights and obligations under the contract to a new party. This may seem like it covers a change of control, but it does not as an assignment is a specific action taken. A change in control clause must specifically address how the contract is to be handled if or when the other party to the agreement undergoes a specific type of change to its structure and/or ownership. A robust contract will include distinct yet detailed clauses with respect to both assignments and changes of control.

Negotiate Requirements

It is always possible that the change of control issue will not even come to fruition. Thus, rather than get bogged down in trying to avoid this situation, it may be possible to negotiate some requirements in the event that it does in fact occur. For example, your company may seek to include some kind of permission process during which the other side seeks consent to make the change and maintain the contract or provide some form of payment as compensation for the change. Obviously, retaining the right to terminate the contract affords the most protection, but whether this is needed really depends on the type of agreement at stake.

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Anti-Assignment Provisions and Assignments by ‘Operation of Law’: What Do I Have to Do? What Should I Do?

Introduction.

One of the key roles of legal due diligence in mergers and acquisitions (M&A) is to assist in the efficient and successful completion of any proposed M&A transaction. Due diligence is not merely a procedural formality but can serve as a proactive shield against unforeseen challenges and risks. One essential aspect of the legal due diligence process is reviewing third-party contracts to which the target entity is party, in order to better understand the scope of its commercial relationships and to anticipate any issues that may arise via the underlying contractual relationships as a result of completing the proposed M&A transaction.

A frequent reality in many M&A transactions is the requirement to obtain consents from third parties upon the “change of control” of the target entity and/or the transfer or assignment of a third-party contract to which the target is party. Notwithstanding the wording of such contracts, in many instances, the business team from the purchaser will often ask the question: “When is consent actually required?” While anti-assignment and change of control provisions are fairly ubiquitous in commercial contracts, the same cannot be said for when the requirement to obtain consent is actually triggered. The specifics of the proposed transaction’s structure will often dictate the purchaser’s next steps when deciding whether the sometimes-cumbersome process of obtaining consents with one or multiple third parties is actually needed.

This article examines what anti-assignment provisions are and how to approach them, depending on the situation at hand, including in the context of transactions where a change of control event may be triggered. This article also discusses how to interpret whether consent is required when faced with an anti-assignment provision which states that an assignment, including an assignment by operation of law , which requires consent from the non-assigning party.

Understanding Anti-Assignment Provisions

Generally, an anti-assignment provision prohibits the transfer or assignment of some or all of the assigning party’s rights and obligations under the contract in question to another person without the non-assigning party’s prior written consent. By way of example, a standard anti-assignment provision in a contract may read as follows:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written consent of Company XYZ.

In this case, Company ABC requires Company XYZ’s prior written consent to assign the contract. Seems simple enough. However, not all anti-assignment provisions are cut from the same cloth. For example, some anti-assignment provisions expand on the prohibition against general contractual assignment by including a prohibition against assignment by operation of law or otherwise . As is discussed in greater detail below, the nuanced meaning of this phrase can capture transactions that typically would not trigger a general anti-assignment provision and can also trigger the requirement to get consent from the non-assigning party for practical business reasons.

To explore this further, it is helpful to consider anti-assignment provisions in the two main structures of M&A transactions: (i) asset purchases and (ii) share purchases.

Context of M&A Transactions: Asset Purchases and Share Purchases

There are key differences between what triggers an anti-assignment provision in an asset purchase transaction versus a share purchase transaction.

i) Asset Purchases

An anti-assignment provision in a contract that forms part of the “purchased assets” in an asset deal will normally be triggered in an asset purchase transaction pursuant to which the purchaser acquires some or all of the assets of the target entity, including some or all of its contracts. Because the target entity is no longer the contracting party once the transaction ultimately closes (since it is assigning its rights and obligations under the contract to the purchaser), consent from the non-assigning party will be required to avoid any potential liability, recourse or termination of said contract as a result of the completion of the transaction.

ii) Share Purchases

Provisions which prohibit the assignment or transfer of a contract without the prior approval of the non-assigning party will not normally, under Canadian law, be captured in a share purchase transaction pursuant to which the purchaser acquires a portion or all of the shares of the target entity. In other words, no new entity is becoming party to that same contract. General anti-assignment provisions are not typically triggered by a share purchase because the contracts are not assigned or transferred to another entity and instead there is usually a “change of control” of the target entity. In such cases, the target entity remains the contracting party under the contract and the consent analysis will be premised on whether the contract requires consent of the third party for a “direct” or “indirect” change of control of the target entity and not the assignment of the contract.

Importantly, some anti-assignment provisions include prohibitions against change of control without prior written consent. For example, the provision might state the following:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written approval of Company XYZ. For the purposes of this agreement, any change of control of Company ABC resulting from an amalgamation, corporate reorganization, arrangement, business sale or asset shall be deemed an assignment or transfer.

In that case, a change of control as a result of a share purchase will be deemed an assignment or transfer, and prior written consent will be required.

A step in many share purchase transactions where the target is a Canadian corporation that often occurs on or soon after closing is the amalgamation of the purchasing entity and the target entity. So, what about anti-assignment provisions containing by operation of law language – do amalgamations trigger an assignment by operation of law? The short answer: It depends on the jurisdiction in which the anti-assignment provision is being scrutinized (typically, the governing law of the contract in question).

Assignments by Operation of Law

In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale – situations not normally effected via legal statute or court-ordered proceeding in M&A transactions – will not in and of itself effect an assignment of that contract by operation of law . [1]

Still, one must consider the implications of amalgamations, especially in the context of a proposed transaction when interpreting whether consent is required when an anti-assignment provision contains by operation of law language. Under Canadian law, where nuances often blur the lines within the jurisprudence, an amalgamation will not normally effect the assignment of a contract by operation of law . The same does not necessarily hold true for a Canadian amalgamation scrutinized under U.S. legal doctrines or interpreted by U.S. courts. [2]

Difference Between Mergers and Amalgamations

As noted above, after the closing of a share purchase transaction, the purchasing entity will often amalgamate with the target entity ( click here to read more about amalgamations generally). When two companies “merge” in the U.S., we understand that one corporation survives the merger and one ceases to exist which is why, under U.S. law, a merger can result in an assignment by operation of law . While the “merger” concept is commonly used in the U.S., Canadian corporations combine through a process called “amalgamation,” a situation where two corporations amalgamate and combine with neither corporation ceasing to exist. For all of our Canadian lawyer readers, you will remember the Supreme Court of Canada’s description of an amalgamation as “a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands.” [3] Generally, each entity survives and shares the pre-existing rights and liabilities of the other, including contractual relationships, as one corporation. [4]

MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V.

As a practical note and for the reasons below, particularly in cross-border M&A transactions, it would be wise to consider seeking consent where a contract prohibits assignment by operation of law without the prior consent of the other contracting party when your proposed transaction contemplates an amalgamation.

In MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V. (a Superior Court of Delaware decision), the court interpreted a Canadian (British Columbia) amalgamation as an assignment by operation of law , irrespective of the fact that the amalgamation was effected via Canadian governing legislation. In essence, the Delaware court applied U.S. merger jurisprudence to a contract involving a Canadian amalgamation because the contract in question was governed by Delaware law. This is despite the fact that, generally, an amalgamation effected under Canadian common law jurisdictions would not constitute an assignment by operation of law if considered by a Canadian court. As previously mentioned, under Canadian law, unlike in Delaware, neither of the amalgamating entities cease to exist and, technically, there is no “surviving” entity as there would be with a U.S.-style merger. That being said, we bring this to your attention to show that it is possible that a U.S. court (if the applicable third-party contract is governed by U.S. law or other foreign laws) or other U.S. counterparties could interpret a Canadian amalgamation to effect an assignment by operation of law . In this case, as prior consent was not obtained as required by the anti-assignment provision of the contract in question, the Delaware court held that the parties to that agreement were bound by the anti-assignment provision’s express prohibition against all assignments without the other side’s consent. [5]

To avoid the same circumstances that resulted from the decision in MTA Canada Royalty Corp. , seeking consent where an anti-assignment provision includes a prohibition against assignment by operation of law without prior consent can be a practical and strategic option when considering transactions involving amalgamations. It is generally further recommended to do so in order to avoid any confusion for all contracting parties post-closing.

Practical Considerations

The consequences of violating anti-assignment provisions can vary. In some cases, the party attempting to complete the assignment is simply required to continue its obligations under the contract but, in others, assignment without prior consent constitutes default under the contract resulting in significant liability for the defaulting party, including potential termination of the contract. This is especially noteworthy for contracts with third parties that are essential to the target entity’s revenue and general business functions, as the purchaser would run the risk of losing key contractual relationships that contributed to the success of the target business. As such, identifying assignment provisions and considering whether they are triggered by a change of control and require consent is an important element when reviewing the contracts of a target entity and completing legal due diligence as part of an M&A transaction.

There can be a strategic and/or legal imperative to seek consent in many situations when confronted with contractual clauses that prohibit an assignment, either by operation of law or through other means, absent the explicit approval of the non-assigning party. However, the structure of the proposed transaction will often dictate whether consent is even required in the first place. Without considering this nuanced area of M&A transactions, purchasers not only potentially expose themselves to liability but also risk losing key contractual relationships that significantly drive the value of the transaction.

The Capital Markets Group at Aird & Berlis will continue to monitor developments in cross-border and domestic Canadian M&A transactions, including developments related to anti-assignment provisions and commercial contracts generally. Please contact a member of the group if you have questions or require assistance with any matter related to anti-assignment provisions and commercial contracts generally, or any of your cross-border or domestic M&A needs.

[1] An assignment by operation of law can be interpreted as an involuntary assignment required by legal statute or certain court-ordered proceedings. For instance, an assignment of a contract by operation of law may occur in, among other situations: (i) testamentary dispositions; (ii) court-ordered asset transfers in bankruptcy proceedings; or (iii) court-ordered asset transfers in divorce proceedings.

[2] MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V ., C. A. No. N19C-11-228 AML, 2020 WL 5554161 (Del. Super. Sept. 16, 2020) [ MTA Canada Royalty Corp. ].

[3] R. v. Black & Decker Manufacturing Co. , [1975] 1 S.C.R. 411.

[4] Certain Canadian jurisdictions, such as the Business Corporations Act (British Columbia), explicitly state that an amalgamation does not constitute an assignment by operation of law (subsection 282(2)).

[5] MTA Canada Royalty Corp .

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Including a “Change of Control” Clause in Business Contracts

You’ve searched for the right business partner and have finally found the one you think will be right. You are prepared to promise a term of 6 years with 2 optional renewal periods of 1 year each. What could go wrong? For one thing, the people who run or own the business can change. Even after diligently researching and evaluating the party to which you are obligating your business by contract, you may risk having to deal with another party in the future. The “counter-party,” may transfer all or some of its assets or stock in the business to a third-party, leaving you to deal with a new partner, who you don’t know, or who might potentially even be a competitor of yours. What can you do?

Many contracts contain an anti-assignment clause, which prohibits the parties from assigning their rights or obligations under the contract to another party. In addition, contracts should, but often do not, have a “Change of Control” clause, allowing you to have recourse (even termination) if the partner that you’re doing business with changes in ownership or structure. In the case of an asset sale by that party, for example, you might not want to be doing business with a shell of a company that has sold a dramatic portion of its assets or those parts of its business that are most important to you. Having the right to terminate the contract in the event of a sale of particular assets, a particular percentage of assets, or a particular line of business, protects your interests. Stock sales, which can occur without your knowledge, can result in ownership of the business being altered dramatically; the transfer of the business could even be made to one of your competitors. It’s important for you to know of such proposed transactions in advance and take steps to protect your business.

For this reason, among others, contract drafters will include a Change-of-Control provision which allows a party to determine if and how he would like to continue to do business in the event of a change of ownership, change of management, or change in the assets of the other party. This can stand alone or be a part of the assignability section. When drafting a Change of Control provision, make sure you:

Address assignability.
Define the kind of change that you fear the most. Is it the transfer by a counter-party of a certain percentage of ownership or interest? The sale of “all or substantially all of the assets” of the counter-party? Maybe a change in the make-up of the governing board? This is a good time to examine and define the affiliates of your counter-party. Depending on how much ownership they have in common with the original party to the agreement, changes of control involving affiliates may not affect operations significantly.
Determine the type of control you require. Should you require your counter-party to obtain your consent? Provide payment? Give you the right to terminate the contract if you decide you do not want to do business with the third-party.

For more information about particular contract clauses that help you protect your business interests, contact us today.

About the authors:

Attorney Paul McGinley practices business and commercial law , counseling small and large business clients in a variety of industries.

Attorney Nicole O’Hara regularly negotiates contracts for the commercialization of intellectual property and other business agreements.

The content found in this resource is for informational reference use only and is not considered legal advice. Laws at all levels of government change frequently and the information found here may be or become outdated. It is recommended to consult your attorney for the most up-to-date information regarding current laws and legal matters.

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Regulation and Compliance > Federal Regulation > SEC

5 Guideposts for RIAs to Comply With SEC’s Change of Control Rules

By Chris Stanley

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In some form or another, nearly every registered investment advisor will at some point be involved in a merger, acquisition, sale, or restructuring. Whether it’s a simple equity ownership stake by a new financier, the addition of a new partner, a union of two practices, the death of a major shareholder or the full-blown execution of a succession plan, RIAs will inevitably need to navigate SEC “change of control” rules and guidance.

Such rules and guidance are rooted in the requirement that investment advisory contracts may not be assigned without client consent. I discussed the interplay of positive and negative consent a few years back in this article , but left open the question of what actually constitutes an “assignment” that would necessitate client consent. Said another way, what types of mergers, acquisitions, sales, or restructurings are considered an assignment of an advisory contract and therefore require client consent?

For starters, the SEC attempts to define “assignment” in the very first definition of the Investment Advisers Act, Section 202(a)(1): “Assignment includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor’s outstanding voting securities by a security holder of the assignor […]”.

There are a few more sentences specific to partnerships, but we’ll address that later. The general concept of the “assignment” definition is that there are essentially two situations in which an assignment is deemed to have occurred: (1) when advisory contracts are transferred to another RIA or pledged as collateral, or (2) The equity ownership structure of an RIA changes such that a “controlling block” of the RIA’s outstanding voting securities changes hands.

Both situations would trigger the need for client consent.

With respect to #2, the logical next question is: what constitutes a “controlling block?” What percentage of voting equity interest needs to change hands for the SEC to care? Unfortunately the SEC does not define “controlling block”, but we can cobble together an understanding from a few different guideposts.

The first is Section 202(a)(12) of the Advisers Act, which defines “control” as “the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company”. This is only moderately helpful since “controlling influence” is still left undefined, but at least we can discern that such control should be in relation to management of the RIA or its policies. And just because somebody employed by an RIA has a fancy title doesn’t mean he or she automatically has control over the RIA.

The second is the instructions to Form ADV Part 1, the glossary to which presumes that RIA equity owners with the right to vote 25% or more of the securities of that RIA “control” that RIA. Under this framework, the following persons would be deemed to control an RIA:

A corporate stockholder that owns 25% of its voting stock
A LLC member that owns 25% of its voting membership units, has contributed 25% of the capital, or has a right to receive 25% of the capital upon dissolution
A partner that has contributed 25% of the partnership’s capital, or has the right to receive 25% of the capital upon dissolution

The third is actually the section that defines “control” in the Investment Company Act (applicable to mutual funds), not the Advisers Act. In Section 2(a)(9), the SEC establishes a rebuttable presumption that “any person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company shall be presumed to control such company”. Though technically not applicable to RIA change of control scenarios, many have looked to this percentage as a helpful guidepost regardless.

The fourth is SEC Rule 202(a)(1)-1, which states that “a transaction which does not result in a change of actual control or management of an investment advisor is not an assignment for purposes of section 205(a)(2) of the [Investment Advisors] Act”. This mainly applies to reorganizations, and the SEC cites a scenario in which an RIA changes its state of incorporation as one example of a transaction that would not constitute a change of control.

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The fifth and final guidepost is several no-action letters that, though fact-specific to the complex transactions described therein, generally stand for the proposition that the SEC is ultimately concerned with the “trafficking” in investment advisory contracts to the detriment of investors. So long as there is no actual change in control or management of an RIA, the trafficking concern is moot.

And for RIAs Organized as Partnerships…

Minority partners that are admitted to the partnership, die, or otherwise withdraw from the partnership do not trigger an advisory contract assignment. That said, any change in the membership of the partnership triggers a client notification obligation within a reasonable time.

This is all a tortuous way of saying that determining whether or not an advisory contract assignment or change in control has occurred may not be as straightforward as it seems. Complete lift-outs or cash-for-stock transactions are likely a no-brainer, but private equity infusions, partial buyouts and certain mergers likely require a more nuanced analysis.

The 25% voting security threshold is by analogy only, and higher or lower thresholds may very well be justified given the right facts.

When in doubt, simply send clients a negative consent to borderline control changes (assuming your advisory contracts permit negative consent) and let them decide whether or not to continue the advisory relationship.

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Change of Control Clause

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A Guide to Understanding Anti-Assignment Clauses

Introduction

With the increasing trend of globalization in the business world, Israeli companies and investors are commonly entering into agreements with U.S.-based entities. One of the most frequently found clauses in U.S. commercial agreements is an anti-assignment provision that prevents either or both of the parties from assigning the agreement to a third party prior to receiving the consent of the non-assigning party. Many transactions will also require the due diligence review of a large number of U.S. commercial agreements that the target has entered into. The following post will provide an overview and general guidance on the proper analysis of anti-assignment clauses.

Silent Provision and Change of Control Provision

In the event that an agreement does not contain an anti-assignment provision, a contract is generally assignable without the consent of the non-assigning party. See Peterson v. District of Columbia Lottery and Charitable Games Control Board , 673 A.2d 664 (D.C. 1996) (“The right to assign is presumed, based upon principles of unhampered transferability of property rights and of business convenience.”) Exceptions include where the assignment affects the duties of the other party to the contract, where the contract is considered to be a personal contract and when the assignment violates public policy (i.e. tort liability).

On the other hand, many contracts contain provisions that not only prevent the assignment of the contract, but also state that a change of control of the target is deemed an assignment or the contract contains a separate clause requiring consent in the event of a change of control. This type of provision will often be triggered in transactions in which a buyer is acquiring the target company. A careful review of change of control clauses is thus especially imperative and often very fact specific to the deal at hand.

Deal Structures

One of the commonly used anti-assignment provisions reads as follows: “No party may assign any of its rights under this Agreement, by operation of law or otherwise, to a third party without the prior written consent of the non-assigning party.” In the situation where the target has entered into agreements that contain this clause, whether or not an assignment is considered to have taken place in the event of the acquisition of the target will largely depend on the specific deal structure of the transaction.

The commonly used deal structures are an asset acquisition, a stock acquisition and a merger.

Asset Acquisition : In an asset acquisition the buyer only acquires those assets and liabilities of a target that are specifically listed in the Asset Purchase Agreement. Any agreement that has an anti-assignment clause will be triggered in the event of an asset acquisition. Indeed, one of the disadvantages of structuring a corporate acquisition as an asset acquisition is that contracts that will be transferred must be assigned
Stock Acquisition : In a stock acquisition, a buyer acquires a target’s stock directly from the selling shareholders. After the closing of the Stock Purchase Agreement, the target will continue as it existed prior to the acquisition with respect to its ownership of asset and liabilities. Thus, in essence, the anti-assignment clause was never triggered in the first place. See Baxter Pharm. v. ESI Lederle , 1999 WL 160148 (Del. Ch. 1999).
A direct merger occurs when the target merges with and into the buyer, and the buyer continues as the surviving entity. In a similar fashion to an asset acquisition, this type of merger will trigger the anti-assignment clause
A forward triangular merger occurs when the target merges with and into the buyer’s merger subsidiary, with the merger subsidiary surviving the merger. This type of merger will trigger the anti-assignment clause. See Tenneco Automotive Inc. v. El Paso Corporation , 2002 WL 45930 (Del. Ch. 2002) and Star Cellular Telephone Company, Inc. v. Baton Rouge CGSA, Inc., 19 Del. J. Corp. L. 875 (Del. Ch. 1993).
A reverse triangular merger occurs when the buyer’s subsidiary merges with and into the target, with the target surviving as a wholly owned subsidiary of the buyer. In effect, the target continues to exist after the closing. The Delaware Chancery Court in Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, 2013 WL 655021 (Del. Ch. Feb. 22, 2013) held that the acquisition of a target in a reverse triangular merger did not violate an existing agreement of the target that prohibited assignments by operation of law. The court noted that generally, mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be such after the merger. Thus there is a significant difference between a reverse triangular merger and both a direct merger and forward triangular merger, as in those cases the target was not the surviving company of the merger. Note, however, that the matter is not uniformly resolved. In SQL Solutions, Inc. v. Oracle Corp. (N.D. Cal. 1991), a United States District Court in the Northern District of California applied California law and federal IP principles to hold that a reverse triangular merger constitutes an assignment by operation of law.

Additional Considerations

Damages and Termination : Some courts have held that a contractual provision prohibiting assignment operates only to limit the parties’ right to assign the contract (for which the remedy would be damages for breach of a covenant not to assign) but the provision does not limit the power to actually assign the contract (which would invalidate the assignment), unless the contract explicitly states that a non-conforming assignment shall be “void” or “invalid.” See, e.g., Bel-Ray Co v. Chemrite (Pty.) Ltd ., 181 F. 3d 435 (3d Cir. 1999). It is also imperative to review the termination section of an agreement, as certain agreements contain a provision by which the non-assigning party has the right to terminate the agreement in the event of an assignment.

As described above, any review of U.S. commercial agreements is highly dependent on the structure of the deal and at times, the specific jurisdiction governing the agreement. With offices across the United States, and specifically in Delaware, New York, and California, all states with highly sophisticated and oft-invoked commercial laws, Greenberg Traurig is uniquely situated in a position to offer high value legal services to Israeli clients.

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Contract drafting
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Differences between the change of control clauses and assignment clauses in technology contracts

This article has been written by Shivam Sharma pursuing the Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho . This article has been edited by Anahita Arya (Associate, Lawsikho) and Dipshi Swara (Senior Associate, Lawsikho).

Table of Contents

Introduction

Both assignment clauses and change of control clauses are Boilerplate Clauses, i.e., clauses which are deemed to be standard, miscellaneous and of general nature. Like most Boilerplate Clauses, these are tucked away at the back end of the agreements and can seem to be generic and dry. But for most technology companies, a wrong assignment or change of control clause could drastically affect the valuation of their company. This is especially true for contracts concerning intellectual properties .

In a nutshell, the Assignment Clause dictates whether or not one of the parties to the contract can transfer the contract to someone else who is not a party to the contract. If the contract can be transferred, then the assignment clause also dictates when such a transfer will take effect. This usually takes place when there is a change in control in the management itself, for instance, in the case of a merger. Yet, that doesn’t make it into a change of control clause.

The Change of Control clauses themselves does not address assignment. Such a clause states whether a party can terminate the contract if the other party goes into a merger or there is a change in control via other means. In addition, they can also address what are the consequences of such a change in control.

Being boilerplate clauses, these two clauses are often neglected and not always clearly labelled (and in some instances even mislabelled). Yet as this article will show, they are indispensable for the valuation of a tech start-up. This article attempts to showcase how these two clauses operate in a contract and how they differ in meaning and interpretation.

Why are these clauses important for tech-driven companies?

Most budding tech enterprises tend to be risk-taking ventures, which end up losing a lot of cash in short spans of time. In order for them to survive it becomes imperative that they adapt to and make the best of corporate opportunities. These include opportunities for mergers, acquisitions, joint ventures etc. Yet with all these transactions, the prerequisite is for the company to have a very strong market valuation.

This valuation is further dependent upon the products it has developed. For a technology company, this value comes down to two main factors :

The intellectual property (IP) it owns;
All the contracts that affect the development of the above-stated IP, such as research and development agreement, Intellectual Property licenses, consultancies agreements, etc.

If the contracts which affect the development of the IP do not survive the M&A transaction, they have no value to the acquirer. As the intellectual property itself is central to the tech company, an IP contract with no value would connote no value of the tech company itself. Thus in every M&A transaction, it is the valuation of the IP that matters the most. This valuation is further subjected to close scrutiny of the ‘Assignment Clause’ and ‘Change of Control Clause’.

Sale of business of a tech-company

There are two ways in which a business can be sold, via the sale of shares of the company (sale of controlling power) or via the sale of assets of the company. When the assets of the company are being sold, the party’s IP contracts get transferred to the buyer. This is a situation where the assignment clause steps in. An assignment clause dictates whether a party holds the right to assign or novate the contract to a third party. If the assignment clause allows for the transfer, it will add to the value of the tech company in the evaluation by the acquirer. A change of control clause, on the other hand, comes into play when there is a change in managerial control of the party. This occurs when the entire business of the party is being acquired by a third party. Generally, a change in control clause will state that in case a party undergoes a change, the other party shall have a right to terminate the contract. This is why this clause is also called the “poison pill” in the event of acquisition of a party. This is because, post the acquisition, the agreement itself has no value to the acquirer.

Assignment clause

Generally, there is not an outright ban on assignment under the agreements. The agreement may state that the assignment is possible as long as there is a written consent provided by the party to the other party.

Sample Clause: The parties agree to the following:

That none of the parties to this Agreement shall assign any of its rights or obligations or the entirety of this Agreement to any third party without the written consent of the other party;
That the above clause shall not apply in the case of one of the parties undergoing a merger or acquisition of the entire entity or of substantially all its assets;
That the above two clauses shall be binding upon the respective successors and assigns of the parties to the Agreement.

From the above sample assignment clause, it can be inferred that there cannot be any assignment except for in the case of merger and acquisition. Thus, an assignment clause answers the following questions:

Can there be an assignment to the Surviving Entity in the cases of merger and acquisition? The Surviving Entity can be both a new company or another company that took over the original party to the contract. Assignments are especially tricky when the original party to the agreement is no longer in existence as now the agreement will be carried out by a completely different party.
Can the party (being a company), assign the contract to its affiliates, i.e., its parent company, its sister companies, its subsidiaries, etc.? This is much easier to negotiate as the affiliate companies are already in existence and there is an absence of the element of surprise as in the case of a merger and acquisition.
Can there be an assignment made to Divested Entities? This is especially of grave importance to technology companies.
In case a party finds itself at a point that it cannot competently discharge its obligations, can it assign the contract to its competitors? If yes, then what would the term ‘competitor’ connote?

Change of control clause

A change of control clause constitutes of two main elements:

The definition of change in control;
The operation of the clause after the occurrence of an event that meets the requirement under the definition.

There exists no standard definition of change of control but it does include the following transactions:

A transfer of shares of the company;
A complete sale of all or a substantial portion of assets of the company;
Mergers and Acquisitions.

That if either party undergoes a change of control, the other party shall have the right to terminate the Agreement within a period of 30 days from the date of change of control;
That for termination of Agreement under the above clause, the party terminating the contract must serve a 30-day notice on the other party;
That the term ‘change of control’ shall mean any transaction or a series of transactions whereby more than 50 per cent of the outstanding shares of the target company is acquired within a duration of one year.

From the above-stated sample clause, it becomes clear that a party will have the right to terminate the agreement in the event that the controlling ownership of the other party changes hands.

Followings are some of the uses of a Change of Control Clause:

In the event of a smaller change in ownership: In the example above the change of control was held out to be 50 per cent or more. This, however, could be a bar set too high for some and thus even a lower standard can be prescribed, such as such a change of ownership of shares representing 25 per cent of the total outstanding shares. This is especially helpful when the company in question is a public company where control can change hands with a change as small as 10 per cent.
When will there be no right to terminate the agreement? This can include events where the shares held in irrelevant quantities exchange hands.
Should there be a payment made to the party when there is a novation? If the amount of payment to be made is huge it can affect the valuation of the party.

Summary of differences

The table below is a summarized representation of the differences explained above:


It addresses the question as to what happens when a party to the contract undergoes an M&A deal and is no longer in existence or has become a shell company.	It addresses a situation where the party which has undergone the M&A transaction is still in existence.
The company is selling its assets (Intellectual Property).	There is a change in the managerial control of the party, i.e., the entire business of the party is being acquired by a third party.
Generally, assignments will be allowed in a contract unless there is an anti-assignment clause present.	Generally, a change in control clause will state that in case a party undergoes a change, the other party shall have a right to terminate the contract.
If the assignment clause allows for the transfer, it will add to the value of tech company in the valuation by the acquirer.	This clause is also called the “poison pill” in the event of acquisition of a party. This is because, post the acquisition, the agreements in relation to IPs will have no value to the acquirer. As such, this clause causes the valuation to decrease.
Usually, there is a requirement of novation in order to facilitate a valid assignment.	Once there is a change of control, it will lead to the termination of the contract. There will be a new round of negotiations and new contracts will be entered into.

Both Assignment Clause and Change of Control Clause address two very different kinds of changes. When an assignment clause addresses a change in control, it addresses the question as to what happens when a party undergoes an M&A deal and it is no longer in existence or has become a shell company. On the other hand, a change of control clause addresses the situation when the party which has undergone the M&A transaction is still in existence.

It is usually the practice to leave the discussions on the boilerplate clause to the very end of the negotiation stages. However, as this article attempted to show, ‘Assignment Clause’ and ‘Change of Control’ clauses are by no measure generic and are in reality quite essential to the valuation of young tech-start-ups. Thus, it is required that more concentrated efforts are poured into the negotiation and drafting of these two clauses so as to reach a point of seemingly innocuous boilerplate provisions.

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Change of Control

A material change in the ownership of a company

What is Change of Control?

In finance, a Change of Control occurs when there is a material change in the ownership of a company. The exact criteria that determine such a change can vary and are defined by law and through contractual agreements. A change of control clause is often included in creditor pacts and executive employment agreements to protect investors and managers from major changes in how the company is run.

Change of Control in Creditor Agreements

It is common for creditor agreements to include a change of control clause to protect the lender in case the company comes under new ownership. Such clauses may stipulate that the lender can demand to be repaid in full upon triggering of the clause by a change in company ownership. Unsure as to the creditworthiness of the new owner(s), a bank or other lending institution may prefer to immediately have all of the loan principal returned and cancel the loan.

Such clauses may be necessary as new owners can change the risk profile of the company and cause lenders to be in a situation where there is a greater risk of the borrower defaulting.

Change of Control in Employment Agreements

Senior executives may have a clause in their employment agreement to protect them from termination if there is a change of control. If a material change in the ownership of the company results in them being fired, then the clause will ensure that they receive a significant payout in the event of such termination.

Executives may insist on such a clause in their agreement due to the risk of new owners having a different view as to the proper direction for the company. In other words, it may not necessarily be the case that the new owner believes the management team is doing a poor job, but simply that the new owners have a different corporate vision .

Mergers and Acquisitions

One of the most common ways for a change of control clause to be triggered is through mergers and acquisitions (M&A). During the M&A process and the negotiation period, it’s important to consider the impact of the change of control on debt in both the target and the acquirer, as well as executive compensation arrangements in both companies.

Learn more in CFI’s M&A Modeling Course .

Additional Resources

Thank you for reading the CFI guide to change of control. CFI’s mission to help anyone become a great financial analyst, and with that goal in mind these additional CFI resources will be helpful:

Corporate Structure
Succession Planning
Corporate Strategy
Debt Capacity
See all valuation resources
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Change in Control Contract Clauses (3,258)

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Anti-Assignment and Change of Control Contract Provisions in the Sale of a Business

Asset Sales and Equity Sales

Although deal lawyers generally describe their practice as involving “mergers and acquisitions,” the sale of a small or medium-sized business is usually structured as either an equity sale or an asset sale. In an equity sale, the buyer buys the equity from the owner(s) of the target company — stock in the case of a corporation and membership interests in the case of a limited liability company. The business is transferred to the new owners, corporate or limited liability company entity and all, and the target becomes a wholly-owned subsidiary of the buyer. There is no change in the status of the target entity itself, and its contracts, assets, and liabilities remain with the entity.

In an asset sale, specified assets are transferred from the target company to the buyer, while the corporate or limited liability company entity remains in place and continues to be owned by its equity holders. The assets transferred might be all or substantially all of the target’s assets, or they might be more limited in scope. Similarly, some or all of the target’s liabilities might be transferred to the buyer or retained by the target company, although most of the liabilities often stay with the target. The contracts of the target company are transferred to the buyer by assigning the contracts to the buyer.

It is common for commercial contracts, leases, and other agreements to include anti-assignment provisions. In addition, bank credit agreements, distribution agreements, and other agreements often contain change of control provisions. It is important for the buyer and seller to review the target’s material contracts early in the transaction process to determine whether such provisions exist.

Anti-assignment Provisions

In an asset sale the target’s contracts are transferred to the buyer by means of assigning the contracts to the buyer. The default rule is generally that a party to a contract has the right to assign the agreement to a third party (although the assigning party remains liable to the counter-party under the agreement). However, contracting parties often want to have the right to control who they do business with, so they include a clause in their contracts that prohibits the counter-party from assigning its rights or delegating its responsibilities under the agreement absent prior written consent.

These provisions pose a problem in the context of an asset sale. Because the target doesn’t have the right to assign a contract containing an anti-assignment clause absent its counter-party’s agreement to permit the assignment, the target is dependent on the counter-party’s willingness to agree to the assignment. The failure to obtain consent to assign a material agreement could jeopardize the transaction as the buyer is likely to refuse to close if it won’t receive the benefit of a contract that is important to the business.

The process of obtaining consents can be time-consuming and should be started at the earliest practical moment. It’s not unusual for a counter-party to extract some value in exchange for agreeing to the assignment. Sometimes the counter-party is somewhat opportunistic and sees an opportunity for a windfall. In other cases, the need for the target to obtain consent for assignment is an opportunity for relief from a disadvantageous agreement. In such cases where the contract is advantageous to the target (e.g., if the target is able to purchase products from a supplier at prices below market under a long-term supply agreement because it locked in low prices and the market prices have subsequently risen), the counter-party will often be unwilling to consent to the assignment of the agreement absent concessions.

The need for obtaining consents from counter-parties is often obviated in the context of an equity sale, because equity sales don’t require the assignment of contracts to the buyer. In an equity sale the target’s assets, including its contracts, are not transferred to the buyer; rather, the entire corporate or limited liability company shell is transferred to the buyer with its assets and liabilities remaining intact. Sometimes the only way to accomplish a transaction is to structure it as an equity sale if it’s not possible to obtain agreement to assign a crucial contract.

Change of Control Provisions

The target’s material contracts should be reviewed early in the process even when the transaction is structured as an equity sale, because change of control provisions, which have the same effect as anti-assignment provisions, are triggered by an equity sale. Such provisions are common in contracts where the counter-party requires a great deal of control over who its does business with. Change of control provisions are common in credit agreements, where the borrower’s financial wherewithal is crucial to the lender; commercial leases, where the tenant’s financial stability is an important aspect of its ability to pay rent over the course of the lease; and distribution agreements, where a manufacturer is dependent upon the skills of current ownership and management to distribute its products in a particular territory.

Material contracts that contain change of control provisions require the parties to deal with the counter-party to the contract because the provisions will be implicated in both asset sales and equity sales.

Due Diligence Implications of Anti-assignment and Change of Control Provisions

Sellers should review their important contracts for anti-assignment and change of control provisions before taking their company to market. If an important contract contains such a provision and the counter-party is not willing to agree to the transaction on reasonable terms, the deal will look much different — and less attractive — to the buyer. It’s good to know early in the process that there’s a problem so the seller can plan accordingly, and so it can devise a strategy for overcoming the challenge.

Buyers should review the target’s material contracts to identify anti-assignment and change of control provisions as part of its due diligence efforts. It would be imprudent to hand over the purchase consideration when the buyer would not have the benefit of one or more crucial contracts.

Whether a transaction is structured as an asset sale or an equity sale, the buyer and seller should pay close attention to anti-assignment and change of control restrictions in the target company’s important contracts. Failure to do so could delay or endanger the closing of the transaction or even leave the buyer with less of the business than expected. That’s a recipe for trouble.

2 Responses

Just curious where one draws the line between an anti-assignment clause and a no change of control provision. For example, does a clause that reads “…this Agreement or the services hereunder is not transferable, by assignment, sublicense, or ANY OTHER METHOD to any other person or entity…” (CAPS added by me).

sorry, failed to finish my thought: can such a clause be reasonably construed as prohibiting a change of control, or have the courts said no, one must be explicit about prohibiting changes in control? Thanks!

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Harris' border work was on 'root causes' of migration; she wasn't in charge | Fact check

The claim: Kamala Harris was 'put in charge of the border'

A July 21 Instagram post ( direct link , archive link ) by Donald Trump Jr. blames Vice President Kamala Harris for the country's immigration problems.

"She was put in charge of the border and we saw the worst invasion of illegals in our history!!!" reads part of the post, which is a screenshot of a post from X, formerly Twitter.

Similar posts on Threads have described Harris as the Biden administration's "border czar."

The Instagram post was liked more than 200,000 times in a day.

More from the Fact-Check Team: How we pick and research claims | Email newsletter | Facebook page

Our rating: False

The post exaggerates the vice president's role in addressing migration at the southern border. Harris was never put in charge of the border or made "border czar," immigration experts said. President Joe Biden tasked Harris with leading the administration's diplomatic efforts addressing the "root causes" of migration in El Salvador, Guatemala and Honduras.

Harris led effort addressing 'root causes' of migration in Central America

Early in his presidency, Biden tasked Harris with addressing the “root causes” of migration in Central America. The assignment came out of an executive order Biden issued in February 2021 that sought to reduce migration from the Northern Triangle countries of El Salvador, Guatemala and Honduras, where gang violence, trafficking networks and economic insecurity have caused people to flee.

But the vice president’s role was more limited than being put in charge of the southern border, or being named a so-called “border czar,” immigration experts said.

"VP Harris was never made the border czar or charged with managing the border," Andrew Salee , president of the Migration Policy Institute , said in an email. "That role has always been held by the secretary of Homeland Security . She was asked to be the chief diplomatic officer with Central American countries at a time when most of the increase in unauthorized immigration was coming from three countries in Central America and to help lead a private investment strategy in the region."

Homeland Security Secretary Alejandro Mayorkas himself noted the different responsibilities between himself and Harris in June 2021 comments at the El Paso, Texas, border.

"The vice president is leading our nation’s efforts to address the root causes – that fundamental question of why people leave their homes," Mayorkas said. "And it is my responsibility as the secretary of Homeland Security to address the security and management of our border."

In March 2021, Biden announced Harris would lead the administration's diplomatic efforts with the Northern Triangle countries to stem migration to the U.S. southern border and work with these nations to enhance migration enforcement at their borders. Harris said at the time that the administration "must address the root causes that – that cause people to make the trek, as the president has described, to come here."

Aaron Reichlin-Melnick , policy director at the American Immigration Council , said the "root causes" work Harris took on is distinct from border policy because it focuses on different problems and targets.

"Border policy focuses on individuals who have already made the decision to leave home and have made it to the U.S.-Mexico border and aims to either prevent them or to quickly process them for humanitarian relief or deportation once they cross," Reichlin-Melnick said in an email. "By contrast, 'root causes' policy focuses on individuals who have not left their homes yet, and aims to convince them to stay in their home countries either through economic development – which discourages migration for economic opportunities – or through reduction of violence and persecution that forces people to seek protection elsewhere."

The White House released the administration's " Root Causes Strategy " in July 2021. Its implementation was ongoing as of March when the vice president and the Partnership for Central America , a non-governmental organization, jointly announced $1 billion in new private-sector commitments to address the underlying conditions leading to migration in Guatemala, El Salvador and Honduras. The public-private partnership has generated more than $5.2 billion since May 2021 , the White House said.

Fact check : Joe Biden dropped out of presidential race but is finishing term

Elina Treyger , a senior political scientist at the RAND Corporation whose research includes migration and immigration enforcement, also said Harris' diplomatic role with the Central American countries "is in no way a 'border czar'-like position." Treyger said border policy involves many other issues such as enforcement policies, how to process migrants expressing fear of prosecution or torture and how to allocate resources at the border.

U.S. Border Patrol encounters with migrants at the southern border have soared under the Biden administration . Illegal crossings at the U.S.-Mexico border hit a record high of 2.2 million in 2022, and the number of people taken into custody by U.S. Border Patrol has reached the highest levels in the agency's history under Biden, the Washington Post reported .

After a bipartisan border security bill failed to advance in Congress, Biden issued a directive in June to turn away migrants who do not enter the country through legal ports of entry when the number of crossings is high.

Trump, the son of former President Donald Trump, did not immediately respond to a request for comment.

Our fact-check sources:

Aaron Reichlin-Melnick , July 22, Email exchange with USA TODAY
Andrew Salee , July 22, Email exchange with USA TODAY
Elina Treyger , July 22, Email Exchange with USA TODAY
White House, Feb. 2, 2021, Executive Order on Creating a Comprehensive Regional Framework to Address the Causes of Migration, to Manage Migration Throughout North and Central America, and to Provide Safe and Orderly Processing of Asylum Seekers at the United States Border
White House, Feb. 6, 2023, FACT SHEET: Vice President Harris Announces Public-Private Partnership Has Generated More than $4.2 Billion in Private Sector Commitments for Northern Central America
White House, March 24, 2021, Remarks by President Biden and Vice President Harris in a Meeting on Immigration
White House, June 25, 2021, Remarks by Vice President Harris, Secretary of Homeland Security Mayorkas, Chairman Durbin, and Representative Escobar in Press Gaggle
White House, July 29, 2021, FACT SHEET: Strategy to Address the Root Causes of Migration in Central America
White House, March 25, FACT SHEET: Vice President Harris Announces Public-Private Partnership Has Generated More Than $5.2 Billion in Private Sector Commitments for Northern Central America
White House, July 2021, U.S. Strategy for Addressing the Root Causes of Migration in Central America
Department of State, Aug. 1, 2023, Central America Forward
The Washington Post, Feb. 11, Trump vs. Biden on immigration: 12 charts comparing U.S. border security
U.S. Embassy in Honduras, March 25, FACT SHEET: UPDATE ON THE U.S. STRATEGY FOR ADDRESSING THE ROOT CAUSES OF MIGRATION IN CENTRAL AMERICA
USA TODAY, July 17, Border security takes center stage at RNC. Here's the actual data under Trump, Biden

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The notificants listed below have applied under the Change in Bank Control Act (“Act”) ( 12 U.S.C. 1817(j) ) and of the Board's Regulation LL ( 12 CFR 238.31 ) to acquire shares of a savings and loan holding company. The factors that are considered in acting on the notices are set forth in paragraph 6 of the Act ( 12 U.S.C. 1817(j)(6) ).

The public portions of the applications listed below, as well as other related filings required by the Board, if any, are available for immediate inspection at the Federal Reserve Bank(s) indicated below and at the offices of the Board of Governors. This information may also be obtained on an expedited basis, upon request, by contacting the appropriate Federal Reserve Bank and from the Board's Freedom of Information Office at https://www.federalreserve.gov/foia/request.htm . Interested persons may express their views in writing on the standards enumerated in paragraph 6 of the Act.

Comments received are subject to public disclosure. In general, comments received will be made available without change and will not be modified to remove personal or business information including confidential, contact, or other identifying information. Comments should not include any information such as confidential information that would not be appropriate for public disclosure.

Comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors, Ann E. Misback, Secretary of the Board, 20th Street and Constitution Avenue NW, Washington DC, 20551-0001, not later than August 7, 2024.

A. Federal Reserve Bank of Kansas City (Jeffrey Imgarten, Assistant Vice President) 1 Memorial Drive, Kansas City, Missouri 64198-0001. Comments can also be sent electronically to [email protected] :

1. Richard W. Robirds, Sterling, Colorado, as co-trustee with Farmers State Bank of Brush, Brush, Colorado, of the Testamentary Trust created by the Last Will and Testament of Alonzo Petteys, Deceased, Dated 8/21/1964, and the Robert A. Petteys Trust; as members of the Petteys Family Control Group, to acquire voting shares of The Farmers Realty Company, Brush, Colorado, and thereby indirectly acquire shares of Equitable Savings and Loan Association, Sterling, Colorado. In addition, Judith A. Gunnon, Rochester, Minnesota, as trustee of the Judith A. Gunnon Trust; Carol J. Tomasini, Kittredge, Colorado; Julia A. Casto, Boxford, Massachusetts; Christian R. Gunnon, Maple Grove, Minnesota; John A. Gunnon, Rochester, Minnesota; Cynthia C. Sprenger, Auburn, Washington, Leslie Petteys, Huntington, West Virginia, as trustee of the Petteys Family Trust FBO Leslie Petteys, and Tom Petteys, Sheridan, Colorado, as trustee of the Petteys Family Trust FBO Tom Petteys, to retain shares of The Farmers Realty Company and join the Petteys Family Control Group.

Board of Governors of the Federal Reserve System.

Erin Cayce,

Assistant Secretary of the Board.

[ FR Doc. 2024-16165 Filed 7-22-24; 8:45 am]

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Secret Service Under Scrutiny After Assassination Attempt on Trump

President Biden calls for a review of the protective agency’s actions after the attack, which left an audience member dead and two critically wounded.

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Former President Donald J. Trump, wearing a blue suit, white shirt and red baseball cap, walking down steps. American flags are behind him, and people wearing dark suits, white shirts and sunglasses are to his side.

By Zolan Kanno-Youngs David A. Fahrenthold Hamed Aleaziz and Eileen Sullivan

The reporters have covered presidential security over various administrations.

July 14, 2024

President Biden on Sunday called for an “independent review” of security measures before and after the attempted assassination of former President Donald J. Trump, while directing the Secret Service to review all of its security measures for the Republican National Convention this week.

Mr. Biden’s directive, though brief and without specifics, is likely to increase the scrutiny of the decisions and possible failures of the agency charged first and foremost with protecting the lives of the country’s current and former leaders, and their families.

Less than 24 hours after Mr. Trump was injured at a campaign rally in Butler, Pa., members of Congress were promising hearings and former law enforcement officials were questioning why the warehouse roof where the would-be assassin, Thomas Matthew Crooks of Bethel Park, Pa., fired shots was not covered by the Secret Service’s security perimeter, despite being within the range of some guns.

Mr. Trump, the presumptive Republican nominee, was herded off the stage and pronounced fine, but the gunman came shockingly close to succeeding. A spectator was killed in the shooting and two others were critically wounded.

“Congress will do a full investigation of the tragedy yesterday to determine where there were lapses in security and anything else that the American people need to know and deserve to know,” Speaker Mike Johnson, Republican of Louisiana, said Sunday on NBC.

The chair of the House oversight committee also asked the Secret Service director, Kimberly A. Cheatle, to testify at a hearing on July 22.

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COMMENTS

Don't Confuse Change of Control and Assignment Terms
Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist.
Change of Control?
Summary. Parties normally seek to include provisions in an agreement that allow for either termination or an adjustment of their rights, such as payment, upon a change of structure or ownership of the other party. This is known as a "change of control" clause. This can often be due to a concern that the other party may be acquired by a ...
Assignment, Novation and Change of Control Clause
The rights of assignment, novation and a change of control aim to address changes to these key building blocks. They a im to give boundaries to who can be a party to the contract and t heir obligations. For more information about your commercial contract, our experienced contract lawyers can assist you as part of our LegalVision membership.
PDF Practical guidance at Lexis Practice Advisor
change of actual control or management of the adviser would not be an assignment. The Advisers Act does not expressly provide a specific test for control, but practitioners generally apply the rebuttable presumption in Section 2(a)(9) (15 U.S.C. § 80a-2) of the Company Act for purposes of determining whether a transaction is an assignment under
Mergers and Restrictions on Assignments by "Operation of Law"
Nonetheless, " [w]hen an anti-assignment clause includes language referencing an assignment 'by operation of law,' Delaware courts generally agree that the clause applies to mergers in which the contracting company is not the surviving entity.". [3] Here the anti-assignment clause in the original acquisition agreement did purport to ...
Do Change of Control Transactions Constitute an Assignment by ...
A change of control is a significant change in the equity, ownership, or management of a business entity. This can occur through a merger, consolidation or acquisition. The general rule is that change of control of a corporate entity is not an assignment by operation of law, and therefore does not violate a basic anti-assignment provision.
Spotting issues with assignment clauses in M&A Due Diligence
Exclusion for Change of Control Transactions. In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company.
Assigning Contracts in the Context of M&A Transactions
Although contracts are generally freely assignable, in the context of any M&A transaction or other proposed contract assignment, careful consideration should be given to: (1) whether the contract in question includes an anti-assignment provision and, if so, whether the provision is "comprehensive" (i.e., applies to change of control ...
Why and How to Add a Change of Control Clause to Contracts
A change in control clause must specifically address how the contract is to be handled if or when the other party to the agreement undergoes a specific type of change to its structure and/or ownership. A robust contract will include distinct yet detailed clauses with respect to both assignments and changes of control.
Anti-Assignment Provisions and Assignments by 'Operation of Law': What
In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale - situations not normally effected via legal statute or court-ordered proceeding in M&A transactions - will not in and of itself effect an assignment of that contract by operation of law. [1]
Assignment; Change of Control Sample Clauses
Assignment; Change of Control. The Contractor shall make no assignment, transfer, or other conveyance of the rights, duties or obligations of the Contract without the prior written consent of the Department.This provision includes the reassignment of the Contract due to change in ownership of the Contractor.Any assignment shall be made explicitly subject to all defenses, setoffs or counter ...
Including a "Change of Control" Clause in Business Contracts
For this reason, among others, contract drafters will include a Change-of-Control provision which allows a party to determine if and how he would like to continue to do business in the event of a change of ownership, change of management, or change in the assets of the other party. This can stand alone or be a part of the assignability section.
Does a change of control constitute assignment?
650+ full-time experienced lawyer editors globally create and maintain timely, reliable and accurate resources across all major practice areas. 83% of customers are highly satisfied with Practical Law and would recommend to a colleague. 81% of customers agree that Practical Law saves them time. Under UK/English Law does a change of control, or ...
5 Guideposts for RIAs to Comply With SEC's Change of Control Rules
The fourth is SEC Rule 202(a)(1)-1, which states that "a transaction which does not result in a change of actual control or management of an investment advisor is not an assignment for purposes ...
Change of Control Clause
Change of Control Clause. Also known as change of control. A provision in an agreement giving a party certain rights (such as consent, payment or termination) in connection with a change in ownership or management of the other party to the agreement. Not all change of control provisions are triggered by the same action. For example, a change of ...
A Guide to Understanding Anti-Assignment Clauses
Silent Provision and Change of Control Provision In the event that an agreement does not contain an anti-assignment provision, a contract is generally assignable without the consent of the non ...
Differences between the change of control clauses and assignment
Both assignment clauses and change of control clauses are Boilerplate Clauses, i.e., clauses which are deemed to be standard, miscellaneous and of general nature. Like most Boilerplate Clauses, these are tucked away at the back end of the agreements and can seem to be generic and dry. But for most technology companies, a wrong assignment or ...
Change of Control
In finance, a Change of Control occurs when there is a material change in the ownership of a company. The exact criteria that determine such a change can vary and are defined by law and through contractual agreements. A change of control clause is often included in creditor pacts and executive employment agreements to protect investors and ...
Assignment and Change of Control
Assignment and Change of Control. 7.1 This Agreement and the license rights granted hereunder, or any part thereof, may not be assigned or transferred by the Licensee without the prior written consent of the Licensor. Sample 1 Sample 2 See All ( 7) Assignment and Change of Control. (a) Executive shall not assign his rights or delegate the ...
Change in Control Contract Clause Examples
Change in Control. 8.1 Definitions. (a) An "Ownership Change Event" shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the ...
Anti-Assignment and Change of Control Contract Provisions in the Sale
Change of Control Provisions. The target's material contracts should be reviewed early in the process even when the transaction is structured as an equity sale, because change of control provisions, which have the same effect as anti-assignment provisions, are triggered by an equity sale.
ASSIGNMENT UPON CHANGE OF CONTROL
ASSIGNMENT UPON CHANGE OF CONTROL. (a) Notwithstanding Section 16.2.1, Company may, without University's consent, assign this Agreement and its rights and obligations under this Agreement in connection with a Change of Control, but only if the Change of Control complies with this Section 16.2.2. Sample 1. ASSIGNMENT UPON CHANGE OF CONTROL.
Welcome to Turnitin Guides
Creating PeerMark assignments guidance: Class and assignment management: Creating and managing QuickMarks, rubrics and grading PeerMark assignments guidance: Grading and feedback: User profile guidance for administrators and instructors: User profile settings. Administrator account settings and migration help: Administrator hub: Release notes ...
No, Kamala Harris wasn't put in charge of the U.S. border
The assignment came out of an executive order Biden issued in February 2021 that sought to reduce migration from the Northern Triangle countries of El Salvador, Guatemala and Honduras, ...
Federal Register :: Change in Bank Control Notices; Acquisitions of
Start Preamble Start Printed Page 59737. The notificants listed below have applied under the Change in Bank Control Act ("Act") (12 U.S.C. 1817(j)) and of the Board's Regulation LL (12 CFR 238.31) to acquire shares of a savings and loan holding company.The factors that are considered in acting on the notices are set forth in paragraph 6 of the Act (12 U.S.C. 1817(j)(6)).
Apple Tries to Rein In Hollywood Spending After Years of Losses
The iPhone maker is starting to exert more control over its production partners. Actor Jason Sudeikis speaks during a news conference in the James S. Brady Press Briefing Room at the White House ...
5 things to know for July 24: Biden speech, Secret Service, Nepal ...
5 things to know for July 24: Biden speech, Secret Service, Nepal plane crash, Russian troops, Climate change
What Project 2025 is and the biggest changes it proposes
Give Trump power to investigate his opponents: Project 2025 would move the Justice Department, and all of its law enforcement arms like the FBI, directly under presidential control.It calls for a ...
Secret Service Under Scrutiny After Assassination Attempt on Trump
President Biden calls for a review of the protective agency's actions after the attack, which left an audience member dead and two critically wounded.
GOP expected to challenge Harris's control of Biden fundraising
GOP eyes legal challenges as Harris assumes control of Biden's war chest. The issue, involving tens of millions of dollars, could get tied up in the Federal Election Commission and then in court.

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