Short Reads

Can an SPV be misled before it exists?

Can an SPV be misled before it exists?

Can an SPV be misled before it exists?

31.07.2018

Transactions are regularly structured through special purpose vehicles (SPVs). An SPV is often established at the end of the negotiations, just before signing the agreement. The other party to the agreement provides information and raises certain expectations during the negotiations. The individuals negotiating for the SPV do not necessarily become officers of the SPV once it is established.

Examples of legal structures using SPVs are:

  • contracts to design, build, finance, maintain and operate (DBFMO contracts);
  • securitizations;
  • mergers & acquisitions.

After having entered into the agreement, the SPV may discover that the other party withheld certain information during the negotiations, thereby violating a disclosure obligation. The other party may have also made false statements. This may result in the SPV having a less favourable position that originally intended. Can the SPV then invoke error? Or is this not possible, as the SPV did not exist during the negotiations?

The same questions apply to the interpretation of the contract. Can an SPV rely on expectations about the meaning of certain provisions if they were raised before the SPV was established?

In the 2017-2018 Proceedings of the Dutch Association of Corporate Litigation (Geschriften vanwege de Vereniging Corporate Litigation, published end of July 2018) I defend the position that an SPV has pre-contractual rights. It would be unacceptable for the other party to an agreement to have a licence to provide incorrect information. Although many lawyers would probably agree with this position, the legal grounds for the pre-contractual rights of a non-existing party are not clear. In my contribution to the Proceedings, I examine three legal grounds:

  1. acting on behalf of a legal entity in formation;
  2. acting on behalf of a principal whose name will be given in due time;
  • attribution of knowledge.

My conclusion is that one size does not fit all. Different legal grounds will apply in different situations, and a broad interpretation or analogous application will often be required. But the SPV certainly need not remain empty-handed.

For more information with regard to this subject, please contact Branda Katan.

Team

Related news

23.06.2022 NL law
De balans van het nieuwe normaal

Articles - In het Tijdschrift voor Jaarrekeningenrecht staat Manon Cremers stil bij de veranderingen in jaarvergaderingen sinds Covid-19 en hoe de toekomst er van deze vergaderingen uitziet.

Read more

03.05.2022 NL law
Bijdrage Tijdschrift voor Insolventierecht

Articles - Gertjan Boekraad schreef voor het Tijdschrift voor Insolventierecht een annotatie bij een arrest van de Hoge Raad over de vraag hoe in het faillissement van een bedrijf om te gaan met de vordering van de overheid die een milieuovertreding van dat bedrijf moet herstellen.  

Read more

16.03.2022 NL law
Voornemen Kabinet om vervaldatum Tijdelijke Wet COVID-19 Justitie & Veiligheid wederom te verlengen tot 1 juni 2022

Short Reads - Het kabinet is voornemens om de werkingsduur van de Tijdelijke Wet COVID-19 Justitie & Veiligheid (“de Tijdelijke wet”) opnieuw bij Koninklijk besluit te verlengen. Daartoe is vandaag een ontwerp besluit gepubliceerd (zie ook: de kamerbrief). De huidige vervaldatum van de Tijdelijke wet is 1 april 2022. De nieuwe vervaldatum zal worden vastgesteld op 1 juni 2022.

Read more

11.05.2022 NL law
Proposal for a Directive on Corporate Sustainability Due Diligence

Short Reads - On 23 February 2022 the European Commission (the "Commission") published a proposal for a Directive on Corporate Sustainability Due Diligence (the "CSDD proposal"). This long awaited proposal – if adopted unchanged – will require certain (very) large EU and non EU companies to set 

Read more