Signing

Signing refers to the point in a company transaction when buyer and seller legally execute the share purchase agreement (SPA). Unlike closing, the company is not yet handed over at this stage, signing sets the contractual terms of the transaction in a binding way, while economic completion follows later at closing.

What is signing?

At signing, both parties sign the negotiated share purchase agreement and become legally bound by the agreed terms: purchase price, representations and warranties, non-compete clauses, and other contractual provisions. Signing marks the end of the negotiation phase and typically follows an extensive due diligence process, in which the buyer has reviewed the target company's financial, legal, and tax situation. From signing onward, both sides are contractually bound, even though the actual transfer of ownership happens later.

How does signing differ from closing?

Signing and closing are two distinct points in a transaction. At signing, the purchase agreement is executed and thereby becomes legally binding. At closing, by contrast, the transaction is actually completed: the purchase price is paid, shares or assets transfer, and the buyer takes over operational control of the company. Days, weeks, or, for example when antitrust clearance is required, even months can pass between signing and closing.

Why are signing and closing often separated in time?

Between signing and closing, certain closing conditions typically still need to be met before the transaction can take effect. These include antitrust clearance, approval from governing bodies or shareholder meetings, securing acquisition financing, or obtaining regulatory approvals. This period between signing and closing is also known as the interim period; during this time, the seller is usually bound by contractual conduct obligations, for example, to continue running the business in the ordinary course, to preserve the target company's value until handover.

What happens if something changes between signing and closing?

To guard against the risk of material deterioration between signing and closing, share purchase agreements often include a MAC clause (Material Adverse Change), which under certain conditions gives the buyer a right to withdraw if the target company's business or financial position deteriorates significantly. Representations and warranties given at signing typically also need to be reconfirmed at closing (via a bring-down certificate) to ensure they still hold true.

Signing vs. closing: what's the difference?