Signing and Closing

Signing creates the obligation and closing performs it. At signing the parties execute the agreement, typically a share purchase agreement, and from that moment they are bound by it. Nothing has changed hands yet. At closing the buyer pays the price, the seller transfers the shares or assets, and the buyer takes control.

When nothing stands in the way, both happen in one meeting or one signing session. This is called a simultaneous signing and closing. When something must happen first, the agreement is signed with closing still to come.

The distinction matters for more than timing. Different documents are signed at each stage, by people whose authority has to be valid on that day.

Signing and closing are separated when the transfer cannot lawfully or sensibly take place on the day the parties agree. The usual causes are written into the agreement as conditions precedent. A competition authority or another regulator may have to approve the deal. A lender, landlord or important customer of the company may have a right to consent to a change of owner. The buyer may need to draw its financing.

Neither side wants to spend months on those steps without a binding deal. Signing first gives both that certainty. The price and terms are fixed, and each side is committed subject only to the listed conditions.

Between signing and closing the parties satisfy the conditions, the seller keeps the business steady and the advisers prepare the closing documents. The steps usually run in this order.

1. The agreement is signed. The parties are bound, and the period before closing begins.
2. Filings and requests go out, such as applications for regulatory approval and requests for third-party consents.
3. The seller runs the company in the ordinary course. The agreement lists actions that need the buyer's consent in this period, such as large contracts or new borrowing.
4. Each condition is confirmed as satisfied or is waived. The agreement then fixes the closing date, often a set number of working days later.
5. The advisers repeat their checks. They confirm that each signatory still has authority and that powers of attorney remain valid, and they update sanctions and beneficial ownership checks.
6. Closing takes place. Payment is made against the transfer, and the closing documents are signed and exchanged.
7. Filings follow, and each side assembles its record of the deal.

If the conditions are not met by a final date set in the agreement, known as the long-stop date, the deal can usually be ended without closing.

Under EU law, an electronic signature is valid in principle at both stages. Article 25 of the eIDAS Regulation says that an electronic signature cannot be denied legal effect or refused as evidence solely because it is electronic. It gives a qualified electronic signature the equivalent legal effect of a handwritten one.

The regulation leaves national rules on form in place (Article 2(3)). Some countries require a notary for the transfer of shares in certain types of company, or for the agreement to transfer them. The requirement can attach to the signing, to the closing or to both, so each stage has to be checked under the law that governs the company. Where notarisation is required, no type of signature replaces the notary's part.

Where the form is free, the parties choose the signature level. Closing documents are often signed in a fixed order within a short time. A qualified electronic time stamp carries a legal presumption that the date and time it shows are accurate (Article 41(2)), which helps to prove that order later.

Each party checks the other side's signatories, and each regulated adviser checks those of its own client.

Between the parties it is a matter of contract practice. A company signs through its directors or through an attorney, and the other side asks for evidence of their authority: a current extract from the company register, a board resolution approving the deal, and the power of attorney where one is used. A power of attorney has to cover the document being signed and still be in force on the day. National law may require it in the same form as the transaction itself.

For advisers the duty is statutory. Lawyers and notaries who assist a client in buying or selling a business entity are obliged entities under Article 3(3)(b) of the EU Anti-Money Laundering Regulation. They must verify that any person purporting to act on behalf of the customer is so authorised, and verify that person's identity (Article 20(1)(i)). As a rule, this is done before the business relationship is established or the transaction is carried out (Article 23(1)). The regulation applies from 10 July 2027. Until then, the national laws that implement the EU anti-money laundering directives apply.

The Anti-Money Laundering Regulation does not mention closing, but its updating rules will often call for a fresh check when months have passed since signing. Customer due diligence includes verifying whether the customer or its beneficial owners are subject to targeted financial sanctions (Article 20(1)(d)). Article 26(4) requires obliged entities to verify this regularly, at a frequency that matches the risk.

Customer information must also be reviewed and, where relevant, updated when the customer's relevant circumstances change or the firm becomes aware of a relevant fact about the customer (Article 26(3)). A long gap produces such changes. A buyer may bring in a new investor to fund the price, which can alter who its beneficial owners are.

Closing is the moment when the money moves, so it is the natural point for an adviser to confirm that nothing has changed. These checks do not replace the obligation to apply targeted financial sanctions, which exists separately (Article 26(4)).