This chapter focuses on some of the key transaction documents that you might come across during a training contract: engagement letters, non-disclosure agreements, sale and purchase agreements, documents designed to incentivise management teams, shareholders’ agreements and loan agreements. However, during a training contract, you may be asked to proofread or contribute to a broad range of other documents, some of which might be needed to supplement the key transaction documents. Such documents include: board minutes, written resolutions and other corporate authorisations, stock transfer forms, share certificates, powers of attorney, articles of association, side letters, management warranty deeds, master services agreements, transitional services agreements, leases, licenses, employment contracts and many, many more.  

Board minutes: companies must note down and keep a record of who was present and in attendance at meetings and what was discussed and decided. These notes are referred to as “minutes”, and “board minutes” means notes made in connection with board meetings.

Written resolution: the written resolution procedure enables shareholders to approve courses of action that have been proposed by a company’s board, without having to attend a meeting and vote in person. Under this procedure, a company can draft and circulate to those shareholders a document referred to as a “written resolution”, which will set out any proposed courses of action that the board wishes to take. The shareholders can then give their consent by indicating their approval, signing the document, then sending the document back to the company. Note that this procedure can be used to pass ordinary and special resolutions, but is not available for public limited companies and cannot be used by private limited companies to approve certain decisions (e.g. to remove directors or auditors). 

Stock transfer form: a stock transfer form is a standard document required to effect the transfer of shares in UK companies. It contains details of the seller and purchaser of the shares, the type and number of shares being transferred and the consideration paid by the purchaser.

Share certificate: a certificate that is issued to shareholders – either in hard or soft copy – to prove that they are the certified owners of their shares. Share certificates should be issued by a company when a shareholder first acquires that company’s shares, be that directly from the company or via a transfer of shares from another individual or entity. Each share certificate issued will have a unique certificate number and will set out: the company’s details, the shareholder’s details, the type of shares that were issued, the date on which those shares were issued, the quantity of shares acquired, the nominal value of those shares and whether the shares are partly paid, fully paid or unpaid. Note that companies’ articles of association may include bespoke requirements relating to share certificates, so be sure to check these.

Power of attorney: a power of attorney is a legal document that lets a person or company (the “donor”) grant an express power to one or more third parties (known as “attorneys”) to act on that person’s behalf or act in that company’s name and on its behalf. A power of attorney will set out the scope of the powers that are being delegated and attorneys must only act within this scope (otherwise the actions they take on a donor’s behalf may not be valid).

Articles of association: a document that is first drawn up by the founders of a company (or automatically generated by Companies House, if the company is adopting the standard model articles) at the time the company is incorporated. A company’s articles of association sets out a series of written rules (each being an “article”) that govern the running of the company. For example, articles of association will generally cover directors’ powers and responsibilities, the decision-making procedures that must be followed by directors and shareholders, the rules that apply to the issue and transfer of shares and the payment of dividends, the rights attached to each class of share that a company has in issue, and a broad range of other administrative matters. Note that as a company evolves, it might adopt amended articles of association at various points to better reflect its activities and scale.

Side letter: a side letter is a document that is ancillary to another contract, and would typically be used to vary, supplement or clarify the terms of that other contract. For example, side letters can be used to: confirm details that were not known when the main contract was finalised; provide further detail in respect of obligations set out in the main contract (e.g. specific steps that a party must take when fulfilling its obligations); create additional rights and obligations between only a selection of the parties to the main contract; and document any agreed changes to the main contract without the parties having to redraft sections of that main contract (e.g. if one party wants to vary the terms of the other party’s standard terms and conditions). Note that side letters are not automatically binding, so need to be carefully drafted if the parties intend to create legally enforceable rights and obligations.

Management warranty deed: a document used in an M&A context to set out any warranties that are being given to a buyer by the management team of the business being acquired.

Master services agreement: master services agreements – also known as “framework agreements” and “service level agreements” – are contracts between a service provider and their customer that set out the terms of engagement for future work carried out by that service provider (even though the scope and specific nature of such future work might not be known at the time). Master services agreements will usually set out most (but not all) of the terms that will govern such future engagements, including the payment terms, treatment of intellectual property rights, delivery requirements, key warranties, limitations of liability, agreed processes for resolving disputes and more. Once a specific service is needed, the parties would then only need to negotiate any bespoke terms relating to that service (e.g. the price and scope of the service), with such bespoke terms then usually being documented in a supplementary contract that is sometimes referred to as a “statement of work”. The parties would then rely on the terms set out in the master services agreement to cover any other aspects of the agreement, which can significantly speed up and simplify the process.

Transitional services agreement: an agreement that sets out certain essential services or corporate functions that one party (typically a seller) will provide to another party (typically the company that the seller is selling or the buyer of that company) for a limited period of time following an acquisition, in order to enable the buyer to continue running the target business immediately following the acquisition. Services typically provided under a transitional services agreement (whilst the buyer or target makes alternative arrangements for the future provision of those services) include IT support, finance and accounting, human resources and procurement.

Lease: this is a document that sets out the terms governing the grant by a landlord to a tenant of the exclusive use of a property for a set period of time.

Licence: in a commercial context, this is a document that records the terms governing an agreement under which one company permits another company to use an element of its business. For example, under a licensing agreement, a company might grant another party the right to manufacture its products, incorporate its technology into a product or use its brand, usually in exchange for a royalty. In a real estate context, a licence sets out the terms governing the permission granted by a licensor to a licensee to use a particular property (or area of land). Unlike leases, licences do not grant exclusive possession of a property, whilst the rights of tenants tend to be more secure than those of licensees.

Employment contract: these govern the working relationship between an employer and an employee by setting out each party’s rights and responsibilities. Employment contracts typically cover the salary and benefits to which the employee is entitled, the employee’s expected working hours and anticipated responsibilities, the employer’s holiday and sick pay allowances, any applicable restrictive covenants (e.g. non-compete provisions that restrict the employee during – and for a period after – their employment), the notice period for terminating the employment, the circumstances that will entitle the employer to terminate the agreement without notice, and a range of other provisions depending on the context. Employment contracts for senior employees tend to include more onerous restrictive covenants, as such employees are likely to have access to more sensitive company information. Note that employment contracts for directors tend to be referred to as “directors’ service agreements”.

It's also worth looking at definitions of “automatic cross-references” and “defined terms” here, as these mechanisms are key within transaction documents.

Automatic cross-references: clauses/paragraphs within legal documents tend to refer to other clauses/paragraphs. For instance, one clause may include an obligation (e.g. “Clause 14: one party must purchase a minimum of x number of products per year”), whilst another may include processes that must be followed when carrying out that obligation (e.g. “Clause 15: when making a purchase, the buyer must pay within y number of days using z method of payment”). The first clause may need to refer to the second clause, for instance “one party must purchase a minimum of x number of products per year, in accordance with clause 15”. Simply writing “clause 15” could be problematic, as the actual clause number may change if the position of that clause in the document later changes (e.g. if a new clause is inserted above it). To save you having to manually update all the references in your document each time the document changes, Microsoft Word has a function that lets you insert automatic cross-references, so that if that clause changes position in the document, references to that clause should automatically update to reflect its new position. 

Defined term: to avoid repetition in contracts/legal documents, firms tend to use “defined terms”. A “defined term” is a capitalised word or short phrase used throughout a document that corresponds to a more detailed description contained elsewhere in the document (usually at the beginning or end of the document), for example the Buyer, the Seller, the Expert etc. For example, the start of a contract may state that the seller is “Company X, registered at Y address, with company number Z”. Referencing this long sentence each time you reference the seller would make the contract unnecessarily wordy, so firms tend to include a defined term at the end of the sentence, for example: “(the “Seller”)”. In this example, “Seller” is the defined term, so whenever “Seller” with a capital “S” is used throughout the document, this indicates that the document is referring to “Company X, registered at Y address, with company number Z”. Using defined terms in this way helps to facilitate more precise/unambiguous drafting, without making documents too complex or wordy.