The Closing is Chaotic. Be Ready.
Most business lawyers know that closings can be chaotic. There are dozens of documents to sign, many in duplicate, and certain issues always seem to crop up. Keep in mind that the closing is bound to be filled with emergency issues and minor glitches. Real estate closings are handled by title companies and are common enough that issues seldom arise, but mergers and other complex commercial transactions are a different story altogether. Here are some big things to watch out for.
Incorrect Names on Documents
Sounds simple, but often the final documents have incorrect names or misstate the company name. Often in complex deals, the documents name the wrong entity altogether. This is particularly common when a buyer of a business has formed several entities to handle various parts of the acquired operations. Also, a sloppy drafting job can result in the buyer being named as seller, or flip-flop the maker and holder of notes.
Speed is Your Enemy.
Closings are often rushed by sellers eager to cash in, agents desperate to get commissions, and closing agents who have overbooked themselves to get as many closing fees per day as possible. Nobody wants you to take your time. But haste is often a dreadful error. Speed is your enemy at the closing. Go very slow, review each and every paragraph of every document, no matter how angry people get. They will be mad alright. But it is your future on the line, not theirs, and they know it. Ultimately, they will grudgingly give in and let you be meticulous. Check things out carefully, and remember, the documents you have seen the day before may have been changed during the night. Read and check everything thoroughly, no matter how much of a hurry the closing agents seem to be in. Insist that they slow down and wait for you to be diligent. If you have a business lawyer helping you, have him or her exert influence over the group to slow things down, otherwise the documents can fly past you so fast you may never know what you have signed.
Last Minute Documents
In Colorado, banks are notorious for showing up with totally unseen documents for your signature at the closing. Sometimes they have simply not gotten the lending package together in time for the closing and they arrive late with it, expecting you to simply execute everything sight unseen. This can often happen with a standard deed of trust or mortgage, or guaranty. In Denver, where a public trustee system exists, this is especially common. Such documents should be viewed skeptically and thoroughly reviewed. Even if they tell you something is standard or boiler-plate, that makes no difference. Lots of standard things can burn you.
Eleventh Hour Changes
These can be deadly to a deal. Somebody has changed their mind or tries to extort a last minute concession. Don't stand for it. Walk away. Closings can usually be rescheduled. The risks of making changes at the last minute escalate dramatically when a bank is involved. They have usually approved the transaction based on former documentation and representations, and will not be happy with any last minute changes made behind their back, so to speak. It may give them the basis to back out of the loan, or terminate it and accelerate all payments due under the loan as soon as they discover the changes. If the bank finds out and calls the loan due, it will probably be fatal, since the loan proceeds have already been paid out to the other parties. You will have to pay the bank back and then try somehow to get the monies back from the various payees. You may have no right or power to do so, and a bankruptcy will be your only alternative. So, always keep the bank firmly in the loop and apprised of any changes, especially last minute changes. They need to have seen and approved everything in writing, including any last minute modifications.
Your shareholders may not have approved the changes either. If you have raised money from third parties based on one version of the deal, do not make changes to the deal at the closing table, or you may be facing fraud claims or breach of fiduciary duty claims from your investors. Be on the safe side. Call a business lawyer from the Denver office of The Vasilco Law Group, P.C. to review documents for you and stand by your side.
Contact a Denver Business Lawyer at The Vasilco Law Group, P.C. for legal counsel and litigation representation.