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Break Fee Agreement

Break Fee Agreement Template for New Zealand

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Key Requirements PROMPT example:

Break Fee Agreement

"I need a Break Fee Agreement for a corporate acquisition where my company (as purchaser) agrees to pay a 2% break fee if we fail to complete the purchase by March 2025 due to our inability to secure financing or obtain regulatory approvals."

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Document background
Break Fee Agreements are essential documents in New Zealand commercial practice, particularly in the context of significant corporate transactions, mergers and acquisitions, or property developments. The Break Fee Agreement serves as a risk allocation mechanism, providing certainty to parties by establishing clear financial consequences if a transaction fails to proceed for specified reasons. These agreements must comply with New Zealand law, including the Contract and Commercial Law Act 2017, Fair Trading Act 1986, and relevant corporate regulations. They are commonly used to protect parties who invest significant time and resources in pursuing a transaction, by ensuring compensation if the other party withdraws or if specific trigger events occur. The agreement typically specifies the exact circumstances under which the break fee becomes payable, the calculation method, and payment terms.
Suggested Sections

1. Parties: Identifies and defines all parties to the agreement

2. Background: Sets out the context and purpose of the agreement, including reference to the primary transaction or relationship

3. Definitions and Interpretation: Defines key terms and establishes interpretation rules

4. Break Fee Trigger Events: Clearly specifies the circumstances or events that will trigger the obligation to pay the break fee

5. Break Fee Amount: Specifies the amount or calculation method for the break fee

6. Payment Terms: Details the timing, method, and conditions for payment of the break fee

7. Representations and Warranties: Standard representations about capacity and authority to enter into the agreement

8. Dispute Resolution: Procedures for resolving any disputes related to the break fee

9. Governing Law and Jurisdiction: Specifies New Zealand law as governing law and relevant jurisdiction

10. General Provisions: Standard boilerplate clauses including notices, amendments, and severability

Optional Sections

1. Conditions Precedent: Used when the break fee agreement is contingent on certain conditions being met first

2. Security: Include when security is required to guarantee payment of the break fee

3. Regulatory Compliance: Required for transactions subject to specific regulatory oversight or approval

4. Confidentiality: Include when the break fee arrangement needs to remain confidential

5. Related Party Provisions: Required when the break fee involves related party transactions

6. Tax Provisions: Include when there are specific tax implications or requirements regarding the break fee

7. Force Majeure: Optional clause for circumstances where external events might affect the break fee obligations

Suggested Schedules

1. Break Fee Calculation Methodology: Detailed explanation of how the break fee is calculated, including any formulas or variables

2. Trigger Events Details: Comprehensive list and description of events that trigger the break fee

3. Form of Notice: Template for formal notices required under the agreement

4. Payment Instructions: Detailed payment procedures and bank account information

5. Related Agreements: List and summary of any related agreements referenced in the main agreement

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Affiliate
Authorisation
Break Fee
Break Fee Event
Business Day
Claim
Completion
Completion Date
Confidential Information
Control
Corporations Act
Effective Date
Encumbrance
Event of Default
Execution Date
Force Majeure Event
Governmental Agency
GST
Implementation Agreement
Implementation Date
Insolvency Event
Law
Loss
Material Adverse Change
Notice
Payment Date
Permitted Break Fee Event
Primary Transaction
Related Company
Related Party
Regulatory Approval
Representative
Subsidiary
Superior Proposal
Target
Tax
Transaction Documents
Trigger Event
Relevant Industries

Financial Services

Real Estate

Corporate Services

Mergers & Acquisitions

Private Equity

Investment Banking

Property Development

Infrastructure

Mining

Energy

Telecommunications

Relevant Teams

Legal

Finance

Corporate Development

Mergers & Acquisitions

Executive Management

Risk & Compliance

Treasury

Commercial

Business Development

Company Secretariat

Relevant Roles

Chief Executive Officer

Chief Financial Officer

General Counsel

Legal Counsel

Corporate Lawyer

M&A Director

Transaction Manager

Finance Director

Company Secretary

Commercial Director

Investment Manager

Deal Manager

Business Development Director

Risk Manager

Industries
Contract and Commercial Law Act 2017: This is the primary legislation governing contract formation, enforcement, and remedies in New Zealand. It's crucial for ensuring the break fee provisions are legally binding and enforceable.
Fair Trading Act 1986: Ensures that the break fee terms are not misleading or deceptive, and that they are fairly presented to all parties involved.
Commerce Act 1986: Relevant for ensuring the break fee doesn't constitute anti-competitive behavior or create barriers to market competition, particularly in commercial contexts.
Credit Contracts and Consumer Finance Act 2003: If the break fee applies in a consumer context, this Act governs fee structures and ensures they are not unreasonable or operate as a penalty.
Property Law Act 2007: Relevant if the break fee relates to property transactions, as it contains provisions about contractual penalties and relief against forfeiture.
Companies Act 1993: Important for corporate transactions involving break fees, especially in relation to directors' duties and corporate governance requirements.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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