How to Review Gap Undertakings That Restrict Trading Between Exchange and Completion

Where completion comes later, review the gap undertakings before exchange. Confirm the interval, list every company the sentence binds, and leave a silent ordinary-course line unfilled. The consent acts, the request, and what silence means need to be written. Do not use the material adverse change test for a trading breach unless covenant compliance is a condition. Then rewrite the clause, or do not exchange.

These undertakings restrict trading only while exchange and completion are split. Mark that gap, and list every company the sentence actually names, before you treat ordinary course as a benchmark. On a silent line, ordinary course is only the words written there.

The five marks follow one share purchase agreement for the sale of the shares, subject to contract. The courts are those of England and Wales. They do not apply Scots law. An open landlord consent keeps exchange and completion apart.

Disclaimer: Checkory provides AI support, not legal advice. Consult a qualified lawyer for binding decisions.

Why do these undertakings run only after exchange and before completion?

Gap undertakings, also called pre-completion undertakings, are contractual covenants on how the target is managed between exchange and completion. They are not set by statute. If exchange and completion are the same moment, there is no interval, and the covenant does not operate.

Fieldfisher’s note of 12 January 2026 puts the gap at days, weeks, or months. Over that gap, a split-exchange checklist places National Security and Investment Act 2021 approvals beside buyer consent. The glossary extract calls the undertakings contractual. A typical mistake is to bind a subsidiary the sentence does not name. A Delaware covenant decided on 8 December 2021 bound the companies it named.

Why is the benchmark only the words on the page?

The benchmark is only the measure the clause writes. A silent ordinary-course sentence does not already mean the target’s own recent practice, and it does not already mean industry practice. Mark “benchmark not written” and leave the line unfilled. If you mean one of those measures, write it.

On 8 December 2021 the Delaware Supreme Court measured past practice by that seller’s history, not other companies. Sidley’s note of 13 February 2022 says to write industry practice if you mean it. Mintz’s note of 29 January 2020 records an industry comparison where those words were missing. Norton Rose’s UK-style limb — the business as carried on before the agreement — is not in this draft.

Fasken’s 13 February 2025 reading of Fairstone is not this clause. The CMA guidance of 2 January 2025 defines ordinary course for a merger investigation, not for this agreement. Delaware law does not govern this draft.

Why do named departures need prior written consent?

Named departures need the buyer’s prior written consent because a bare ordinary-course line does not say which acts leave ordinary trading. Ordinary trading stays off the list. The list is not control of the business, and it is not a shareholders’ reserved-matters veto.

Gun-jumping is the buyer running the target before completion, so the list is not control. A fictional training list uses euro figures and five business days that are not legal rules. A £40,000 facility and a £48,000 hire are not a threshold. A reserved-matters veto outside a sale gap is a different instrument.

Why is silence not consent unless the clause says so?

Silence is not consent unless the clause says so. Write what a complete request contains, how long the buyer has to answer, and that consent is not unreasonably withheld or delayed. A reasonableness phrase is not a yes that nobody requested. If the draft is silent, a week of silence is still silence.

The email of 2 April 2020 came after the changes, so it was not prior consent, and that date is not your response period. Sidley’s “might have differed” remark does not force a yes. Fairstone, where consent was never sought, is not this English clause. Write deemed consent if silence should count.

Why is a trading breach a different test from a material adverse change condition?

A trading breach and a material adverse change condition answer different questions: trading in the gap, or value. A material adverse change is the value test. Mark a refusal to complete only if this draft makes covenant compliance a condition. Leave the value condition undecided on this log.

The Delaware appeal excused completion for an ordinary-course breach inside a material adverse effect carve-out. Cleary’s note of 20 December 2021 treats that link as drafting advice. Covenant compliance means the interim covenants were performed, so a refusal exists only if this draft writes it. Whether the value condition is engaged is a separate check.

When do you rewrite the clause, and when do you not exchange?

Stop when the log is complete. If any mark is still unwritten, rewrite the clause, or do not exchange on the silent reading. The log does not find a breach already committed, and it does not find a right to refuse completion. The order is gap and companies, benchmark, consent acts, request and silence, then covenant compliance only if written.

Whether a material adverse change condition is engaged turns on that condition’s own words. A reserved-matters veto for board decisions, where there is no sale gap, is a different instrument. Conduct after completion that affects an earn-out is a different covenant.

Satisfaction or waiver of a condition precedent is its own check. The commercial longstop is a separate date. A force majeure list belongs to its own clause.

A first pass flags the sentence in plain language. It is the machine pass that extracts clauses before a person reads every page. A qualified lawyer, not the chatbot, decides the exchange. Upload the draft.