Long Stop Date

The long stop date is the latest date by which all conditions precedent must be satisfied and closing must have occurred. If it passes, both parties typically gain a right to walk away, so a transaction cannot remain in limbo indefinitely. It is set against the longest expected condition, usually merger control or foreign investment clearance, which is why in purely German procedures it often falls three to six months after signing and considerably later where several jurisdictions are involved.

The economic reason for the limit is clear: during the interim period the seller still carries the operating risk yet is restricted in its decisions by interim covenants and cannot sell the business to anyone else. Every extension aggravates that position. Extension mechanisms are common where a clearance is in sight but not yet granted, sometimes automatic for a defined period, sometimes at a party's request. Negotiation also covers who may invoke the termination right: a party that has culpably prevented a condition from being met generally cannot rely on it, and a buyer that refuses remedies imposed by the competition authority despite having undertaken to accept them likewise loses the right.

The provision is often supplemented by compensation for the seller where clearance fails for reasons within the buyer's sphere. Working backwards from the longest expected condition is advisable, with a safety margin in case an authority opens an in-depth review. A date set too tightly regularly leads to renegotiation under time pressure. It should also be settled whether the date extends automatically on defined events or requires an agreement, because in the second case a party can use the extension as a bargaining tool.

Note: This explanation is for general information only and does not constitute legal advice. The legal position depends on the individual case and may change with new legislation or case law. For a binding assessment, please consult a qualified lawyer.