Anti-Embarrassment Clause

Business, Legal & Accounting Glossary

Definition: Anti-Embarrassment Clause


Anti-Embarrassment Clause


Full Definition of Anti-Embarrassment Clause


An anti-embarrassment clause, also known as an on-sale clause, is a provision that allows the seller to recalculate the purchase price of a share and subject it to an increase if the buyer sells the same shares at a higher price. This clause is only active for a limited time after the conclusion of a certain transaction. This clause is commonly seen in stock purchase agreements.

When it comes to the sale of land or other property, an anti-embarrassment clause is also known as overage. This provision primarily applies to the seller of land or shares and provides the seller with an increase if the asset’s value rises in the future. In the case of land, this means that the seller might request an increase in value if the land’s value has increased as a result of a specific event, such as obtaining approval for construction or authorization to use it for a purpose that did not exist at the time of sale. It does not only apply to market increases in the value of the asset as a result of normal market forces, but also to specific events that boost its worth.

In the case of shares, the anti-embarrassment provision shields the seller from a circumstance in which the buyer sells the target company’s shares at a greater price than what was in effect at the time of sale. Because the value of shares can rise for a variety of reasons, including improved company performance, increased market confidence, and share price inflation, this condition is only enforceable for a limited time after the sale has been completed. At the time of purchase, both the buyer and the seller agree on this timeframe. Furthermore, it protects the seller from being “embarrassed” as a result of the buyer receiving a greater price for the shares shortly after the sale. As a result, the seller might request that the price be recalculated to ensure that he or she receives a share of the higher prices.

Anti-embarrassment clauses are rarely negotiated in the sale of a mid-market corporation because it is unlikely that the company will be sold to another buyer in a relatively short period of time.


Synonyms For Anti-Embarrassment Clause


Overage
On-sale


Related Phrases


Purchase and Sale Agreement
Sandbagging
Stock Purchase Agreement
Return on Assets
Your Watch, My Watch Clause
No-Shop Clause
Sale Process


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Definition Sources


Definitions for Anti-Embarrassment Clause are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 24th January, 2022 | 5 Views.