Financing
If a buyer needs to obtain financing for a transaction, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist in the buyer’s financing?
There are no specific rules regarding the seller’s obligation to assist the buyer’s financing. However, the Commercial Code prohibits a company from granting a loan for the acquisition of its own shares or providing collateral for the same purpose. Such a loan agreement is void. A transaction securing such a loan is not void, but the person whose loan was secured must compensate the damages incurred by the company due to such security.
Due to this prohibition, a leveraged buyout in Estonia is usually done through a special purpose vehicle created specifically for that purpose.
