Glossary entry

Completion Net Carbon

Definitions

Option 1

Completion Net Carbon means the aggregate GHG Emissions of the Target and the Subsidiaries at the [Completion Date], as set out in the Carbon Statement, excluding any carbon Insetting or Offsetting by the Target and the Subsidiaries between the date the GHG Emissions were calculated and the [Completion Date].

Option 2

Completion Net Carbon means the aggregate GHG Emissions of the Target and the Subsidiaries at the [Completion Date], as set out in the Carbon Statement, and including any carbon Insetting or Offsetting by the Target and the Subsidiaries between the date the GHG Emissions were calculated and the [Completion Date].

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Drafting notes

Options 1 and 2 use TCLP’s glossary definitions of GHG EmissionsInsetting and Offsetting. The term Carbon Statement is as defined in Felix’s Clause.

Commercial use

This term is for use in a share purchase agreement ( SPA ) where one company buys a controlling percentage of a target company’s shares. It can also be used for asset purchases.

It is envisaged that a lower completion net carbon value will result in a higher purchase price for the target. As buyers will want to acquire a company with low net carbon that will keep them on track to meet their net zero targets, sellers will be incentivised to reduce the GHG emissions associated with the target to increase the sale price and their negotiating power.

Just transition considerations

If the buyer is in a weaker bargaining position owing to its geographical location, the clause could be adapted to exclude scope 3 emissions.

Pricing mechanism

The definition could be amended to increase a company’s purchase price inversely to its completion net carbon.

Application

Share purchase agreements, asset purchase agreements, agreements to purchase property or agreements for lease.