Change Of Control Clause

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A contractual provision which gives a party to an agreement enhanced protection if the controlling shareholding of the other party is transferred. In commercial contracts a change of control clause will often give the party who is not subject to a change in ownership the right to terminate the agreement in the event of a change of control of the other party. In employment contracts, a change of control clause entitles the employee to a specified payment or enhanced notice period if their employer is taken over and the takeover results in dismissal by their employer or a material reduction in the employee’s responsibilities leading to constructive dismissal within a specified time. In finance contracts a change of control clause will enable the bank to declare an event of default or a mandatory prepayment event and therefore cancel any obligation to make further loans and require the repayment of existing loans.

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