Change of Control

Plain English Definition: A business undergoes a “change of control” when a certain specified level of its shares change hands, or when it sells all or substantially all of its assets. The term is important in the context of an acquisition because some of the Business’s contracts may prohibit a change of control, in which case the contracts in question would be terminated on the Closing Date unless the third parties to the contracts consent to the change of control. Change of control provisions serve the same purpose as prohibitions on assignment, but they go further by extending the consequences to stock sales that involve a change of the majority owner.