Abort Fees In Engagement Letters – A Case Study

Following recent litigation in the High Court concerning the payment of an abort fee in a nomad and broker's engagement letter for an IPO, we thought it might be useful to review the key facts of the case and raise points to consider when drafting abort fees in engagement letters in general.

The engagement letter - the abort fee provisions

The company in question engaged the broker to act as its nominated adviser and provide corporate finance and brokerage services with respect to an admission. The engagement letter entered into between the parties provided that:

• the company will pay the broker an abort fee in the event that the company aborts the transaction "for reasons unconnected to the broker or its performance of the marketing and the book build process"; and