Legal
Change-of-Control Clause
Also known as: Change-of-control provision, CoC clause, assignment restriction
A provision in a contract that triggers a renegotiation, termination right, or consent requirement when the business changes ownership.
WHY IT MATTERS
Change-of-control clauses hide in contracts most founders signed years ago and never read again: customer agreements, vendor contracts, lease agreements, loan covenants, insurance policies, and software licenses. Each one defines what happens when the ownership of the business changes hands. Some require the other party’s consent before the deal can close. Some give the other party the right to terminate the relationship entirely. Some trigger renegotiation of pricing, terms, or exclusivity. Buyers scrutinize every contract during diligence looking for these clauses, because each one is a risk. A customer who can walk is a revenue risk. A lease that accelerates is a cost risk. A loan that comes due on change of ownership is a liquidity risk. Founders who catalog and resolve their change-of-control exposure before going to market eliminate surprises that delay or kill deals. Founders who don’t discover the problem when the buyer’s attorney does — and by then, it’s a deduction.