Video 19 – Liability For Warranties After A Business Sale?

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Rob Goddard:

We really only take up about 80 or 90 pages in a for sale contract. So what are the implications? What are the things that people need to be mindful of when they sit down with their lawyer?

Steve Barry:

So from a practical perspective, I mean, nobody wants to invest a massive amount of time in trying to either disclose information that the buyer needs to know about or warranting answers and information that’s been given, or then indemnifying the answers and the warranties that have actually been given. So a decent lawyer will walk you through that, will have a commercial view of what needs to be disclosed and how it can be covered. And from a practical perspective, there’ll be views and there’s established practice here in the UK, and then other international territories as well as to how long the indemnity is associated with those things would typically be. As a matter of course, the longest indemnities will typically be tax related.

Rob Goddard:

Yeah.

Steve Barry:

In terms of information that’s given on a tax warranty, but there are generic warranties and indemnities that are given in pretty much every transaction. And a decent commercial lawyer will walk you through those, give you guidance, and they will form part of the negotiation that takes place.

Mike Whittle:

Yeah. I mean, I think it would be worth saying that, let’s not forget that every business is a completely separate legal entity in its own right. So when a business is sold, the warranties that that legal entity has provided to other parties go with the sale. So the nuance to that is during the sales process, once we create the shared purchase agreement, the seller will be required to give certain indemnities and warranties to the buyer to offset some of those risks that they may be acquiring, the unknown risks, I guess. And that’ll form part of the process.

Rob Goddard:

So when you’re assessing which commercial lawyer to pick, please don’t use price as the only determinant factor. Cheap lawyers aren’t necessarily the people that are skilled and they’re around us. Because if you go cheap and they miss something, something’s left out or something sound vigorous in the contract, that could cost you millions. So forget about the commercial legal fees. It could cost you millions. So if you’re looking for good value, quality, experienced people who know what they’re doing, come to us because we’ve got a whole panel of them.

Steve Barry:

Agreed.

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Alternatively, If you would like to discuss a potential business sale with one of our Client Directors, please either call Amanda on 0118 959 8224, email agale@evolutioncbs.co.uk or Make An Online Enquiry.

 

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