Warranties On Share Purchase Agreement

The seller provided relevant information in the disclosure letter as much as possible. If a seller does not disclose a relevant warranty case, he may be sued by the buyer for breach of the warranty. This guarantee confirms that the seller is the sole and true owner of the shares sold. As a result, the responsibility for guaranteeing sales contracts appears legally or contractually. The legal guarantee is the liability arising from the absence of the expected qualifications in the product, which are subject to the sales contract, and defects that reduce its value2. For a share purchase transaction to take place, the target company must be properly and in good condition. This means that the company must be officially recognized by Companies House. Being “in good reputation” means that the company has continued to exist since its inception. A warranty is a contractual allegation of fact and is presented in a share purchase agreement by the seller to describe different characteristics of the transaction at the time of purchase. In order to ensure the best possible protection against the existing or previous tax arrears of the business acquired prior to the acquisition, the buyer will generally endeavour to obtain certain guarantees and/or tax compensation from the seller. Unusually, there was a threshold for eligibility for sellers` debts that returned the first $500 billion of a debt non-refundable, with a fee cap at the agreed purchase price.

From the sellers` point of view, they should ensure that all references to representation are removed from the OSG, as well as a comprehensive comprehensive agreement clause to exclude any false, innocent or negligent representation based on guarantees contained in the agreement. Compensation is usually limited to specific issues arising from the due diligence phase of a sale and purchase transaction, for example. B they may relate to a case involving an unresolved dispute or a customer-specific dispute that appeared at the beginning of the transaction. Given the pace of changes introduced in both Polish and international legislation, the evolution of judicial decisions and inconsistencies in the decisions of the tax authorities, appropriate guarantees and compensation clauses covering the company`s tax accounts should be among the buyer`s priorities when negotiating the SGT`s terms and conditions. Sub-taxes are real money and can seriously affect the profitability of the buyer`s investment. It is therefore advisable to include appropriate guarantees in share purchase contracts.