Sunday, February 10, 2008
Selling Your Business - reps and warranties
If you are selling your business, you may be selling the assets or all of the shares of your corporation, but either way, the purchaser will likely want you to provide some representations and warranties with respect to your ownership of the assets, tax issues, employees, perhaps environmental warranties, etc. Depending upon the level of complexity of the transaction and the type of business being transferred, the reps could be as few as 5 or 6 and as many as 50 or 60. Either way, it is very important for a vendor to carefully read these representations and warranties to ensure that they are accurate and truthful. Often much of the negotiations around a transaction can centre around what reps and warranties will be given and whether they are limited to the knowledge and belief of the vendor or not. Make sure you understand what you are representing and warranting to a purchaser. If these statements are dishonest or inaccurate, a purchaser may have recourse against you after closing. Be sure to get legal advice about these items, prior to signing any agreement.