Tuesday, January 31, 2012

Reps & Warranties on a Share Sale

Today I spent some time working my way through a share purchase agreement, largely amending it to narrow the representations and warranties that my client was being asked to give, on the sale of his shares to another shareholder of the same company. The buyer actually has a great deal of knowledge about the company, and is involved in its day-to-day operations. In this context, it is very important to examine what each of the parties has knowledge of, how much risk the purchaser will bear and how many assurances the vendor will give. This is often a major area of negotiation between the parties, as there is usually a time period, after the sale, during which a purchaser can sue a vendor for any representation or warranty that was false. If you are buying or selling shares in a company, this is an important area to review and on which to obtain legal advice. It just makes good business sense.

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