This guarantee confirms that the seller is the sole and true owner of the shares sold. For this reason, guarantees are an essential protection for the buyer and are generally the subject of intense negotiations between lawyers from both parties in an attempt to obtain a fair position for the buyer and seller. A recent case before the English High Court again highlighted the importance of guarantees in share purchase contracts and why they should be carefully considered before the deal is concluded, particularly if the sale is faster. At the time of signing the share purchase agreement, the accounts of the target entity should provide a true overview of the target entity`s business. 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. Although shares are the fundamental theme of share purchase contracts1, the purpose of the purchaser through share purchase agreements is generally the acquisition of companies from the company to which the subject shares belong. In this context, in addition to unit qualifications, qualifications, which would significantly affect the business activity, are essential for the buyer. Both the compensation clause and the seller`s guarantees are time-limited and should not last longer than the expiry of the company`s tax commitments. If you are considering buying or selling a business or would like more information about stock purchase contracts, please contact Emma Benniston with our Corporate Commercial Team. Contact them on 0121 716 3701 or firstname.lastname@example.org to find out how we can do it. This case underscores the need to take seriously the guarantees and disclosures that make up an important part of the sale of a business. And what can go wrong if the subject is not properly considered? Guarantees in stock or asset purchase contracts are generally broad. They make a series of assertions about property status, labour and labour law, processes, asset status, accounting and operating systems.
2. The seller has the necessary power and authority to take and perform his obligations under the share purchase agreement. If a warranty is found to be false, the purchaser may seek damages for a breach of the warranty in question, which could result in shares below their guaranteed value. 6. The seller has the right to sell the shares to the buyer A target company subject to a share purchase agreement cannot be insolvent, i.e. cannot pay its debts. According to Article 219 TCO, “the seller is liable for the absence of the qualifications communicated for purchase and is also responsible for material, legal or economic defects incompatible with qualifications or the quantity of qualifications and the reduction or transfer of the benefit that the buyer expected to obtain for his use.” It is important that at the time of the share purchase agreement, the target company is not involved in a dispute or participates in an out-of-court settlement of disputes, such as mediation.B.