Other
PA SGS 5 Consolidation
- Course
- Institution
Comprehensive notes on SGS 5 private acquisitions based on learning outcomes and SGS activities.
[Show more]
2 reviews
By: serdilkaya • 1 year ago
By: aqsabhutto • 2 year ago
Seller
Follow
daryalevchenko
Reviews received
Content preview
Drafting the Acquisition Agreement: Contractual ProtectionsA. Apportioning liability
Seller will be assuming a lot of risk in a share purchase
On a share sale, seller will want a ‘clear break’ and pass on all the risk to the buyer – ‘caveat emptor’ (‘buyer beware’)
Buyer will want risk of unexpected liabilities to be on Seller by way of Warranties and Indemnities
o Warranty – statement of fact given by Seller re company
o Indemnity – promise by S to compensate B if certain circumstances arise – debt claim
Seller has 3 protections:
1. Negotiation of warranties & indemnities (to narrow their scope - specific);
2. Disclosure Letter (re warranties, not indemnities!)
3. Limitation clause (vendor protection provisions; contractual position)
B. Disclosure
Work in tandem w/t warranties
Disclosure qualifies warranties so that S not liable for breach of warranty
Buyer will want to only qualify Ws that have been “fairly” disclosed in Disclosure Letter
Example: Planning Permission
o “All buildings of Target have all necessary planning permissions”
o Suppose one of the building’s extension’s was not granted a PP
o Risk for S -> local authority to require B to take down extension and allow B to sue S for damages bcs that
would cost B money
o Here -> S can disclose that the particular extensions does not have planning permission and is free from
liability for breach of warrant
Warranties can either be subject to:
(1) matters disclosed in Disclosure Letter; or
(2) matters fairly disclosed in Disclosure Letter
When is a disclosure effective?
o Previous common law position -> disclosure had to be ‘fair’
Levison
“Merely making known the means of knowledge which may enable the other party to work out certain facts and
conclusions will be insufficient needs to be ‘sufficiently precise’
Daniel Reeds
“Fair disclosure requires some positive statement of the true position and not just a fortuitous omission from which the
buyer may be expected to infer matters of significance.”
New Hearts Limited
“Mere reference to a source of information, which is in itself a complex document, within which the diligent enquirer
might find the relevant information, would not satisfy the requirements of a clause providing disclosure.” -> You need to
flag the issue.
…BUT THEN…. The common law position changed: Infiniteland case:
Held: no universal standard of disclosure
Disclosure does not always have to be ‘fair’ to be effective:
-> It depends on wording of the acquisition agreement
Example: S decided not to disclose the HMRC dispute on the basis that B already knows about it from its DD exercise?
Seller gives warranty
Seller knows warranty is untrue
Seller does not disclose against the warranty
*Buyer, through different sources, knows true state of affairs before completion takes place
Can the buyer bring a warranty claim? - Infiniteland case:
If parties agree in contract that:
1. B can’t sue B can’t bring a claim
2. B can sue B can bring a claim
If contract is silent B can probably sue
BUT: court can penalise B on damages awarded if knowledge of breach influenced price
Buyer’s knowledge
Take care re type of knowledge referred to:
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller daryalevchenko. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $4.55. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67232 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now