SELLER’S POSITION
May be expressed as ‘Seller’s Limitations
SS want to ensure client’s exposure under AA is reduced to minimum – achieved in 3 ways:
1. NEGOTIATION
STRIKING OUT/AMENDING WARRANTIES
SS should remove warranties that S has no control over or too broad in scope
o E.g. BS may include warranty that none of T’s customers will terminate business
dealings as a result of sale of T
o E.g. Debts owing to T will be recovered within 1 month after completion
If warranty acceptable in principle, may be amended to rid it of ambiguity/narrow scope to
make it more practical to disclose against
o E.g. BS may have included warranty that T not involved in any litigation or disputes
of any nature
Not practical as may be small disputes with customers as a result of routing
debt collection
Left unamended = S would have to disclose smallest of disputes
Can be amended to limit scope e.g. cover disputes over value of £5000
LIMITING INDEMNITIES
SS should ensure indemnities refer to only very specific types of risks
o Should not accept indemnities that are general in nature
Tax indemnities exception to this rule – drafted in broad terms
, 2. DISCLOSURE
Disclosing against remaining warranties that are incorrect or inaccurate – allows S to avoid
liability for breach of warranty – pushes liability back onto B
Enables B to obtain info about T
Recorded in Disclosure Letter sent from S to B with annexed docs aka disclosure bundle
DISCLOSURE LETTER (DL)
S’s liability for breach of warranty limited by contents of DL
DL = a contract in its own right signed by both parties
o S gives details of any matters which make statements of fact given in warranties
untrue (i.e. qualifying warranties, so delete reference to Tax Covenant /
Agreement / Indemnities)
General disclosures (‘front-end’ of DL) = S seeks to ensure that anything B could have
found by conducting public searches (Companies House / Land Registry) [+ anything B has
reviewed] is deemed to have been disclosed –matters of public record
o i.e. B is deemed to know all matters covered by general disclosure, regardless of
actual knowledge
Specific disclosures (‘back-end’ of DL) – relate to specific warranties given, covering
matters which, if not disclosed, would cause a BoW
o E.g. warranty that no litigation true, but for one small piece of litigation, details of
which are given in specific disclosure
TIMING
1st draft DL by SS to B prior to completion – gives B time to review and evaluate disclosures
o Auction = SS prepare SPA + DL together or after receiving mark ups of SPA
o PTS = BS prepare SPA + DL in response to this
o Signed at same time as SPA
Finalised at completion with 2 bundles prepped – 1 for each B and S – must be identical
Supplementary DL possible where split exchange and completion, signed on completion
May be repeated disclosure at completion if split
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