Presentation Agenda

How can the Buyer be protected? Warranties, representations and indemnities The differences between them and their consequences How can the Seller be protected? Vendor protection clauses, disclosure letters etc. Tactics for each side Based on English law and practice (also very widely used in international deals)

How important is this subject?

Most fascinating area of the law? - No! Vital to the parties to a deal? Definitely! Letters of intent often refer to usual reps and warranties but working out a reasonable balance can be a major task Dont leave it to the junior assistant if anything goes wrong it will probably be here Not only the lawyers but the commercial team need to understand what is involved

Cross-border transactions
In civil law countries, parties rely heavily on the Code - warranties therefore shorter and more general Under common law, there is almost complete freedom of contract - therefore necessary to spell out exactly what the parties agree Although agreements follow a pattern, there are no absolute standard documents buyer precedents and seller precedents differ widely US practice also differs from UK for example, giving warranties on indemnity basis and listing exceptions in schedules

Shares or Assets?
Does the Buyer acquire a company or a business, or a combination of both? Often driven by tax considerations but leads to very different structures In an assets deal, Buyer needs protection for the agreed categories of assets and liabilities In a share deal, warranties etc. need to be much wider Buyer needs protection against any surprises within the corporate envelope

The Meanings of English Legal Terms

Need to distinguish between: Conditions Warranties Representations Indemnities

What is a Condition?
Normally defined as a contractual term whose breach allows the innocent party to terminate the contract In the M&A context, most relevant in the form of conditions precedent A list of conditions (e.g. competition clearance, board approvals) must be fulfilled before the parties are obliged to complete the deal But a party may still be liable for failing to achieve a condition which is within its control