In an M&A deal, the buyer’s lawyer discovered that one of the target company’s licences had expired. The seller’s lawyer tried to down risk the issue and said it could be renewed after completion. The buyer’s lawyer flagged the potential penalties – imprisonment and fines for each day of continuing default.

How do you deal with this in the sale and purchase agreement (SPA)?

There are three possible ways.

Making renewal of the licence a condition precedent in the SPA is the safest for the buyer because the deal doesn’t close until the licence is renewed. But it may slow the deal.

Retention of part of the purchase price until the licence is renewed gives the buyer some leverage because the seller would want to be paid the balance sum.

Post-completion rectification may be ignored by the seller who has already been paid. The buyer may have to bring an action against the seller to enforce it but this may not be feasible, especially if the buyer requires the seller to remain involved in the company post-completion.

Lawyers can suggest options based on legal expertise. But clients know the commercial context and what matters most to them. A better decision is made when lawyers and clients work through the legal and commercial considerations together.

This post was first posted on LinkedIn on 23 May 2026.