M&A: Quantitative limitations of liability

Linkedin Post

In M&A transactions, sellers may try to limit their liabilities by having quantitative limitations in the SPA.

Quantitative limitations may take the following forms:

1. “De minimis” limit provides a minimum limit for a claim to be recoverable. The rationale is to exclude small claims where the cost incurred in recovering the claims exceed what the claims are worth for.

2. Threshold or tipping basket provides a minimum limit for aggregate claims to be recoverable.

3. Having a deductible i.e. a buyer may only claim the amount in excess of an agreed sum.

4. Having a cap to the seller’s aggregate liability. The cap is usually expressed as a fixed sum or percentage of the purchase price.

#malaysiancorporatelawyer
#mergersandacquisitions

This post was first posted on Linkedin on 24 February 2023.

Linkedin Post
Partial Share Sales in Malaysia: What Sellers Need to Know About Guarantees

In partial disposals, it’s common for sellers and buyers to agree that any existing guarantees given by the sellers to secure banking facilities of the target companies will be adjusted to reflect the post-completion shareholding. For public listed companies (PLCs) in Malaysia, this can affect the deal timeline if not …

Linkedin Post
M&A Break Fees: Practical Constraints in Malaysia

In M&A transactions, break fees refer to a pre-agreed sum payable if a party withdraws from a proposed transaction without any breach by the counterparty. In principle, break fees are intended to deter frivolous exits and to compensate the other party for transaction-related costs, including due diligence and advisory expenses. …

Linkedin Post
M&A Disclosure Letter: DIY or Get a Lawyer?

In M&A transactions, a disclosure letter sets out the exceptions and qualifications to the representations and warranties (R&Ws) given by a seller in a share sale and purchase agreement (SPA). Getting it wrong can turn an unintentional misstatement into a breach of contract, with serious legal and financial consequences. Should …