Representations and warranties seller should avoid

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Today’s post is on some of the representations and warranties a seller should avoid giving in a M&A transaction.

1. Representations and warranties about the future
The seller should avoid providing representations and warranties in respect of future events if there is uncertainty about the future. Further, after the seller disposes of the seller’s shares, the seller may no longer be in control of the target company and hence, not in a position to ensure the representations and warranties continue to be true.

Example:
The Company has not supplied services which are, or were, or will become, in any material respect, faulty or defective.

2. Representations and warranties on matters which are not within the seller’s control

Example:
No other party to any contract to which the Company is a party is unlikely or unwilling or unable to fulfil its contractual obligations.

3. Widely drafted representations and warranties
Without definitive parameters, the seller may be caught off guard by breach of representations and warranties which the seller has not contemplated.

Example:
The statutory books and books of account and other records of whatsoever kind of the Company are up-to-date and maintained in accordance with all applicable legal requirements.

The list above is not exhaustive and may differ depending on the facts of the circumstances.

What would you add to the list?

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Originally posted on Linkedin on  8 November 2021.

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