Shares sale and purchase: What to do with guarantee?

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In a sale and purchase of shares, the buyer will typically require any guarantee given by the target company for the benefit of any company in the seller’s group to be released.

If the guarantee has been given for the benefit of a company which will not be wholly owned by the target company after completion of the sale and purchase, the buyer will not want to risk to be solely liable if the guarantee is being called upon.

Similarly, the seller will normally expect release of any guarantees which the seller (or where the seller is a corporate seller, any other company in the seller’s group) has given in respect of the target company.

Typically, release of guarantee will be a post completion matter in the sale and purchase agreement.


This post was first posted on Linkedin on 1 February 2021.

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