The “Insurance and Guarantees” section of the sales contract is one of the most negotiated sections of any agreement between a buyer and a seller. It includes factual statements and promises about what is being sold. The seller will provide several assurances and guarantees on the purpose and assets. One topic that is not usually addressed at the Memorandum of Understanding stage, but which is the subject of significant negotiations in the sales contract, is “insurance and guarantees”. The memorandum of understanding usually stipulates that the seller gives the buyer usual insurance and guarantees, and the contract of sale contains the full text and scope of these insurances and guarantees. Often, in the case of a typical sales contract, insurance and guarantees can cover most of the document (often 15-30 pages themselves!). On the other hand, a buyer wants the seller`s insurance and warranties to be unlimited and as broad as possible. More comprehensive insurance and warranties often require a seller to disclose more information during contract negotiations and due diligence and can provide a better basis for the buyer`s rights of termination and indemnification in the event of a breach after conclusion. Advertising plans are also used by the buyer, as they may require a seller to list certain important business points, such as.B necessary permissions, third-party consents, as well as information about staff performance and compensation. By inviting the seller to list these types of items, the buyer can use the disclosure plans as a checklist of items that need to be tracked and finalized until they are concluded. Representatives and guarantees contain a compensation clause that reduces the risk of financial loss if one of the parties omits significant insurance that could result in a financial loss after the transaction. The buyer`s insurance and guarantees are generally limited to the following: shares are the essential subject of share purchase contracts. Consequently, the seller`s main obligation results in principle from defects in the shares.
In the absence of specific provisions concerning insurance and guarantees in the context of share purchase contracts, this obligation is subject to general provisions. Accordingly, the seller defends above all that the shares are properly issued by the target company, that the share certificates are duly issued if necessary and that other similar matters directly concern the shares. . . .