Reps and warranties refer to factual allegations made by a seller in the course of an attempt to induce a buyer to buy his business. Each of the parties involved in the transaction relies on the other to provide real information about the transaction. The seller assures that the business is worth the investment that the buyer plans to make. Representatives and guarantees include a compensation clause that reduces the risk of financial losses if one of the parties does not make a significant presentation that could result in financial loss after the transaction. Some of the information that the buyer`s lawyers verify in the representations and guarantees include: as a result, the assurances and guarantees that define certain qualifications of the target company, such as the target company, are properly put in place, it has the necessary authorizations and licences to carry out its activities, it has the right to use the assets necessary to maintain its activities in accordance with the law and it conducts its activities in accordance with the law and is contained in the contracts to purchase shares. Representatives and guarantees offer the buyer the opportunity to conduct due diligence Type of due diligenceAn one of the most important and longest processes of an AM agreement is due diligence. The due diligence process is something the buyer does to confirm the accuracy of the seller`s claims. A possible M-A agreement involves different types of due diligence. for the transaction. Lawyers representing the parties must review the agreement to ensure that it is fair to the buyer and seller. In the event that the insurance and guarantees provided in the agreement relate to the qualifications of the companies concerned, not to the shares (due to the fact that shares are the main theme of share purchase contracts), the question of whether these can be considered as specific qualifications (“representations and guarantees”) under Article 219/1 tCO is controversial4. When the buyer issues equity securities to the seller, another guarantee is given. The buyer`s insurance and guarantees are usually limited to the following: if the transaction is a share deal, there are also insurances and guarantees on the target`s equity.
While the buyer may have performed his own due diligence, he will generally always expect the seller to confirm several facts in this section. They will also have to be at the origin of these facts throughout the sale process. Although shares are the fundamental theme of share purchase contracts1, the purpose of the purchaser through share purchase agreements is generally the acquisition of companies from the company to which the subject shares belong. In this context, in addition to unit qualifications, qualifications, which would significantly affect the business activity, are essential for the buyer. During negotiations on the purchase of a business, it is the buyer`s responsibility to demand more information from the seller regarding certain factual claims of the seller. This is due to the fact that the buyer bears more risk Systemic riskThe risk of the system can be defined as the risk associated with the collapse or failure of a business, sector, financial institution or entire economy. This is the risk of a major failure of a financial system in which a crisis occurs when investors lose confidence in the users of the capital that the seller must ensure that all questions are forwarded to the seller for answer and that all the necessary information for the transaction is provided. This article assesses the results of the breach of insurance and guarantees to the target company, to which the shares are the subject of a share purchase agreement, and the liability of the seller resulting from such a breach.