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On Warranties and Indemnities on Shares and Asset Sales



An appreciation by Elizabeth Taylor of Richmond Green Chambers and Phillip Taylor MBE, Head of Chambers
and Reviews Editor, “The Barrister”

Chancery barristers, corporate lawyers or indeed any practitioners involved with the purchase or sale of companies, their businesses, or their assets, should certainly acquire this long-established legal text, making sure they keep it handy.

Having been around since 2001, (this is the new tenth edition) this highly regarded title from Sweet & Maxwell’s Commercial Series has established itself as the definitive work of reference on this complicated subject.

Yes, the new edition reflects the changes in the law, conventions and practice that have emerged since the last edition was published in 2011. But it continues to remain true to its basic aim, which, says the general editor Robert Thompson, is to function as a practitioners’ guide ‘designed to assist in the preparation and negotiation of suitable sale and purchase documentation for the sale or purchase of companies or the business and assets of them’

Be they sales or purchases, such transactions are fraught with risk, as disclosure of possible problems may not necessarily be in place, or forthcoming. Indemnities and warranties therefore are, together or separately, a means or a mechanism for mitigating risk. This book examines in precise detail the issues, the perspectives and the practicalities involved across an extremely broad range of situations in which practitioners may find themselves.

‘All too often, deals fail due to a lack of real understanding of the issues and the alternative ways of apportioning risk in a way that is likely to be acceptable to both the vendor and the purchaser.’ warns the editor. ‘In most cases,’ he adds, ‘a negotiated compromise will resolve a potential deal breaker.’

One can infer that when dealing with big money and big risk, the general commonsense attitude should be one of caution. Consider this example. Under ‘Penalties’ in the chapter on Taxation Warranties — what, for instance, is the practitioner to do in a case where – and we quote — ‘The Company has not been the subject of an audit, investigation, discovery or access order by, or involving a Taxation Authority and there are no circumstances which make it likely that an investigation, discovery or order will be made.’

Considering the positions of both the vendors and purchasers, the accompanying commentary postulates that if the wording of a resulting warranty is somewhat wide — or maybe extremely wide — the vendors, ‘should be most cautious in accepting it.’ As for the purchasers, they might argue that if a series of past investigations has taken place for instance, these could be indicators (or warning signs) that there is ‘an underlying issue’ which they would need to know about.

Thus reassuringly detailed and erudite, the book, fortunately, is logically organised. The first chapter covers the history and function of warranties and indemnities, with the subsequent twelve chapters examining all the salient aspects of this area of law. Also provided are tables of cases, statutes and statutory instruments plus a table of European legislation. There are ten appendices and – for the time-pressured practitioner – there’s an accompanying CD Rom on the inside back cover.

Dealing as it does with a complex subject within an equitable jurisdiction rather than one of common law, this is an important book which practitioners in this field will undoubtedly consider an important purchase.


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