The purchase agreement will almost always limit the seller`s liability for breach of warranty in any way. The purpose of the guarantees given and the assurances given by the Seller is to ensure that the Company has generally complied with its tax obligations in accordance with the applicable regulations. Theoretically, it may seem sufficient for a claim against the seller if the buyer proves that the seller violates the general warranty that the company has calculated and paid taxes in accordance with tax regulations. Finally, remember that warranties should not be viewed lightly, that buyers should conduct a thorough due diligence exercise, regardless of how quickly a transaction is expected, and that claims limitation clauses should be carefully reviewed and drafted by experienced lawyers. Another example could be the guarantee that the target company has not received a notice period for any of the company`s essential contracts and that there is no reason to terminate those contracts. Again, this could be an important question for the buyer, who can evaluate the target company on the basis that its key contracts remain in effect after the purchase. The allocated share capital, i.e. new shares issued to existing shareholders or third parties. It is important for a possible successful claim that the seller`s warranties granted to the buyer are not based on subjective factors, i.e. .dem seller`s knowledge, knowledge of the applicable regulations or knowledge of certain circumstances. Examples of terms used to weaken the strength of warranties include “to the best of the seller`s/management`s knowledge” or “the seller is not aware of it”. The seller`s indemnification clause and warranties are limited in time and must not apply longer than the expiry of the company`s tax obligations. A recent case before the English High Court has once again highlighted the importance of collateral in share purchase agreements and why they should be carefully considered before the transaction closes, especially if the sale is prompt.
A tax return provides for situations in which the seller`s liability for the underpaid tax of the company may be triggered, e.B. in the event of a tax audit of the company relating to certain taxes or tax matters, or the determination by a tax administration of the amount of underpaid tax or the refusal of a tax administration to refund VAT to the company. etc..