This is a follow up post on our series of merger and acquisition issues. If you are selling your company you’ll be faced with the prospect of indemnifying the purchaser for any damages they suffer in connection with the sale. Now such indemnification may arise for a number of reasons, such as an unknown debt or lien that was on an asset you sold, a claim that an employee or third party made against the company or an asset which you did not inform the purchaser of, or a number of other issues. These are usually breaches of the representations and warranties that sellers have to make to the buyers in the asset purchase agreement. For example, the seller will represent (i.e. state as true at the time of signing or closing or both) that there are no debts owed by the company or liens on the company assets. If the deal closes and a lender or lien of the company did exist, its a breach of that representation, and the seller is liable to the buyer for any resulting damages. Read more
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