The guarantees and assurances provided by the seller are intended to ensure that the company has, in general, fulfilled its tax obligations in accordance with the rules in force. In theory, it may seem sufficient for the buyer to prove that the seller does not respect the general guarantee that the company has calculated and paid, as required by tax rules. In the view of both parties, full disclosure is essential. This is due to the fact that the buyer depends on the assets or shares acquired from all issues and issues disclosed. For the buyer, full disclosure means that there will be no surprises after closing. Problems often arise when the correct ip allocation requirements are not subject to service agreements or when the founders have not signed PIIA agreements that have transferred ip to the company (see Snapchat) or have conducted preliminary research for a public university or government authority. Depending on the size of the agreement, this may be a problematic area because of the patent rolls. 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. This time, commitment is an important consideration that is not always appreciated by sellers. If the seller spends the most time dealing with the transaction, the company may suffer.
This could have a negative impact on the purchase price or profits. Despite this finding, there are no specific regulations on the seller`s liability resulting from the target company`s qualification in the context of cbT or TCO share purchase contracts. Representations and guarantees come into effect on the day of the sales contract. If the closure occurs at a later date, insurance and guarantees will be re-issued. This is done on the closing date by a „Bring down“ certificate. It is also said that the date has changed and that all parties agree. 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. In this context, Tekinalp believes that if the majority of the shares are transferred to the target company, the seller is liable for material and legal defects and assets deficiencies5.