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Week 3 - Legal Due Diligence PDF
Week 3 - Legal Due Diligence PDF
8 February2012
By Helen Michelle Jrgensen
LEGAL DUE DILIGENCE
Customised process
Scope
Mission & Strategy
The Team
Interaction between advisors
Vendor due diligence
Form of the due diligence report
LEGAL DUE DILIGENCE
Change of control
Rights to terminate or renegotiate
Guarantees
Live warranties/indemnities
Consents
Material liabilities
THE DATA ROOM
13
Purpose of due
diligence/warranties/disclosure
To flush out information
To provide a way to adjust afterwards
if disclosures are wrong
To avoid breach of warranty claims
(for the seller)
Disclosure is the sellers shield not
buyers sword
The warranties written as absolute
statements but are qualified by the
disclosures, and knowledge
14
Form of disclosure
15
How should a seller prepare disclosure?
Seller prepares
Golden rule even if seller knows that buyers is aware of
something include it
Involve the business team
Keep an index of documents keep track
16
How should a seller prepare disclosure?
17
How should a seller prepare disclosure?
18
How should a buyer review disclosure?
19
How to respond to general disclosures
20
How to respond to general disclosures
21
How to respond to general disclosures
22
How to respond to general disclosures
23
Disclosure
Buyers knowledge
Sellers knowledge
24
Warranting the disclosures
25
The fully and fairly disclosed
discussion
26
WARRANTIES
Typical English/American: 50 pages or
more
28
Disclosure and warranties
29
Practical points to note:
30
Basic warranties for share sale
31
Purpose of warranties
32
For a seller
33
Warranties and disclosure
Use of material/substantial
De minimis clause is to avoid arguments as to materiality
Warranties as to the future
34
For a Buyer
35
Indemnities
36
Advantages of indemnities
37
Disadvantages of indemnities
38
Seller protection limitations on
liability
Time limits
De minimis amounts
Overall caps
Other limitations
39