Who this is for: sellers negotiating the sale and purchase agreement, and their advisers.
They commit you to standing behind statements about your business after you have sold it, and to paying if those statements turn out to be wrong.
Warranties are statements of fact. Indemnities are promises to cover specific losses. Disclosure is how you limit both.
Disclosure is the protection, not the admission
A warranty you have properly disclosed against is far harder to claim on.
Disclosure converts a known issue into a priced one. The instinct to keep quiet about a messy contract or an open tax question is the expensive instinct.
The limits worth negotiating
- A cap on total liability
- A basket or threshold, so small claims cannot be aggregated against you
- A time limit, usually shorter for commercial warranties than for tax
- Clear carve-outs for anything disclosed
Where the disputes actually come from
Tax, accounts, and anything about contracts continuing after a change of control.
If you cannot stand behind a statement, do not sign it and hope.
Disclose it, price it, or carve it out.
Frequently asked questions
How long do warranties last after a sale?
Commercial warranties are usually shorter than tax warranties.
How much should you disclose before it starts costing you price?
Disclose fully. A buyer who reprices on a disclosed issue was going to find it in diligence anyway, and finding it later costs you more leverage than it costs you price now.
Is warranty and indemnity insurance available in Singapore?
There is but most sellers might put it into trust to protect but sellers might be at risk of bankruptcy.
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