Share Purchase Agreement Insurance: What It Is and Why You Need It
When it comes to buying or selling a business, the Share Purchase Agreement (SPA) is a crucial document that outlines the terms and conditions of the transaction. However, even the most meticulously drafted SPA can’t protect the buyer or seller from unexpected issues that arise after the deal is done. That’s where Share Purchase Agreement Insurance comes in.
What is Share Purchase Agreement Insurance?
Share Purchase Agreement Insurance, also known as Warranty and Indemnity Insurance, is a policy that protects buyers and sellers in the event of a breach of warranties or indemnities in the SPA. In other words, if one party makes a misrepresentation or fails to disclose important information, the insurance policy will cover the costs associated with any resulting legal action.
Why Do You Need It?
Without Share Purchase Agreement Insurance, a breach of warranties or indemnities could result in a costly and time-consuming legal battle. The buyer may seek damages for any losses incurred as a result of the misrepresentation, and the seller may be required to defend themselves against these claims. In addition, the buyer may need to pay for any necessary remedial action to correct the issue.
With Share Purchase Agreement Insurance, however, both parties can rest easy knowing that they’re protected from any unexpected claims. The insurance policy will cover the costs associated with any legal action, including legal fees, damages, and remedial action. This allows the buyer and seller to focus on running their business, rather than worrying about potential litigation.
Who Benefits from Share Purchase Agreement Insurance?
Share Purchase Agreement Insurance benefits both the buyer and the seller. For the buyer, it provides peace of mind knowing that they’re protected in the event of a breach of warranties or indemnities. For the seller, it reduces the risk of costly legal battles and allows them to close the deal with confidence.
In addition, lenders and investors may require Share Purchase Agreement Insurance as a condition of funding the purchase. This is because it provides an extra layer of protection for their investment, reducing the risk of financial loss in the event of an unexpected claim.
Conclusion
In conclusion, Share Purchase Agreement Insurance is a valuable tool for anyone involved in the buying or selling of a business. It provides protection against unexpected claims and reduces the risk of costly legal battles. If you’re considering purchasing or selling a business, be sure to speak with your legal and financial advisors about the benefits of Share Purchase Agreement Insurance.