The terms of the sale by the sellers to the target buyer were documented by a share purchase agreement (SPA). The OSG contained standard guarantees that the sellers had provided to the purchaser with respect to the legal financial statements of the 2013 target (2013 accounts), namely that this claim was ultimately rejected by the judge because of the restrictions imposed on the OSG. The purchaser had not properly summarized the claim when the purchaser had initially disclosed the claim to the sellers and, by the time the buyer`s deadline, the deadline for the declaration of non-tax guarantee rights had passed. The sellers negotiated the sale of their stake in Target in Cardamon Limited (Buyer) for $2.3 million, which they consider to be highly discounted, based on (a) of the sale on an accelerated two-week basis; (b) the buyer would not perform due diligence for the destination and (c) the sellers would give the “blinded” guarantees since they were not involved in the management of the transaction. In this case, the sellers, in order to make the deal quickly, had given the accounts guarantees that relied on their managers and accountants, without making their own assessment. These guarantees ultimately proved to be false and thus lost all the proceeds of the sale. Compensation in sales contracts is almost always generated by tax considerations. The bulk of the contracts for the sale of shares and property will include a declaration of self-sustaining tax compensation that the purchaser will have to conclude after the conclusion. Stock guarantees or asset sales have two main functions.
First, the warranties required for a particular property require the seller to provide the buyer with information about known problems related to the object. Second, they are a means of apporting risk between the buyer and the seller, as they are likely to remedy the buyer`s situation (i.e. a breach) when the statements contained in the guarantees are false and cause a loss to the buyer. In other contracts, such as loan contracts, guarantees serve a similar function, but they also cause delay events. The main advantage of compensation over other forms of restoration is that it can avoid problems in terms of quantum loss. The applicant may recover the full amount of the damage suffered by a violation of the corresponding compensation. If you allege a breach of compensation, there is no need to show guilt or an offence; there is no obligation for the buyer to mitigate his loss and, in general, it is more difficult to argue that the damage is too far away to be recovered. Therefore, if, in the example above, the buyer had awarded the seller compensation that the machine would operate for specific purposes, the buyer would have been able to recover the $10,000 and would have the right to retain the machine. The guarantees provided by the seller in the share purchase agreement (hereafter the SPA) offer the buyer protection against the risk of unknown debts.