The warranty schedule arrives late, runs to many pages, and looks like boilerplate. It is not. It is a list of statements about your business that you are personally guaranteeing to be true, and a claim under it can arrive long after the money has been spent.
The Difference That Matters
A warranty is a statement of fact — that the accounts are accurate, that there is no litigation, that the company owns its assets, that employment terms are as disclosed. If it turns out to be untrue and the buyer suffers loss as a result, the buyer may have a claim. An indemnity is a different and heavier obligation: rather than a statement of fact, it is a promise to reimburse, typically covering a specific identified liability if it arises, without the buyer having to establish loss in the same way. Indemnities are normally reserved for known or suspected risks — a live dispute, a Revenue matter under query, an environmental or title problem. The seller’s discipline on any indemnity is scope: draw it tightly to the specific matter, with a cap and a time limit, rather than leaving it open. A broad indemnity is the single heaviest obligation a seller can sign, and it is worth resisting a general one where the buyer’s real concern is a specific identified issue.
The Four Limitations
Standard rather than aggressive, and worth negotiating as a matter of course. A cap on total liability, so exposure is a defined figure rather than open-ended. Time limits, so claims must be brought within a specified period after completion — commonly longer for tax-related warranties than for general commercial ones. A de minimis threshold so trivial claims cannot be brought, usually alongside an aggregate threshold to be exceeded before any claim at all. And conduct provisions, giving the seller notice of and some say in the handling of a third-party claim that might trigger a warranty claim — without which a buyer could settle a claim generously and pass the cost to you. Alongside all four sits the real protection, which is not in the agreement: the disclosure letter. Matters properly disclosed are generally carved out, so exposure is defined by the quality of the disclosure rather than by the length of the schedule. And the reassuring note: most well-prepared owner-managed sales complete and are never revisited. What produces claims is an unread schedule, hurried disclosure, and problems never surfaced — each of which is within the seller’s control.
Read the schedule yourself. Your solicitor can tell you what a warranty means; only you know whether it is true. That is the one part of this process that cannot be delegated.
Going through a warranty schedule? 01 5827148.
Richard O’Shea — Solicitor & TEP
Solicitor at Mary Molloy Solicitors, established 1981, and a TEP of the Society of Trust and Estate Practitioners. The firm acts for buyers and sellers on business sales and acquisitions — structure, heads of terms, due diligence, the sale agreement, warranties and disclosure, completion and what follows it. Because a substantial share of Irish business sales are retirement exits, the firm’s estate and succession practice sits alongside the transactional work: the deal and what happens to the proceeds are usually the same client’s problem. Nothing here is tax advice — structure is tax-driven and that belongs with your accountant and Revenue, before heads of terms are signed. 01 5827148 · richardoshea@marymolloysolicitors.com · LinkedIn
General information, not legal advice. This website contains general information about Irish law on business sales and acquisitions. It is not legal advice and does not create a solicitor—client relationship. Every transaction turns on its own facts — the structure, the documents, the parties, the consents required — and advice on yours requires a consultation.
Nothing here is tax advice, and tax drives structure. The choice between an asset sale and a share sale is very largely a tax question, and it should be settled with your accountant or tax adviser, and by reference to Revenue’s own guidance, before heads of terms are signed rather than afterwards. This firm does not advise on tax, does not state rates, thresholds, reliefs or conditions, and does not indicate any tax outcome.
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