How often does Seller Sign Reps & Warranties as individuals

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by a searcher from New York University - Leonard N. Stern School of Business
in Washington, DC, USA

2yrs ago

How often does Seller Sign Reps & Warranties as individuals

In asset sale, the selling entity will lose its assets and likely close shortly after.

In which case, curious to know what everyone's experience on how reps & warranty are typically structured.

Do seller sign personally? Get R&W insurance? or just hold large sum in escrow?

(Looking to confirm I am not too biased on what I've seen, etc)

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reply by a professional 2yrs ago
from Dartmouth College in Los Angeles, CA, USA

Yes in an asset sale where the selling entity will be a shell company you definitely need the seller personally guaranteeing the reps. You can require an escrow or that the shell not liquidate for a period of time and keep reserves in place necessary to satisfy claims, but that still does not protect you in the event of fraud or a longer duration claims (if specifically limited to indemnification under the purchase agreement). R&W insurance is typically not purchased for deals under approx. $25mm since it is cost prohibitive but recently there are providers going down market I think.

reply by a searcher 2yrs ago
in Rindge, NH 03461, USA

Yes, seller always need to sign personally, in both stock and asset sales. R+W insurance is good but not required. KEY is to have seller note with 'offset' clause that allows you to deduct any undisclosed liabilities from the seller note.