How often does Seller Sign Reps & Warranties as individuals

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December 13, 2023

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

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
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.
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Reply by a searcher
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.
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