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COVID Related Warranties Added

January 2021

COVID-19 has substantially increased the legal and business risks involved in any sale taking place during the pandemic. This month two new business purchase agreements (BPAs) have been added been to the business sale templates, which both include additional warranties to cover the business fallout and uncertainty created by the pandemic.

Based on our standard form BPA and BPA with a guarantee, these templates include additional warranties that consider the important changes COVID-19 has introduced to employment law and health and safety regulation as well as including enhanced warranties to cover customer contracts, supply chains and business continuity amongst other things. A buyer may expect the seller (and guarantor) at the very least to be able to warrant these additional matters, for example whether the seller has made use of the furlough scheme for relevant employees and that customer contracts have not been affected by COVID-19. To the extent that a seller (or guarantor) is unable to, they will need to disclose against the relevant warranties in a disclosure letter.

Business sales can be complex and the extent to which a business may be affected by the pandemic will vary from business to business, but these new templates are designed as a starting point which customers may need to add to depending on the business concerned.

The new versions of the BPA are short form templates and designed for relatively simple transactions.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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