The litigation landscape post pandemic: share purchase agreements and warranty claims

Despite the challenging conditions, we saw acquisitions pick up towards the end of 2020.  Some of this was driven by the opportunities which undoubtedly arise when certain sectors are under stress and others (pharma, info comms, digital) are facing a positive shift in demand for their products and services.

But sellers who are faced with reduced or no-earn out payments will start to ask whether this is a consequence of recent events or poor management by the buyers post-acquisition?  Buyers who find themselves thinking the company they have acquired is not worth what they paid for it will start to ask if the accounts showed a true and fair view of the state of affairs of the company and its profit or loss, or were they misled because the sellers failed to comply with the relevant accounting standards in recognising and making provision for the effects of the COVID-19 pandemic.

Look out for any issues and start investigating immediately.  Any price adjustment disputes, claims for breaches of accounts warranties and claims under tax covenants must be notified in accordance with the provisions in the SPA.  What does the SPA say about how a notice must be worded, the date by which any claim must be notified and how notices must be served?  Getting the notification right is extremely important because any notice that does not properly comply with the contractual provisions for notification in the SPA will be invalid and purchasers will lose their right to bring a claim.