Reps & Warranties: Compliance with Law; Permits
Essential Question:
Is the business operating within the law?
In Brief:
What laws and permits are applicable to the business and industry?
Is the business following those laws, and have they done so in the past?
Over what time period is this representation being made, and what does that mean in terms of risk allocation?
Category: Continued Diligence & Fact-Finding; Risk Allocation
What is it?
Over a period of time, the company has been and is currently operating within all applicable laws.
When does it matter?
The Seller’s current and past compliance with laws applicable to the Business is obviously a significant issue; the Buyer will not want to purchase a business operating outside the confines of the law or be stuck with liabilities created by the Seller.
What to look out for?
Pay attention to the time period being proposed. From the Seller’s perspective, it’s worth it to try to limit this time period to current compliance, especially if previous violations have already been cured.
