Reps & Warranties: No Conflicts; Consents
Essential Question:
Who needs to know about this transaction, and who needs to give it the okay?
In Brief:
If there will be any third-party interest in this transaction (contracts, governmental entities, regulatory bodies), they’ll be listed here.
From that list, both Buyer and Seller will work to notify the necessary parties and get consent where necessary.
It can be time consuming – get the ball rolling early.
Category: Continued Diligence & Fact-Finding
What is it?
A confirmation that by selling all or part of the business, the Seller is not doing anything illegal or violating any existing ruling or decree, nor are they putting any encumbrance on the business, and that they have gotten the go-ahead from any relevant third party.
When does it matter?
This representation gives the buyer peace of mind. The Disclosure Schedules that correspond with this section are where the Seller lists out every consent that is required to transfer the Assigned Contracts to the Buyer, and any governmental or regulatory entities that need to be informed, and the parties work from that list to try to obtain those consents. Getting this list together early gives the parties an idea of the legwork that will be required to complete the transaction.
What to look out for?
There will be exceptions to this, but you must be specific. And it’s better to be overcautious than under. Don’t try to figure this out yourself. If it even smells like you need a consent, send the letter. Make the buyer tell you you don’t need it.
