Some Differences In Law And Practice Between U.K. And U.S. Stock Purchase Agreements

• Posted by Geoffrey G. Gussis on April 17th, 2007


• Filed in Corporate/M&A

Leon N. Ferera, John R. Phillips, John Runnicles and Jeffery D. Schwartz of Jones Day have written a recent article that could come in handy if your company is involved in stock purchase agreements involving U.K. entities:

“As M&A becomes increasingly international, historic differences between U.K. and U.S. practice are diminishing. The vagaries of the underlying legal considerations in each of the jurisdictions are responsible in part for the differences, but custom and practice play a major role in shaping the form and substance of U.K. and U.S. stock purchase agreements or, to use U.K. nomenclature, share sale and purchase agreements. This Commentary focuses on differences in the following areas:

Whether “representations and warranties” or just “warranties” are given by the seller;

The standard of disclosure against warranties/representations;

The effect of the buyers knowledge on its ability to bring a claim under the warranties;

Repetition of warranties/representations;

Material adverse change clauses;

Quantification of damages for breach of warranty/representation; and

Procedural and substantive matters relating to enforcement of claims/litigation.

Of course, in the U.S., except in certain limited circumstances, contract and tort law are matters of state rather than U.S. federal law. While there are broad similarities between the laws of the various states, there may be important differences.”

Jones Day - United Kingdom - Some Differences In Law And Practice Between U.K. And U.S. Stock Purchase Agreements from Mondaq (free registration required).

Update: Ken Adams of the excellent AdamsDrafting blog provides his thoughts - he has written extensively on representations and warranties in the past.