M&A update – Sellers and buyers who have completed transactions within the past several years should take note of Gov. Andrew Cuomo’s Executive Order 202.8, tolling the statutes of limitations for all claims through April 19.
The indemnification provisions in an M&A agreement typically establish survival periods for the representations and warranties of the parties. In most cases, the parties will have negotiated a general survival period of six to 24 months for most operational representations and warranties, and a longer survival period tied to statutes of limitations for more fundamental representations and warranties. Fundamental representations and warranties can include those relating to due organization, due authority, capitalization, taxes, title to shares or assets, and broker/finders’ fees. Representations and warranties covering environmental, intellectual property or employee benefits also may be tied to statutes of limitations depending on the deal.
Buyers and sellers should consult with their legal advisors about the survival provisions covering representations and warranties in purchase agreements and, if any are tied to statutes of limitations, determine the applicable statute of limitations for such various representations and warranties and the tolling implications.
Be aware that Cuomo may extend the tolling of statutes of limitations beyond April 19 in one or more follow-up executive orders as long as the state courts are closed. BakerHostetler will provide updates to this alert in the event of any such extensions as information becomes available.
Authorship Credit: Steven H. Goldberg and Jennifer R. Rodriguez
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