Indemnity
A contractual undertaking by the seller to hold the buyer fully harmless against a specifically identified risk.
The indemnity obliges the seller to compensate the buyer euro for euro for a specific risk, often one identified during the due diligence (for example an ongoing tax audit, an environmental risk or litigation). Unlike with warranties, what matters is not a reduction in the value of the business but the occurrence of the defined event.
Indemnities are agreed for identified or particularly critical individual risks and are frequently exempt from liability limits such as cap or time bars, or are subject to their own thresholds. They supplement the warranty regime in the share purchase agreement and are often secured through an escrow.
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This explanation gives a general overview of Austrian law and does not replace advice in an individual case. The specific circumstances of your transaction are always decisive.
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Warranties
Independent assurances by the seller about specific characteristics of the company, the breach of which triggers damages or price-adjustment claims.
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Disclosure letter
A seller disclosure document recording exceptions and qualifications to the warranties given in the purchase agreement.
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Escrow
The holding of part of the purchase price by a neutral third party to secure claims arising after closing.
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Share purchase agreement (SPA)
The central agreement governing the acquisition of a business (share or asset deal), covering the object of sale, purchase price, warranties and completion.
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