The right route

Stuart Pibworth provides guidance on warranties and covenants, and explains why it is important to be aware of the differences

On share acquisitions, purchasers customarily seek protection in the share purchase agreement (SPA) for historic exposures (including tax exposures) of the company/group being acquired (target). For historic tax exposures, protection generally takes one of two forms: warranties and/or covenants. The scope and drafting of that protection will often turn on the tax due diligence undertaken and the relative bargaining strengths of the parties.