Posted on August 20, 2015
In July we posted a blog concerning Warranty and Indemnity Insurance which can protect both sides in the mergers and acquisitions market. On a related note – you may be interested to note that cover is also available to protect the purchasers title to shares when these need to be acquired to complete a deal.
As with real estate purchase – the acquisition of share title can throw up obstacles which may jeopardise the deal. These can include the following scenarios:
- The Seller is not the legal and beneficial owner of all of the Shares.
- The Shares are not free from mortgage, charge or encumbrance.
- The Target is not the legal and beneficial owner of all of the shares in the company in whom title to the Property is vested or which is the registered proprietor at Land Registry.
- The title to the Shares is defective due to a previous document not being properly registered, signed, completed and/or executed.
- A third party claims a better legal ownership to the Shares.
- The seller used a power of attorney to transfer the Shares and that document is shown to be legally defective or the person giving the power of attorney did not have the mental capacity to give it or had revoked it before completion.
- The Target is not the legal and beneficial owner of all of the shares in each of the Target Subsidiaries.
- The Target is not the company in whom title to the Property is vested or the registered proprietor of the Property at Land Registry.
Property Insurance Initiatives (Pii) are able to offer a comprehensive policy wording providing full protection for your clients in respect of both the potential assets being acquired and the shares purchased in order to effect this. All of the scenarios above are insured – as well as more potential issues – full details and a sample policy wording can be forwarded on request.
The advantages of obtaining a policy from Pii are summarised below:
- Market leading comprehensive “All Risks” policy wording.
- Policy documentation is issued within a few hours of the quote being accepted.
- Insurers waive subrogation rights against legal advisors in the event of a claim.
Should you need to discuss any form of restrictive covenant policy, please do not hesitate to contact us.