Typical Share Sale Warranties

Friday, 28 March 2025

Simon Newman

Introduction

Warranties are a key feature of any share purchase agreement (SPA). They are statements of fact made by the seller about various aspects of the company being sold. These warranties provide the buyer with protection, ensuring that the company they are acquiring is in the state represented by the seller. If any warranty is later found to be untrue, the buyer may have the right to claim damages.

This guide outlines the main types of warranties typically included in an SPA and explains their significance.

________________________________________

1. Title Warranties

These warranties ensure that the seller has full ownership of the shares being sold and that the shares are free from any encumbrances or third-party claims. They are crucial as they confirm that the seller has the legal right to sell the shares, and the buyer will acquire full ownership of the company.

Typical clauses include:

• The seller is the legal owner of the shares.

• The shares are free from any liens, charges, or other third-party interests.

• The seller has the power and authority to sell the shares.

________________________________________

2. Accounts Warranties

Accounts warranties provide assurances regarding the financial position of the company as represented in its financial statements. These warranties typically cover the accuracy of the company’s balance sheet, profit and loss account, and cash flow statement. The warranties ensure that the accounts present a true and fair view of the company's financial position.

Key examples include:

• The accounts have been prepared in accordance with applicable accounting standards.

• The accounts give a true and fair view of the company’s financial affairs.

• There are no undisclosed liabilities.

________________________________________

3. Tax Warranties

Tax warranties cover the company’s tax affairs, ensuring that the company has paid all taxes due and has complied with relevant tax laws. They protect the buyer from hidden tax liabilities that could emerge after the purchase.

Examples of common tax warranties:

• All taxes due have been paid, and there are no outstanding tax liabilities.

• The company has made all necessary tax filings and returns.

• There are no ongoing tax disputes or investigations by tax authorities.

________________________________________

4. Litigation and Dispute Warranties

Litigation warranties protect the buyer by confirming that there are no current or pending legal disputes involving the company. These warranties ensure that the buyer is not unknowingly acquiring a company facing costly or reputationally damaging litigation.

Key clauses include:

• The company is not involved in any ongoing legal disputes.

• There are no claims or proceedings threatened or pending against the company.

• The company is not in breach of any laws or regulations.

________________________________________

5. Commercial Contracts Warranties

These warranties provide assurances that the company's commercial contracts with customers, suppliers, and other third parties are valid and enforceable. They also confirm that no material contracts are at risk of being terminated due to the share sale.

Typical warranties in this area might include:

• All material contracts are in full force and effect.

• The company is not in breach of any major contracts.

• No customer or supplier has indicated an intention to terminate or materially alter their contract with the company.

________________________________________

6. Employment Warranties

Employment warranties provide assurance regarding the company’s workforce, confirming that the company complies with employment laws and has no disputes with its employees. This is especially important if the business has a large workforce or key employees critical to the company’s success.

Key employment warranties may include:

• All employees are employed on legally compliant terms.

• There are no ongoing or pending employment disputes.

• The company has met all obligations concerning pensions, redundancy payments, and other employee benefits.

________________________________________

7. Intellectual Property (IP) Warranties

These warranties address the ownership and protection of the company’s intellectual property, which may be vital for companies reliant on trademarks, patents, software, or other proprietary rights. IP warranties are designed to ensure the buyer will continue to benefit from the company's IP assets after the purchase.

Examples of IP warranties include:

• The company owns or has valid licences for all necessary intellectual property.

• No IP rights of the company are being infringed, and no third parties are infringing the company’s IP rights.

• The company is not involved in any IP disputes or claims.

________________________________________

8. Property Warranties

If the company owns or leases real property, property warranties ensure that the company has valid title or leasehold rights over its properties. These warranties also confirm that the properties comply with planning regulations, building codes, and other legal requirements.

Examples of property warranties include:

• The company owns or leases the properties identified in the agreement.

• There are no disputes regarding the company’s ownership or occupation of the properties.

• All properties comply with applicable building regulations and have the necessary planning permissions.

________________________________________

9. Environmental Warranties

These warranties provide protection against environmental liabilities, such as pollution or non-compliance with environmental laws. Environmental risks can be particularly significant in industries like manufacturing or real estate, and the buyer will want to ensure there are no hidden risks that could lead to fines or remediation costs.

Typical environmental warranties include:

• The company complies with all relevant environmental laws and regulations.

• The company holds all necessary environmental permits.

• There are no known environmental issues, such as contamination, that could give rise to liability.

________________________________________

10. Compliance Warranties

Compliance warranties confirm that the company has adhered to all applicable laws and regulations, including data protection laws, anti-corruption laws, and competition laws. These warranties protect the buyer from acquiring a company that is in breach of critical legal obligations.

Examples include:

• The company has complied with all applicable laws and regulations.

• The company has not engaged in any unlawful or unethical practices.

• The company holds all necessary licences and permits for its operations.

________________________________________

Conclusion

Warranties play a vital role in protecting the buyer in a share purchase transaction, offering recourse if the company's condition is not as represented. While this guide covers the main types of warranties typically found in an SPA, each transaction is unique, and warranties can be tailored to the specific circumstances of the deal. Sellers should be aware that giving warranties can expose them to liability, while buyers should ensure that warranties are comprehensive enough to cover all key risks.

Latest Blogs

Applications for an O Licence — Why Accuracy Is Critical
September 01, 2025

Case Study: Operator’s Licence Application Form – Why Getting It Right Matters
July 18, 2025

Case Study: Failure to Follow Up on Audit Leads to Second Public Inquiry
June 15, 2025

All Blogs

Latest Transport Law

Applications for an O Licence — Why Accuracy Is Critical 01 September 2025

Transport Law

Anyone seeking to operate heavy goods vehicles (HGVs) or passenger service vehicles (PSVs) must approach the Operator’s Licence (O Licence) application process with precision and care—especially where there is a history of regulatory issues. This is particularly important in cases involving previously surrendered or revoked licences.

We were recently instructed by a company whose previous O Licence had been revoked within the past year. The company had entered financial difficulty and was placed into administration. They notified the Office of the Traffic Commissioner (OTC), but unfortunately failed to respond adequately to follow-up inquiries. When the OTC requested further information, the company did not reply. Although they attempted to surrender the licence voluntarily, the Traffic Commissioner (TC) ultimately revoked it.

A new application was submitted by a newly formed company with the same directors. This triggered a public inquiry before the TC—a crucial opportunity to demonstrate two key points:

• That the company would be fully compliant with O Licence requirements

• That the directors retained the necessary repute, despite the circumstances surrounding the administration

We worked closely with the company’s transport manager and directors to prepare a comprehensive submission, which was sent in advance of the hearing (typically required at least two weeks prior). With experienced staff now in place, the compliance issues were straightforward to address. The more challenging aspect was persuading the TC that the directors’ conduct did not warrant refusal of the licence.

TCs scrutinise applications rigorously to uphold the principle of fair competition. In this case, our detailed submission addressed all potential concerns. At the hearing, the director and transport manager provided clear and credible first-person evidence, reinforcing the points made in our written materials. We argued that this operator could be trusted and would conform to O Licence compliance and fair competition.

The licence was granted with immediate effect.

Case Study: Operator’s Licence Application Form – Why Getting It Right Matters 18 July 2025

Transport Law

Applying for an Operator’s Licence (O Licence) is more than just completing a form—it's a demonstration of trustworthiness. The Traffic Commissioner (TC) will only grant a licence if satisfied that the applicant can be relied upon to comply with the responsibilities that come with it. That trust starts with the application.

The Application Form – A Critical First Impression

For new applicants, the first and most important step is completing the application form correctly. Done properly, a licence can often be granted within the target timeframe of six weeks or less. Done incorrectly, and the process can stall or even result in a proposed refusal and a call to attend a public inquiry (PI).

One of our clients experienced exactly that.

The Issue: An Honest Mistake with Serious Consequences

Our client had submitted an application which, on its face, appeared to be incomplete. Specifically, it failed to declare a historic association with a previous O Licence application. While the omission was a genuine mistake, it raised a red flag for the TC.

The Office of the Traffic Commissioner (OTC) treated the matter seriously. The failure to declare past associations can suggest negligence—or worse—and it called into question the applicant’s reliability.

Our Approach: Full Disclosure and Positive Evidence

We assisted our client in preparing a comprehensive written submission to the TC's office in advance of the hearing. This included:

A clear explanation of how the error occurred.
Evidence showing that there was no intent to mislead.
Detailed information about the client’s proposed compliance systems.
Supporting documentation showing that the error had brought no advantage—only the disadvantage of triggering a PI.

The Outcome: Licence Granted with Conditions

At the public inquiry, the client gave open and honest answers about the error and demonstrated an up-to-date understanding of the maintenance and compliance obligations expected of O Licence holders.

The TC was ultimately satisfied that the application had been made in good faith. The licence was granted, with a condition that the operator complete an independent systems audit within six months and submit the findings to the OTC.

Key Takeaway: Accuracy is Essential

This case serves as a clear reminder of the importance of getting the application right first time. Even minor errors can result in delays, additional scrutiny, and the stress and cost of a public inquiry.

If you're applying for an O Licence, it pays to seek professional guidance from the start. Our team can help you navigate the process, ensure your paperwork is accurate and complete, and give you the best chance of a smooth application.

Case Study: Failure to Follow Up on Audit Leads to Second Public Inquiry 15 June 2025

Transport Law

Being called to a Public Inquiry is a serious matter for any operator. But facing two inquiries within a year can put an operator’s very survival at risk. In this case, our client—a licensed operator—found themselves before the Traffic Commissioner for the second time in under twelve months. The issue? Failure to follow through on a straightforward undertaking given at the first hearing.

The First Public Inquiry

The operator initially faced a Public Inquiry due to several maintenance failings, along with wider compliance concerns. On paper, the case looked serious. However, the company was committed to improvement and had started taking corrective action even before the hearing date was set.

We were instructed in good time and provided detailed advice not just on the maintenance issues raised, but also on other areas of compliance that had not been fully appreciated by the operator. The company took on board our recommendations and made a robust response to the DVSA’s findings. At the inquiry, the Traffic Commissioner acknowledged the positive steps taken, and the outcome was a formal warning—no more.

The Missed Undertaking

One of the undertakings given at the first hearing was for the operator to arrange an independent systems audit within six months. This was a clear and reasonable requirement. Unfortunately, the audit was not carried out within the required timeframe, and no communication was made with the Traffic Commissioner’s office.

When the TC’s office followed up, the operator explained that the failure had been an honest oversight. An audit was booked immediately, but by then it was too late to avoid the consequences. A second Public Inquiry was called—this time with the O Licence at serious risk.

The Second Hearing

We were instructed once again. The operator accepted our further advice and offered several new undertakings to address the situation. As before, the company’s director and transport manager presented well at the hearing.

In our legal submissions, we emphasised that this was a compliant and responsible operator that had learned from past mistakes and was not a threat to road safety or fair competition. We acknowledged the seriousness of the repeat appearance but highlighted the progress made and the company’s genuine efforts to get things right.

The Outcome

Despite being unimpressed by the need for a second hearing, the Traffic Commissioner accepted that the business had taken appropriate action and showed genuine intent to comply. While revocation was considered, the TC decided—just—to stop short of it.

The result was a short, two-week curtailment of vehicle authority. Given the circumstances, this was a remarkable outcome.

Our client recognised how close they had come to losing their licence altogether and expressed their sincere thanks for our guidance and representation throughout both proceedings.

NA Legal

Typical Share Sale Warranties

Introduction

1. Title Warranties

2. Accounts Warranties

3. Tax Warranties

4. Litigation and Dispute Warranties

5. Commercial Contracts Warranties

6. Employment Warranties

7. Intellectual Property (IP) Warranties

8. Property Warranties

9. Environmental Warranties

10. Compliance Warranties

Conclusion

About the author

Simon Newman

Author's recent posts

Call us for free on 0800 1777 522

Get In Touch Call or fill out the form below

We advise and represent transport businesses throughout the whole of the UK in all parts of England, Scotland, Wales and N.Ireland.

Latest Blogs

IF YOU NEED HELP OR ADVICE

Latest Transport Law

The Application Form – A Critical First Impression

The Issue: An Honest Mistake with Serious Consequences

Our Approach: Full Disclosure and Positive Evidence

The Outcome: Licence Granted with Conditions

Key Takeaway: Accuracy is Essential

The First Public Inquiry

The Missed Undertaking

The Second Hearing

The Outcome