| Abstract [eng] |
This master thesis, through the use of analytical, comparative, logical, systemic and economic methods forms a thorough analysis of problems concerning estimation and recovery of losses caused by the breaches of representations and warranties provided for in share sale–purchase agreements. This paper in both – theoretical and practical standpoints presents the core of the pending problems while suggesting the eventual rules, which if addressed, could ease the estimation of losses and safeguard the fair-minded compensation in the situations when seller’s representations and warranties provided for in share sale–purchase agreements were false. In order to achieve the selected goals of this master thesis, the first part of the paper analyses peculiarities of business transfer through the purchase of shares. It also examines what amount of transferred shares can be considered as a transfer of full business as well as compares the nature of business transactions through the sale of shares and assets. Due to the fact that representations and warranties have become an integral part of share sale–purchase agreements and disputes in business acquisitions are most often caused by the breach of above clauses, the second part of the paper examines their legal nature, substance, goals and place in the Lithuanian law of contracts. The main part of the paper aims to identify problems in estimation and recovery of damages, analyze main methods of the calculation of damages and issues in business valuation, also determine relationship between seller’s duty to disclose and buyer’s duty to investigate the target. In addition, this part examines applicability of the legal rules of defective enterprise when transferring business through the sale of shares. Finally, a conclusion is drawn, that in order to avoid the risk of irrecoverable damages it is advisable to foresee fines for breaches of certain representations and warranties in the contract and by doing so to secure at least minimal compensation of damages. Moreover, it is useful to include other protecting clauses in the agreement, such as price adjustment mechanism, holdbacks or escrow conditions, and to use both conventional and alternative measures for securing buyer’s interests. |
