The importance of always seeking sound advice at the point of sale

A recent High Court ruling highlights the importance of business owners always seeking expert tax advice in relation to share purchase agreements at the point of sale.

The case of Teoco UK Ltd v Aircom Jersey 4 Ltd [2018] involved a claim brought against a seller (Aircom Jersey Ltd 4) by a purchaser (Teoco UK Ltd) for breach of warranty under a share purchase agreement originally agreed by the two Aircom companies.

Back in April 2016, the High Court struck out Teoco’s claim under the share purchase agreement due to the fact that, under the provisions of the contract, its correspondence with Aircom Jersey was “too vague and sloppy” to constitute valid notice that it was making a claim.

The Court found that Teoco had failed to clearly explain whether the claim related to tax indemnity or warranties – and that the company had failed to give notice of the intended claims as soon as deemed ‘reasonably practicable’ under the contract at the point it became aware of them.

At a later date, Teoco attempted to appeal the decision, but the Court of Appeal upheld the High Court’s ruling.

It said that Teoco’s “omnibus reference to warranty claims or tax claims” was insufficient to meet the requirement under the contract for the purchaser to “give reasonable details” of any claim.

Teoco presented a large amount of evidence to the Court suggesting that plenty of detail had been provided to the sellers. However, this did not alleviate the fact that the notification requirement as stipulated in the contract had not been fully met.

Sadly, this kind of harsh decision is only too common, as it is notoriously difficult for a company to convince a Court to ‘imply’ terms into a professionally drafted contract, experts have noted.

Naturally, this highlights the importance of business owners always seeking expert advice from Corporate Finance specialists such as Haslers at the point of sale – particularly if such a sale relates to a share purchase agreement.

If you need advice in relation to such matter, get in touch with our expert, Paul Reynolds at paul.reynolds@haslers.com or by calling 020 8418 3418 today.