Purchaser Indemnified Parties

Spanish translation: las Partes Indemnizadas por el Comprador

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09:56 Jan 28, 2003
English to Spanish translations [PRO]
Law/Patents / Escrow Agreement
English term or phrase: Purchaser Indemnified Parties
XXX of the Indemnity Funds shall be paid to the Purchaser Indemnified Parties
María T. Vargas
Spain
Local time: 19:46
Spanish translation:las Partes Indemnizadas por el Comprador
Explanation:
No expert, but here is something that might help.


THE DUE DILIGENCE EXERCISE

From the purchaser’s point of view, one of the greatest fear in undertaking a merger and acquisition exercise is that of finding hidden debts and liabilities of the target company after the sale is completed. Even if a potential liability may be disclosed by the vendor, there is every possibility that the extent of the liability may be so downplayed as to seem insignificant to the purchaser or to the purchase price being agreed upon. The extent of the problem may be so great that the benefit or gain which is hoped to be reaped from the merger and acquisition exercise is totally wiped out.

One of the most important components in any merger and acquisition exercise is therefore the investigation or due diligence to be carried out on the target company, so as to uncover any hidden debts and liabilities of the company. The due diligence should be carried from an accounting, legal and business point of view.

2.1 The Objectives of a Due Diligence Exercise

Basically, the objectives of the due diligence is to determine the following:-

(1) that the target company has or will have good title to all the assets required to run the business, free from any encumbrances (for example, intellectual property, licences, specific machinery and equipment, etc).

(2) to ascertain and uncover whether the target has any liabilities which are even unknown to the vendor or withhold or downplayed by the vendor;

(3) to ascertain the warranties and representations required to be obtained from the vendor;

(4) to uncover any specific nature or circumstance of the business or the target company which may affect the purchase (e.g. dependency on certain key employees, supply of raw material being limited or restricted in any way etc, lease of land due to expiry soon etc)

(5) to assist the Purchaser in evaluating the worth of the target company.

2.2 Timing Of Due Diligence

From the purchaser’s point of view, it is best that the investigation or due diligence be carried out before the acquisition contract is signed and commitment to purchase is given, but this is unlikely to be acceptable to the vendor. From the vendor’s point of view, it is unwise for it to open up its books to a potential buyer who has not given any commitment to purchase the company, due to the need to maintain confidentiality of its know-how, customers’ list, costing and other confidential information, and to the need of ensuring that the employees, suppliers, bankers and customers are not informed of the unconfirmed sale. It is common in such circumstances for the vendor to disclose only the minimum information (such as the company secretarial records and audited accounts of the company) as the basis of the sale and purchase, subject to the confidentiality undertaking of the Purchaser, and the agreement is then conditional upon the Purchaser’s completion of the due diligence exercise. After the sale and purchase agreement has been signed, the purchaser is likely to require further more in-depth due diligence to be carried out before the completion date.



2.3 How To Deal With Potential Liabilities

There are various ways to deal with any liability or potential liability uncovered during the due diligence exercise depending on the extent and significance of the potential liability:-

(a) the purchaser should be given the opportunity to rescind the agreement; or

(b) the purchaser may wish to proceed with the acquisition but renegotiate on the purchase price to take into account the extent of the liability;

(c) the vendor may be required to pay damages to the purchaser;

(d) In situations where a potential liability exists, it may be necessary for certain retention arrangement to be made so that part of the Purchase Price or an additional sum be placed in an escrow account for an agreed duration of time for the purpose of meeting such potential liability when they do materialise;

As part of the terms and conditions of the acquisition contract, the vendor may be required to give certain warranties and indemnities to the purchaser in respect of such liabilities.
2.4 Confidentiality Undertaking

Due to the confidential nature of the information being disclosed, the vendor would be advised to insist on certain confidentiality undertaking being given by the purchaser and all its advisers, consultants, agents and employees undertaking with the vendor and with the company as follows:

(a) not to use the information disclosed for any purpose save and except for the intended exercise, and

(b) in the event the sale is aborted, all the information and documents shall be returned to the vendor or the company intact;

(c) no disclosure of any of the information be made to any third party save and except on a need to know basis and subject to the purchaser giving similar undertakings to the vendor and the company.

2.5 Potential Liability Arising From The Millennium Bug

As we approach the year 2000, one very imminent potential liabilities facing nearly every target company is the risk associated with the "Year 2000 problem", also known as the "Millennium Bug". The Year 2000 Problem basically refers to the inability of some computer systems to recognise the Year 2000 simply because the systems’ applications are programmed to only recognise the last two digits in a given year. Companies in the manufacturing industry, financial services sector and technology reliant industry are amongst the most at risk. Even if there is insignificant risk of the company being sued, the costs associated with rectifying the problem is likely to be enormous. In the event that the Millennium Bug is identified in the course of the due diligence as a potential liability, the Parties may wish to enter into certain arrangement to resolve the issue - for instance:-

(a) the vendor to indemnify the purchaser and to keep the purchaser indemnified in respect of any claims, proceedings or suits being brought against the target company as a result of the Millennium Bug;

(b) the parties to agree on the proportion of damages or liabilities which each party shall bear in the event any legal suits is brought against the target company;

(c) the parties to share the costs of remediation works between them in an agreed proportion;

(d) the purchase price to be reduced on the basis of the potential liability resulting from the Millennium Bug.


--------------------------------------------------
Note added at 2003-01-28 10:07:21 (GMT)
--------------------------------------------------

Here\'s an example of its use in court.


Se discute acerca de una posible falta de conformidad de unos colorantes para la industria textil entregadospor el vendedor extranjero al comprador español con un cierto retraso. La pretensión judicialmente esgrimida porparte del comprador en orden a ser indemnizado por los daños y perjuicios padecidos no es estimada por el Tribunal.Tres puntos principales de la sentencia tienen interés interpretativo.En primer lugar el Tribunal entiende que el cumplimiento por el vendedor de su obligación de entrega se haproducido dentro de un plazo razonable a partir de la celebración del contrato (artículo 33 c) CIM) al haber elcomprador admitido dicha entrega sin ningún tipo de protesta en el momento en que se llevó a cabo y dado que nose pactó en el contrato expresamente fecha determinada de entrega. No entiende el Tribunal que pueda alterar larazonabilidad que implica la admisión de la entrega sin protesta la temporalidad de los géneros objeto del contrato,más o menos vinculados a un uso comercial con motivo de la Navidad.En segundo término el Tribunal se pronuncia sobre el plazo razonable en el que el comprador debe decomunicar la no conformidad del objeto del contrato al vendedor tras su recepción y descubrimiento conforme alartículo 39 1) CIM. Entiende la resolución que no es razonable que el comprador reciba protestas y cargos decalidad defectuosa por parte de terceros a quienes revendió transformadas las cosas objeto de la compraventainternacional y sin embargo guarde completo silencio ante el suministrador de dichos géneros defectuososrevendidos. La comunicación de la no conformidad no puede ser no efectuada hasta el momento en que por elvendedor se reclama el pago al comprador sino que es razonable que éste se la comunique tan pronto como por laprotesta de terceros tuvo conocimiento de la no conformidad. El Tribunal en esta materia indica, por otra parte, expresamente que en el ámbito de la CIM no existe unaregulación especifica sobre vicios ocultos, ocupando su lugar la disciplina sobre la no conformidad de la cosa objetodel contrato. Finalmente el Tribunal establece una serie de criterios hábiles pero la fijación de la indemnización de daños yperjuicios contemplada en el artículo 74 CIM.
--------------------------------------------------------------------------------
Page 3
A/CN.9/SER.C/ABSTRACTS/17Españolpágina 3II. INFORMACIÓN ADICIONALCorrecciónDocumento A/CN.9/SER.C/ABSTRACTS/14 (Únicamente el texto en francés)En el encabezamiento del caso 197, en el apartado correspondiente a la fecha, donde dice\"20 décembre 1997\"debe decir \"20 décembre 1994\".Documento A/CN.9/SER.C/ABSTRACTS/16 (Únicamente en los textos en inglés y ruso)En el encabezamiento del caso 207, en el apartado correspondiente al número del caso, donde dice\"207\" debedecir\"208\"; y En el encabezamiento del caso 208, en el apartado correspondiente al número del caso, donde dice \"208\" debedecir \"209\". * * *
Selected response from:

johnclaude
Local time: 19:46
Grading comment
Graded automatically based on peer agreement.
4 KudoZ points were awarded for this answer



Summary of answers provided
4 +2las Partes Indemnizadas por el Comprador
johnclaude
3 +1partes indemnizadas por el comprador
xxxEDLING


  

Answers


4 mins   confidence: Answerer confidence 3/5Answerer confidence 3/5 peer agreement (net): +1
partes indemnizadas por el comprador


Explanation:
+

xxxEDLING
PRO pts in pair: 1510

Peer comments on this answer (and responses from the answerer)
agree  Ramón Solá
25 mins
  -> Gracias
Login to enter a peer comment (or grade)

8 mins   confidence: Answerer confidence 4/5Answerer confidence 4/5 peer agreement (net): +2
las Partes Indemnizadas por el Comprador


Explanation:
No expert, but here is something that might help.


THE DUE DILIGENCE EXERCISE

From the purchaser’s point of view, one of the greatest fear in undertaking a merger and acquisition exercise is that of finding hidden debts and liabilities of the target company after the sale is completed. Even if a potential liability may be disclosed by the vendor, there is every possibility that the extent of the liability may be so downplayed as to seem insignificant to the purchaser or to the purchase price being agreed upon. The extent of the problem may be so great that the benefit or gain which is hoped to be reaped from the merger and acquisition exercise is totally wiped out.

One of the most important components in any merger and acquisition exercise is therefore the investigation or due diligence to be carried out on the target company, so as to uncover any hidden debts and liabilities of the company. The due diligence should be carried from an accounting, legal and business point of view.

2.1 The Objectives of a Due Diligence Exercise

Basically, the objectives of the due diligence is to determine the following:-

(1) that the target company has or will have good title to all the assets required to run the business, free from any encumbrances (for example, intellectual property, licences, specific machinery and equipment, etc).

(2) to ascertain and uncover whether the target has any liabilities which are even unknown to the vendor or withhold or downplayed by the vendor;

(3) to ascertain the warranties and representations required to be obtained from the vendor;

(4) to uncover any specific nature or circumstance of the business or the target company which may affect the purchase (e.g. dependency on certain key employees, supply of raw material being limited or restricted in any way etc, lease of land due to expiry soon etc)

(5) to assist the Purchaser in evaluating the worth of the target company.

2.2 Timing Of Due Diligence

From the purchaser’s point of view, it is best that the investigation or due diligence be carried out before the acquisition contract is signed and commitment to purchase is given, but this is unlikely to be acceptable to the vendor. From the vendor’s point of view, it is unwise for it to open up its books to a potential buyer who has not given any commitment to purchase the company, due to the need to maintain confidentiality of its know-how, customers’ list, costing and other confidential information, and to the need of ensuring that the employees, suppliers, bankers and customers are not informed of the unconfirmed sale. It is common in such circumstances for the vendor to disclose only the minimum information (such as the company secretarial records and audited accounts of the company) as the basis of the sale and purchase, subject to the confidentiality undertaking of the Purchaser, and the agreement is then conditional upon the Purchaser’s completion of the due diligence exercise. After the sale and purchase agreement has been signed, the purchaser is likely to require further more in-depth due diligence to be carried out before the completion date.



2.3 How To Deal With Potential Liabilities

There are various ways to deal with any liability or potential liability uncovered during the due diligence exercise depending on the extent and significance of the potential liability:-

(a) the purchaser should be given the opportunity to rescind the agreement; or

(b) the purchaser may wish to proceed with the acquisition but renegotiate on the purchase price to take into account the extent of the liability;

(c) the vendor may be required to pay damages to the purchaser;

(d) In situations where a potential liability exists, it may be necessary for certain retention arrangement to be made so that part of the Purchase Price or an additional sum be placed in an escrow account for an agreed duration of time for the purpose of meeting such potential liability when they do materialise;

As part of the terms and conditions of the acquisition contract, the vendor may be required to give certain warranties and indemnities to the purchaser in respect of such liabilities.
2.4 Confidentiality Undertaking

Due to the confidential nature of the information being disclosed, the vendor would be advised to insist on certain confidentiality undertaking being given by the purchaser and all its advisers, consultants, agents and employees undertaking with the vendor and with the company as follows:

(a) not to use the information disclosed for any purpose save and except for the intended exercise, and

(b) in the event the sale is aborted, all the information and documents shall be returned to the vendor or the company intact;

(c) no disclosure of any of the information be made to any third party save and except on a need to know basis and subject to the purchaser giving similar undertakings to the vendor and the company.

2.5 Potential Liability Arising From The Millennium Bug

As we approach the year 2000, one very imminent potential liabilities facing nearly every target company is the risk associated with the "Year 2000 problem", also known as the "Millennium Bug". The Year 2000 Problem basically refers to the inability of some computer systems to recognise the Year 2000 simply because the systems’ applications are programmed to only recognise the last two digits in a given year. Companies in the manufacturing industry, financial services sector and technology reliant industry are amongst the most at risk. Even if there is insignificant risk of the company being sued, the costs associated with rectifying the problem is likely to be enormous. In the event that the Millennium Bug is identified in the course of the due diligence as a potential liability, the Parties may wish to enter into certain arrangement to resolve the issue - for instance:-

(a) the vendor to indemnify the purchaser and to keep the purchaser indemnified in respect of any claims, proceedings or suits being brought against the target company as a result of the Millennium Bug;

(b) the parties to agree on the proportion of damages or liabilities which each party shall bear in the event any legal suits is brought against the target company;

(c) the parties to share the costs of remediation works between them in an agreed proportion;

(d) the purchase price to be reduced on the basis of the potential liability resulting from the Millennium Bug.


--------------------------------------------------
Note added at 2003-01-28 10:07:21 (GMT)
--------------------------------------------------

Here\'s an example of its use in court.


Se discute acerca de una posible falta de conformidad de unos colorantes para la industria textil entregadospor el vendedor extranjero al comprador español con un cierto retraso. La pretensión judicialmente esgrimida porparte del comprador en orden a ser indemnizado por los daños y perjuicios padecidos no es estimada por el Tribunal.Tres puntos principales de la sentencia tienen interés interpretativo.En primer lugar el Tribunal entiende que el cumplimiento por el vendedor de su obligación de entrega se haproducido dentro de un plazo razonable a partir de la celebración del contrato (artículo 33 c) CIM) al haber elcomprador admitido dicha entrega sin ningún tipo de protesta en el momento en que se llevó a cabo y dado que nose pactó en el contrato expresamente fecha determinada de entrega. No entiende el Tribunal que pueda alterar larazonabilidad que implica la admisión de la entrega sin protesta la temporalidad de los géneros objeto del contrato,más o menos vinculados a un uso comercial con motivo de la Navidad.En segundo término el Tribunal se pronuncia sobre el plazo razonable en el que el comprador debe decomunicar la no conformidad del objeto del contrato al vendedor tras su recepción y descubrimiento conforme alartículo 39 1) CIM. Entiende la resolución que no es razonable que el comprador reciba protestas y cargos decalidad defectuosa por parte de terceros a quienes revendió transformadas las cosas objeto de la compraventainternacional y sin embargo guarde completo silencio ante el suministrador de dichos géneros defectuososrevendidos. La comunicación de la no conformidad no puede ser no efectuada hasta el momento en que por elvendedor se reclama el pago al comprador sino que es razonable que éste se la comunique tan pronto como por laprotesta de terceros tuvo conocimiento de la no conformidad. El Tribunal en esta materia indica, por otra parte, expresamente que en el ámbito de la CIM no existe unaregulación especifica sobre vicios ocultos, ocupando su lugar la disciplina sobre la no conformidad de la cosa objetodel contrato. Finalmente el Tribunal establece una serie de criterios hábiles pero la fijación de la indemnización de daños yperjuicios contemplada en el artículo 74 CIM.
--------------------------------------------------------------------------------
Page 3
A/CN.9/SER.C/ABSTRACTS/17Españolpágina 3II. INFORMACIÓN ADICIONALCorrecciónDocumento A/CN.9/SER.C/ABSTRACTS/14 (Únicamente el texto en francés)En el encabezamiento del caso 197, en el apartado correspondiente a la fecha, donde dice\"20 décembre 1997\"debe decir \"20 décembre 1994\".Documento A/CN.9/SER.C/ABSTRACTS/16 (Únicamente en los textos en inglés y ruso)En el encabezamiento del caso 207, en el apartado correspondiente al número del caso, donde dice\"207\" debedecir\"208\"; y En el encabezamiento del caso 208, en el apartado correspondiente al número del caso, donde dice \"208\" debedecir \"209\". * * *


    Reference: http://www.insurance.com.my/zone_industry/mergers/due.htm
johnclaude
Local time: 19:46
Native speaker of: Native in EnglishEnglish, Native in SpanishSpanish
PRO pts in pair: 766
Grading comment
Graded automatically based on peer agreement.

Peer comments on this answer (and responses from the answerer)
agree  xxxEDLING: Complete research
3 mins

agree  verbis
915 days
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