Asset purchase transactions (EHS issues)—environmental indemnity
Asset purchase transactions (EHS issues)—environmental indemnity

The following Environment practice note provides comprehensive and up to date legal information covering:

  • Asset purchase transactions (EHS issues)—environmental indemnity
  • When is an indemnity needed?
  • Checklist for environmental indemnity
  • Negotiating environmental indemnities

This Practice Note is part of the Environmental transactions asset purchase toolkit. It has been produced in partnership with ELM Law.

When is an indemnity needed?

If contaminated land liability concerns or specific environment, health and safety (EHS) non-compliance issues are revealed during the due diligence phase, the buyer might seek an environmental indemnity in the asset purchase agreement (APA) or a stand-alone environmental deed.

See the following Precedents:

  1. Environmental indemnity for an asset purchase agreement

  2. Asbestos indemnity for when seller is in breach

Checklist for environmental indemnity

When the principle of an environmental indemnity is agreed, lawyers and their clients should discuss the scope of the indemnity before drafting commences.

Indemnities are bespoke to a particular transaction. The table below highlights the key issues that should be considered.

Indemnifying partiesThe buyer may want the seller’s parent company added as guarantor.
Liability capThis will often depend on advice from technical consultants.

Note that clean-up liabilities could potentially exceed the purchase price, particularly if there are groundwater pollution or offsite migration issues.
Time limitThe seller will want an end point to the contractual liability exposure.

Sellers will typically offer a short time limit, say 2–3 years or to the end of the lease if th

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