Business sales—pensions warranties

Published by a LexisNexis Pensions expert
Practice notes

Business sales—pensions warranties

Published by a LexisNexis Pensions expert

Practice notes
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THIS PRACTICE NOTE APPLIES IN RELATION TO PRIVATE sector pension schemeS

A business sale agreement will typically include warranties given by a seller in favour of a buyer.

A warranty is a statement by the seller that a particular fact is true, eg a seller may warrant that a particular pension scheme is the only scheme the target company participates in.

Pensions warranties in the agreement will sit alongside warranties on other areas such as real estate and tax or, alternatively, be contained in a separate pensions schedule appended to the agreement.

This Practice Note explains the need for pensions warranties in business sales, their characteristics, the practical considerations when acting for a buyer or seller and some examples of pension warranties.

Acting for the buyer

Ideally, the buyer should undertake a detailed investigation of the pension arrangements of the business being acquired to understand the risks and liabilities involved with the acquisition. This information gathering phase will highlight the areas where protection against potential future liabilities should be sought from the seller through warranties and indemnities in

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United Kingdom
Key definition:
Warrant definition
What does Warrant mean?

A tradeable security which gives the holder the right, but not the obligation, to buy or sell a specified asset at a specified price on a specified date or dates. A warrant is a kind of derivative—it derives its value from the underlying asset and is a way of obtaining exposures to the value fo the underlying asset without owning it. Warrants are sometimes described as ‘securitised derivatives’—ie derivatives in the form of securities. A warrant is not a debt security and therefore does not have a principal amount, contains no covenant to repay and does not bear interest.

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