Environmental due diligence—share purchase
Environmental due diligence—share purchase

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

  • Environmental due diligence—share purchase
  • The purpose of environmental due diligence
  • The scope of environmental due diligence
  • Environmental technical due diligence
  • Appointing environmental consultants
  • Sources of information
  • Key environmental issues to consider in share purchases
  • Preparing the due diligence report

The purpose of environmental due diligence

For general information on share purchase, see Practice Notes: Due diligence—share and asset purchases and Warranties and indemnities—share purchase.

The purpose of environmental due diligence is to:

  1. assess the risk of contaminated land liabilities at current and previous properties owned or occupied by the target

  2. identify any material non compliance issues or threatened proceedings or claims associated with the target

  3. highlight any significant capital expenditure requirements to comply with the target’s environmental permits or with current or anticipated environmental legislation

  4. provide recommendations to help mitigate these risks as far as possible through contractual protections, price negotiations, further investigations or environmental insurance

Contaminated land is often one of the largest liability concerns in a corporate transaction and is a particularly important consideration in a share acquisition.

In a share purchase, the buyer can inherit liabilities if the target has ‘caused’ or ‘knowingly permitted’ contamination at current and previously owned or occupied properties. The target can also have clean up liabilities as an innocent ‘owner’ or ‘occupier’ if any of the target’s properties are impacted by historic contamination.

The target may also have contractual liabilities from leases or if it has given indemnities in previous agreements.

See Practice Notes: Environmental liabilities—what are clean-up liabilities? and Contaminated land—who may be liable?

The scope of environmental due diligence

It