Q&As

Where A (sole trader) is selling a business to B, but A is currently threatened with a claim seeking sale of the business to C in respect of which A has a counterclaim against C, once A has sold the business to B, will A retain any standing to defend and/or counterclaim in the litigation with C? Is there anything in the sale of the business from A to B which can be included to preserve A’s rights to claim or counterclaim against C for any damage sustained by A as a sole trader prior to sale of the business to B?

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Published on LexisPSL on 05/06/2018

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • Where A (sole trader) is selling a business to B, but A is currently threatened with a claim seeking sale of the business to C in respect of which A has a counterclaim against C, once A has sold the business to B, will A retain any standing to defend and/or counterclaim in the litigation with C? Is there anything in the sale of the business from A to B which can be included to preserve A’s rights to claim or counterclaim against C for any damage sustained by A as a sole trader prior to sale of the business to B?

Where A (sole trader) is selling a business to B, but A is currently threatened with a claim seeking sale of the business to C in respect of which A has a counterclaim against C, once A has sold the business to B, will A retain any standing to defend and/or counterclaim in the litigation with C? Is there anything in the sale of the business from A to B which can be included to preserve A’s rights to claim or counterclaim against C for any damage sustained by A as a sole trader prior to sale of the business to B?

In an asset purchase agreement, a seller (who may also be a sole trader) will typically provide warranties to the buyer in respect of litigation (eg that the seller is not at the date of the agreement, engaged in any litigation, arbitration, mediation, dispute resolution or criminal proceedings related to or in connection with the business, and, so far as the seller is aware, there are no such proceedings pending, threatened or expected). An asset purchase agreement will also contain limitations on the seller’s warranties, which will limit the seller’s liability. In the context of the scenario you have mentioned, the most relevant limitation to a seller who seeks to

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