Representations and Warranties: Protection Against Misrepresentation in Transactions

Since November 2023, Belarus has had a powerful tool to protect buyers in M&A transactions and other complex contracts.

What is it?

Representations and Warranties are the Seller’s written assurance of the truthfulness of key information on which the Buyer relies when entering into a transaction.

• A simple example: the Seller of a company gives a written assurance that:
• The company has no undisclosed tax liabilities;
• All licences are valid and in good order;
• The financial statements are accurate.

How does this benefit your business?

Representations are not just a formality; they are a risk-management tool:

• Saving on due diligence: They reduce the scope and cost of legal/financial due diligence (DD), speeding up the deal.
• Risk allocation: They allow responsibility for “grey areas” and potential issues to be clearly shifted to the Seller.
• Financial protection: The person who has given the representations is liable for any inaccuracy.

What if the representations turn out to be false?

If, after closing, it emerges that the information was untrue:

• Compensation for loss: The Seller must fully compensate the Buyer for the loss (damages).
• Penalty: If provided for in the contract, the Seller also pays a penalty.

Withdrawal from the deal: The Buyer may seek termination of the contract if, knowing the truth, it would not have entered into the deal at all.

Practical example:

You are buying an IT business. The Seller has given a written assurance that there are no tax debts. You discover a USD 100,000 tax debt. The Seller must reimburse you that amount and, potentially, pay a penalty.

Do not put your assets at risk!

Want to use representations to buy safely — or protect yourself on a sale?

REVERA’s legal team will help you to:

• Properly draft representations covering all critical risks (IP, tax, HR);
• Develop a system of penalties and a loss-recovery procedure that actually works.

Protect your next deal: write to info@revera.legal or contact our lawyers!

Authors: Nikita Tolkanitsa, Matsvei Shastsiarniou.