Definition for : Representations and warranties
Representations and warranties, one of the important clauses in the final contract when a (part of a) company is sold, are particularly important because they give confidence to the buyer that the Profitability of the company has not been misrepresented. It is a way to secure the Value of Assets and Liabilities of the target company as the contract cannot provide a detailed valuation. Representations and warranties are not intended to protect the buyer against an overvaluation of the company. They are intended to certify that all of the means of Production are indeed under the company's control and that there are no hidden Liabilities.
(See Chapter 43 Corporate governance of the Vernimmen)
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