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Asset Purchase Agreement Environmental Liabilities

Companies receive legal advice on new circumstances and issues relating to environmental legislation. In addition, companies commission lawyers to review and assess the environmental risk of a target company or a proposed investment project. In addition, companies use lawyers as agents or consultants when the company is subject to environmental administrative sanctions and environmental disputes. One of the reasons (there are many others) why buyers prefer to buy the assets of the selling company rather than the shares or other participations of the owners in the capital is to avoid making commitments of the company to sell. Most buyers prefer to choose the company`s assets and leave the liabilities behind. There are also insurance products for selling commitments that arise after closing, although insurance may not be viable for small businesses, as the songwriter may be asked to form an intelligent opinion about the risk of the transaction and/or demand a disproportionate premium for the risk. There is no legal obligation for a seller to explicitly disclose environmental aspects when selling assets. When the seller is an unloading point under enhanced surveillance, he must disclose environmental issues (Environmental Protection Act) in a manner accessible through public registers. If the seller is not an organization that removes pollutants under enhanced monitoring, the buyer can only obtain the information voluntarily provided by the seller. The courts have always held that transactions entered into to avoid liability cannot be used by the parties to evade their legal responsibilities. This means that buyers and sellers of businesses cannot structure a business just to avoid debt. To prove fraud, a creditor must prove fraudulent intent.

A common feature of the causes of fraud is the lack of adequate consideration, i.e. the purchase price is abnormally low. Under what circumstances can a buyer inherit environmental liability prior to acquisition in the event of a sale/sale of a business (sale of shares)? This is the same as for a sale of assets (see above, sale of assets). However, when it comes to other debts, such as litigation, most buyers prefer not to take them back. Generally speaking, structuring an M&A transaction as an asset purchase gives the buyer the flexibility to avoid unwanted debt. The reason for this is that the buyer only chooses the assets and liabilities he wants to acquire. On the other hand, in case of purchase of shares, the buyer follows in the footsteps of the selling owners and takes over the company as it is. Depending on the nature of the assets or undertakings subject to the transaction, it may be necessary to include certain restrictions on insurance and environmental guarantees, in particular as regards essentials and knowledge. For example, a contract for the sale of a highly regulated chemical company would likely include language in the presentations, provided that the company is and has been in full compliance with all environmental laws or has complied with the rules, with the exception of violations for which the company cannot reasonably be expected to make substantial commitments.

Representations can also be qualified by knowledge. For example, the seller would declare that the assets are, to its knowledge, free from contamination….

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