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Looking Over Your Shoulder: Just How Long Does the Threat of Indemnification Lurk?

When you sell your business, the purchase agreement between you and your buyer will contain a number of promises that you make to your buyer. These promises come in the form of representations, warranties, covenants, and other agreements relating to the business. Many of these provisions are tied to the disclosure schedules that you (or your attorney or both) prepare and attach to the purchase agreement. Still, there are other risks of breach of the purchase agreement that may be outside of your control. In addition, a buyer may also require supplemental indemnification provisions if it has concerns about specific liabilities, including specific environmental conditions; retained employee liabilities; product liability claims; current or pending litigation; and pre-closing taxes.