Newsletter-21

64 NEWSLETTER 2016 Indemnity Clauses under Share Purchase Agreements* Att. Ecem Cetinyilmaz Introduction Under share purchase agreements (“SPAs”), numerous contrac- tual representations and warranties are made by the sellers to the pur- chasers about the nature of the company being purchased. Indemnity clauses under SPAs protect the purchaser against the breach of repre- sentations and warranties given by the seller, as a means of allocating risks and liabilities. This Newsletter examines, among other things, the obligation of the seller to indemnify the purchaser, the means of limitation of liability of the seller, cases where such limitations shall not apply, third party claims, purchaser’s obligation to mitigate dam- ages, and the prohibition of double recovery. Liability to Indemnify Under an SPA, it is possible either to determine specific breaches that would give rise to indemnification claims, or to draft a general breach and indemnification clause. Indemnity clauses regulate the seller’s liability to indemnify and hold the purchaser harmless against all losses or liabilities arising in connection with the breach of the rep- resentations and warranties, which may or may not include the indirect losses and loss of profit, depending on the parties’ agreement. The indemnifying party may be determined as the seller, or in case of more than one seller, all or only one of the sellers. It may be regulated that all of the sellers shall be jointly and severally liable, or they may be held liable in proportion to their shareholding percentage in the subject company. The indemnified party may be the purchaser and/or the subject company. * Article of May 2016