Wherever there’s risk, there’s usually someone prepared to insure it for the best price.
Early last year, we introduced you to definitely a novel product popping up in M&A circles called “representation and warranty insurance” or RWI. Lawyers say the method is becoming a common feature of private deals, specially those where a private equity finance fund is the purchaser.
Bryan Haynes, a lawyer within the Calgary office of Bennett Jones LLP which specializes in private and cross-border transactions, says 2015 would be a “banner year” for the use of RWI.
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“3 years ago, people didn’t know what it had been plus they looked at it with a little bit of suspicion and caution. But I think there’s a general acceptance now,” Haynes says. “There’s been a brief history now of policies being underwritten, of claims being made, and claims being paid. With that, there’s an over-all comfort level.”
RWI takes over if a seller is inspired to refund a few of the purchase price because of a post-closing event that arguably runs contrary to the representations and warranties which were made throughout the deal talks.
It’s possible to negotiate a deal where the seller would directly indemnify a purchaser if need be. But this can be a hot topic in M&A negotiations. RWI was invented about 20 years ago to bridge indemnity valuation gaps that would otherwise sink deals.
Kurt Sarno, co-head of the private equity group at Blake, Cassels & Graydon LLP, says the weakening economy will likely broaden the cavern between vendors and buyers in negotiating such indemnification agreements. Which makes RWI even more relevant today, he states.
“It may get deals across the finish line where, in times like this, the seller wouldn’t want to take the risks that a buyer wants it to hold in respect of indemnification obligations.”
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In this point in time, it’s difficult to conceive of any company either using or condoning using slavery and child labour. The problem persists, at least on the global basis. According to the International Labour Organization, almost 21 million men, ladies and children operate in some form of modern slavery.
Opposing this appears like a motherhood issue, but there’s a tough legal edge for this. Businesses who turn a blind eye to the point run the risk of having slave labour appear in their supply chains.
The Canadian Bar Association meets in Ottawa a few days ago to think about several policy proposals. One matter on the agenda is a package of “model business principles” a company could adopt to ensure it avoids the use of forced labour, trafficked labour or illegal or harmful child labour either in its own operations or its logistics.
Putting together the model code wasn’t as easy as you might think. For instance, calling for an entire ban on child labour overlooks that there are many situations by which children might operate in a family owned business, like a farm, convenience store or restaurant.
Stephen Pike, a Toronto-based partner with Gowling Lafleur Henderson LLP, approached a wing of the CBA that is representative of in-house and corporate lawyers, the Canadian Corporate Counsel Association, with the idea of putting the guideline together. The Canadian model business principles are based on guidelines issued by the Un and resemble principles recently adopted by the Aba.
The proposed Canadian principles could be voluntary, and they’re designed so that companies can adopt these to suit their businesses. “They’re much more of a recommendation than the usual prescription,” Pike says.
It’s important to note that some jurisdictions have legislated strict roles. California, for instance, requires larges businesses operating there to disclose their efforts to eradicate human trafficking and slavery using their supply chains. The U.K. will mandate the publication of the annual statement on slavery and human trafficking, starting with corporate years that end after March 31 of this year.
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Save the date: We can now tell you the 2016 Canadian General Counsel Awards gala will require place June 1 at the Fairmont Royal York in Toronto.
Nominations for the 12th annual CGCAs can be submitted via email (nominations@cgca.ca) until March 24. The honours, founded by the National Post and ZSA Legal Recruitment, would be the only national awards designed exclusively to recognize excellence in Canada’s in-house counsel community.
The award website (cgca.ca) includes a sample nomination form plus more information around the eight award categories. Dan Malamet of ZSA (dmalamet@zsa.ca) may also respond to questions.
dhasselback@nationalpost.com
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