As a business owner, you are always advised to conduct due diligence when performing any business transactions. However, despite the measures people take to prevent these losses; there are times when mistakes happen. Consider a situation where you are acquiring another business, and the other partner assures you their financial statements are true. However, when you complete the transaction, you realize that the documents presented were not accurate. In this case, the most viable recourse you have is looking into the indemnification provisions which will guide you to resolve the dispute.
Indemnifying someone is freeing them from any responsibility for damages that arise from a transaction. In most cases, when a transaction occurs and one party is liable for the losses, the liability will be shifted to them, and the other party will be indemnified. So in this case, the business partner should take responsibility for the loss, and you should be indemnified. When taking legal action for transaction gone wrong, a commercial liability chicago il lawyer will rely on the indemnity clause of your contractual agreements on mergers and acquisitions. Here are a few guidelines that are very useful in determining whether you want to make an indemnity claim.
Time Limits For Asserting Indemnification Rights
Acquisition agreements normally have a timeline within which you can assert your indemnification claim. In most cases, you will have a 12 to 24-month window after the closing, when you can file the claim. There are certain circumstances in which a longer period may be allowed such as cases that involve tax issues, intellectual property rights and environmental law enforcement. Your responsibility is to look at your potential claims and see the applicable warranties to avoid missing the asserting deadline.
Make Sure You Provide Timely Notices
The party that is asserting the indemnification claim should make sure that they do it within a specified time limit. As long as you have asserted the claim has within the allowed time limit, your ability to follow through with the process will be preserved until you have completely resolved the claim. However, in cases where the indemnifying party has acted in fraudulent ways, the applicable period to bring a claim could be extended.
Ensure All Parties Know About The Claim
One of the most important requirements to successfully make an indemnity claim is to notify all of the concerned parties. These include the legal counsel to the indemnifying party, their stockholder or escrow agent, and any other important party. You may also be advised to put the escrow agent on notice to avoid the release of money that could be used to resolve the indemnity claim.
The last but most important tip is to make sure you understand the existing limitations on recovery. They may vary a little from one state to the other, but generally, they will guide you to know how much you can recover for your losses. You will need the help of a competent lawyer to explore all the possible theories of recovery and use the one which will maximize the potential amount to claim.