진술 및 보장의 법적 쟁점 - 진술보장보험을 중심으로 -

Abstract

The representations and warranties clause is often present in contracts that are formed under the laws of the United States, and in the Republic of Korea, the function of the representation and warranties clause became more notable as mergers and acquisitions among companies increased after the financial crisis in the late 1990s. In addition, the importance of the representations and warranties clause was reexamined following the 2018 ruling that focused on the representations and warranties clause in a disupute between Hyundai Oilbank Co. and Hanwha Energy Corporation. In this paper, I discuss the functions of the representations and warranties, the legal nature of liabilities that arise from damages caused by violation of representations and warranties, whether a buyer with malice or negligence has the right to claim damages under this clause, the calculation and limitation of the amount of damages, and representations and warranties insurance that is gaining interest these days. Representations and warranties in M&A contracts cover various fields such as environment, employment, and taxation, and the duration varies from one year to seven years or more, depending on the field. Determining how risks should be shared between a seller and a buyer is the key in M&A contract negotiations. In particular, when a selling entity is owned by a private equity, it is common to liquidate the selling entity after the close of an M&A transaction, so even if the M&A contract includes representations and warranties provisions, the buyer should consider how the damages will be compensated in the event of a breach of the representations and warranties. All parties want to avoid having to go through a prolonged litigation after the transaction is closed. When a transaction involves representations and warranties insurance, the insurance company bears the risk of uncertainty arising from the breach of the representations and warranties. The seller or buyer pays the insurance premium, and if problems occur afterwards, the insurance company pays out and compensates for the resulting damages instead. Since representations and warranties insurance is already widely used in the North American and European markets and provides various advantages to sellers and buyers, it is predicted that Korean M&A transactions will also incorporate provisions in the near future.