JERSEY Law and Practice Contributed by: Paul Burton and David Allen, Maples Group
6.9 Warranty and Indemnity Protection Warranty coverage in private equity transactions in Jersey is generally limited to the title of target shares or assets, the capacity and authorisation to enter into the transaction, solvency, and the accuracy and com - pleteness of the information provided to the buyer. Warranties are usually limited in duration to a 12- to 24-month claim period. While most primary private equity investment transactions in Jersey involve a management team standing behind the deal terms and providing certain limited warranties, other deal- protection measures, such as earn-outs and lock-ins, provide more comfort to private equity-backed buy - ers. Full disclosure of the data room is typically allowed against the warranties. See 6.8 Allocation of Risk regarding customary limitations on liability for war - ranties in Jersey. 6.10 Other Protections in Acquisition Documentation Indemnities from a private equity seller and/or man - agement team are not common in an MBO context. Earn-outs, lock-ins and price adjustment provisions are often negotiated as part of the management- specific terms of an acquisition agreement. A tax covenant and deed of indemnity is also a relatively common feature, further allowing the allocation of risk between buyer and seller. Dollar-for-dollar recovery for unexpected tax liabilities arising from pre-completion profits or events occurring prior to completion pro - vides buyer protection. Buyer (W&I)-insured deals are becoming increasingly common, following the trend in the UK and elsewhere. W&I coverage increases the relatively low level of pro - tection that management teams are able to provide, and which private equity sellers are not prepared to consider. The additional diligence and input from a seller on an insured deal is often accepted as being necessary from a buyer’s perspective. The cost of insuring known risks is generally prohibitive, so is less common. W&I cover typically seeks to reduce buy-side risk in relation to certain fundamental and business warranties, but not tax matters.
Escrows and retentions are rarely used in Jersey pri - vate equity transactions to back the obligations of private equity sellers. An exception may be a finan - cial services business that is subject to regulatory examination given that, in 2019, the financial services regulator in Jersey levied its first civil penalty against a registered financial services business. This trend con - tinued into 2022. Extension of the financial services regulator’s enforcement powers (including the power to levy financial penalties) is the subject of a current industry consultation. Another form of exception to an escrow retention arrangement may be where there is a known risk or prospect of settling pending or threat - ened litigation against the target. 6.11 Commonly Litigated Provisions Litigation is not common in connection with private equity transactions in Jersey or involving Jersey enti - ties. Dissenter appraisal rights claims have not been a feature of the transactions seen here. The limited contractual liability of private equity sellers means that the appetite for transaction counterparties to look to litigate disputes is limited. Alternative dispute resolu - tion pathways often mean that disputes in relation to earn-outs, consideration calculation and related mat - ters are resolved at an early stage. Expert determi - nation on completion account disputes is generally provided in acquisition agreements to be binding and conclusive. Public-to-private transactions (also known as take- privates) are not common in Jersey from a domestic utility or infrastructure asset point of view. However, as many Jersey companies are listed on stock exchang - es throughout the world, including the main board of the LSE and, increasingly, North American stock markets including the NYSE, Nasdaq and the Toronto Stock Exchange, a number of those listed companies have become targets in take-private transactions. The trend seen in 2023 and 2024 of take-privates gaining traction where there has been private equity interest in UK-listed businesses has continued into 2025. One reason for this is the level of comfort safety that pri - vate capital is able to provide for senior management 7. Takeovers 7.1 Public-to-Private
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