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Selling a Business? It’s Rarely a Matter of Just Pocketing the Money

Selling a business is rarely a matter of simply taking the money and walking away and one High Court case revealed that particularly tricky issues can arise when contractual obligations pass from seller to buyer as part of the deal.

A design and construction company had been sub-contracted to carry out works at a naval base. It later sold its business to a group of buyers which, as a condition of the sale contracts, agreed to take over performance of the sub-contract and complete it in a proper and workmanlike manner.

The company became aware that the base’s owner, the Ministry of Defence, had launched two sets of arbitration proceedings in respect of the project in which the buyers were embroiled. The company feared that the buyers might be unable to meet any liabilities arising out of the arbitrations and that it could be liable for any shortfall.

Not being a party to the arbitrations, the company was concerned that it was being kept out of the loop and not being kept up to date on developments. In those circumstances, it launched proceedings against the buyers, seeking disclosure of certain information and documentation arising out of the arbitrations.

In upholding the company’s claim, the Court found that it had a clear commercial interest in the arbitrations and an entitlement to the information and documents sought. The buyers resisted the application on various grounds, including confidentiality, but the Court found no good reason to obstruct disclosure.