A carve out purchase agreement (COPA) is a document used during the acquisition of a company or business assets. It is designed to protect both the buyer and seller from any unforeseen liabilities that may arise after the completion of the transaction.
The COPA contains specific provisions that carve out or exclude certain liabilities from the transaction. These liabilities may include environmental, tax, legal, and regulatory issues. The goal is to ensure that the buyer does not inherit any of the seller`s hidden liabilities.
One of the most important aspects of the COPA is the indemnification clause. This clause outlines the responsibilities of each party if any of the excluded liabilities do emerge after the transaction is complete. The seller may agree to indemnify the buyer for any losses related to these liabilities, or the parties may split the costs in some way.
Additionally, the COPA may include representations and warranties from the seller. These statements are intended to assure the buyer that the seller has disclosed all relevant information about the business or assets being sold. If any of these statements turn out to be false or misleading, the buyer may have legal recourse against the seller.
Overall, the COPA is a crucial part of any acquisition process. It provides a clear framework for addressing potential liabilities, and helps ensure that both parties are protected from unexpected losses. As such, it is important for both buyers and sellers to carefully review and negotiate the terms of the COPA before completing any transaction.