Chancery Court Issues Important Decision Relating to Buyer Indemnification Rights and Seller Participation Rights in Connection with Post-Closing Governmental Investigations

Fried Frank – The Delaware Court of Chancery recently held that a buyer of several healthcare-related companies had vitiated its indemnity rights against the sellers by failing to comply with common provisions of the sale agreement giving the sellers a right to participate in the acquired companies’ defense strategy with respect to post-closing governmental investigations relating to the acquired companies’ pre-closing conduct. The decision indicates that certain actions that a buyer may take after post-closing discovery of regulatory or criminal violations at the acquired company—even when such actions were legally required or commonly considered good practice—may limit the buyer’s indemnification rights with respect to those violations.

Read the full post at Fried, Frank, Harris, Shriver & Jacobson