M&A: Korean Supreme Court Allows Indemnification Claim by Acquiror Despite Prior Knowledge of Inaccuracy in Seller Representations
Ruling for the first time on the issue of acquirer “sandbagging” in reliance on M&A representations and warranties, Korea’s highest court has upheld a share purchaser’s right to claim damages based on a seller misrepresentation, despite the purchaser’s prior knowledge of the inaccuracy or breach. In the October 2015 decision, the Supreme Court, citing principles of deference to express contractual terms, reasoned that, “absent special circumstances,” the acquirer’s prior knowledge of the breach should not prevent it from enforcing a risk allocation provided for in the representations and indemnity clauses of the agreement. Reversing a lower court decision that had rejected the acquirer’s stance as that of a “bad faith purchaser,” the Supreme Court decision clarifies the utility of “anti-sandbagging” provisions that specifically exclude indemnity in these situations.
IADC member Tony Dongwook Kang, a partner at Bae, Kim & Lee, LLC, was lead counsel for the plaintiff for this lawsuit and helped them win the case.