Back To The Basics | Specific Indemnity

• Published date: 10 June 2021
• Subject Matter: Finance and Banking, Charges, Mortgages, Indemnities, Financial Services
• Law Firm: HSA Advocates
• Author: Mr Bharat Sharma and Saurya Bhattacharya

Specific indemnity in a transaction context

Since specific indemnity is often intended to be clear/uncapped protection for the indemnity holder.

Ordinarily, indemnities in an M&A transaction are typically backed by the promoter(s). Specific indemnities are not limited with respect to any of the typical qualifiers on general indemnity:

• Disclosure schedule (often updated at the time of closing if the execution and closing are not on the same date)
• Representations being qualified in terms of knowledge material, and financial thresholds
• Definition of losses, non-inclusion of indirect damages,
• A de minimus, basket and aggregate limitation of liability
• Confining indemnity to undisputed and final losses subject to recovery/recovery through insurance, change in law, mitigation of losses, claim time limits

Recent trends and observations

Few trends for reflection while considering specific indemnity clauses in transaction documents:

• There is sometimes a difference in liability description (whether several, joint, or joint and several) depending on indemnifier
• In case of indemnifying party/parties being individual(s) or natural person(s), there is a consistent trend towards joint and several liability for obvious imperatives of maintaining liquidity for a potentially
• Escrow holdbacks are preferred in certain scenarios - where the funds are vide foreign investment...