Sergei Bakeshin told Delovoy Peterburg about the peculiarities of the institution of representations of circumstances

Delovoy Peterburg newspaper has noted the growing popularity of  the institute of representations of circumstances – legally binding statements by the parties to a transaction regarding the relevance of certain facts for a specified period of time. For example, representations of circumstances include guarantees of title purity, financial condition, absence of bankruptcy risks, third-party claims, including disputes with state authorities, sanctions and tax clauses.

‘Before these norms appeared, there was (and still is) a possibility to invalidate a transaction made under the influence of material misrepresentation or deceit,’ Sergei Bakeshin, Counsel, Head of Dispute Resolution & Insolvency Practice at Maxima Legal, explained to Delovoy Peterburg newspaper. – The rules on representations of circumstances have expanded the range of possibilities for the affected party: without recognising the transaction as invalid, it is possible to recover damages or penalties from the violator, as well as to withdraw from the contract’.

According to Sergei, the most complex assurances of circumstances are used in corporate transactions: in contracts and option agreements on the acquisition of stakes and shares in authorised capitals, in corporate agreements, complex investment transactions, and so on.

However, representations of circumstances are only truly effective if they are made in good faith and a certain level of trust has been established between the parties. ‘Representations of circumstances eliminate the need to verify the existence of a particular circumstance, such as conducting extensive testing of the equipment being purchased or conducting an in-depth due diligence of the company being acquired. On the other hand, without verifying the relevant circumstances, it is possible to encounter unreliability of assurances,’ Sergei Bakeshin said.

To read the full article (in Russian), please see Delovoy Peterburg newspaper`s website >>>