Title to Shares and/or Title to Real Estate
Protection against financial losses arising in M&A transactions
Title insurance for shares and real estate can play a crucial role in mitigating risks and providing security in transactions.
When it comes to shares, title insurance insures the full value of the target and target group, allowing sellers the option to limit warranties or cap their liability. This coverage extends throughout the ownership period, accommodating reorganisations, new financing and changes in ownership.
In real estate, title insurance can be an important safeguard against potential issues that may arise during transactions. It covers the entire value of the real estate assets and offers the flexibility for sellers to provide limited warranties or cap their liability. Known issues discovered during due diligence can also be covered, reducing negotiation around risk allocation.
Key features and benefits
- Policy operates independently of the SPA – “synthetic” set of title and capacity covers
- Good option for jurisdictions where real estate assets are traded by way of share/unit sale agreements
- It covers the insured for as long as they own the securities/real estate
- Can be purchased as a ground up, stand-alone product, but can also “interact” with a W&I programme
- Typically, nil retention and nil de-minimis
- Typically, no underwriting fees
- Limited set of due diligence reports to be provided
- Streamlined underwriting process
- Can cover 100% of the EV, subject to capacity limits.
- Identified risks may be covered under our title policy
The details
- Ownership: the seller does not have valid legal and beneficial title to the Shares or Property and/or does not indirectly own all entities in the Target Group (as per suggested ownership structure).
- Encumbrances: at Completion, the Shares or Property are not free from encumbrance
- Authority: the Seller does not actually have capacity to sell the Shares or Property
- Incorporation: the Seller is not duly incorporated in the relevant jurisdiction
- Pre-emption: a third party has a right of pre-emption or call option over the Shares or the Property
- Fraud: forgery, fraud, undue influence, duress, incapacity or impersonation by the Seller
- Real Estate: property not having the correct planning for the use, impacted by restrictive covenants, does not have the correct easements for use of the property
- Issues caused by historical documents not being properly registered, signed, completed and/or executed
- Limit: Covers the full enterprise valueand title matters can be carved out the W&I
- Period of Insurance: Not linked to the warranty period under the SPA, rather the period of ownership
- Cover: Expands cover to title claims, not just a warranty breach
- Cover: Financiers are automatically covered
- Cover: Cover can be far broader, especially under title to real estate cover
- Cover: Can cover known issues identified during the DD process, not just unknown
- Premium: Affordable capacity, especially when sitting in excess of a W&I policy
- Third party liability – court orders and settlements Reduction in asset value
- Demolition, alteration and/or reinstatement costs
- Loss of rent
- Part or full loss of ownership
- Wasted development and finance costs
- Other rectification costs
- Insured’s rental liability
- Structure: Deal structure, who is driving the need for insurance and timing
- Due diligence: Copy of the corporate, financial and real estate due diligence
- Policy: Whether you need title to property, shares, or both
- Limit: Transaction value or GDV (if properties are being developed)
- Background: Details of the target, no. of properties, use of the properties, jurisdictions
- Other:Copy of the SPA
- Other: Is there any W&I insurance being placed?
Our team are here to help
Chris
Chris Hammond
Chris Hammond
Head of Asia Pacific
Email: [email protected]
Tel: +61 (0)3 8611 3541
Mob: +61 (0)481 130 382
