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Mergers and Acquisitions in Canada

In addition to the due diligence process, the representations and warranties regarding the pension plan of the seller are important in protecting the purchaser, if a pension plan or any of its assets and liabilities are to be assumed. For example, a purchaser will typically seek, at minimum, representations and warranties that: the target company’s pension plan has been registered, administered and invested in compliance with all applicable laws; all contributions are up to date; there are no funding deficiencies (for a DB plan, either on a going concern or a solvency basis); and the target company does not participate in a multi-employer pension plan.

From a purchaser’s point of view, the type of representations and warranties that a seller might give will also depend on whether it has a DC or DB plan. The representations and warranties should survive closing as pension issues, if any, will likely not be identified for months (if not years) after closing. Subject to any limitation periods (legislated or otherwise), in the event of unwelcome surprises, the purchaser should attempt to retain recourse against the seller for any inaccurate representations and warranties given by it, for as long as possible after the closing.

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