Ashurst and Practical Law Corporate Update: October 2025

1. Acquisitions: warranty and indemnity claims and validity of service of claims

Summary. The High Court has held that the sellers of a company were liable to the buyer for damages for warranty breaches under a share purchase agreement (SPA), despite a specific indemnity prohibiting the buyer from bringing a breach of warranty claim and defects in the notice of claim and service of proceedings.

Background. English law provides little statutory or common law protection for the buyer of shares in a private company. Consequently, an SPA usually includes express warranties given by the seller to the buyer relating to the target company.

An SPA will also usually include contractual limitations on the seller's liability including, for example, a provision preventing the buyer from claiming more than once in respect of the same loss (a so-called ''no double recovery'' clause) and cut-off dates by which the buyer must notify the seller of any warranty or indemnity claims or bring legal proceedings.

Facts. In October 2021, N bought the entire issued share capital of an education and training company, A, from L and P for £16,813,008 under the terms of an SPA. A was substantially funded by the Education and Skills Funding Agency (ESFA).

The SPA included a funding indemnity from L and P to N dealing with overfunding and several warranties covering the ESFA funding arrangements with A. The SPA specified time limits requiring N to give L and P written notice of any warranty and indemnity claims and the information to be set out in the notice, which included an estimate of any alleged loss. The SPA also provided that any claims notified to L and P before 1 December 2022 would be deemed to be withdrawn unless legal proceedings were commenced by being both issued and served by 14 February 2023.

In early 2022, A reimbursed £783,325 to ESFA (the clawback sum) after an ESFA audit revealed that A had overclaimed. N argued that this had a substantial adverse financial effect on A's business beyond the amount of the clawback sum and that the price that it had paid for A was significantly more than its true worth.

N provided written notice of its claim on 8 April 2022 and an updated notice on 14 June 2022, which referred to both a funding indemnity claim and a breach of warranties claim. The updated notice also specified an estimate of N's loss in respect of the warranty breaches. N subsequently issued legal proceedings against L and P, and the particulars of claim referred to the breach of several additional warranties.

In October 2022, L and P paid the amount of the clawback sum to N under the terms of the funding indemnity.

On 14 February 2023, a claim form was hand delivered on behalf of N to L and P at their home address, as well as to the offices of L's and P's solicitors.

L and P argued that N's ability to claim under the funding indemnity precluded any breach of warranty claim because of the no double recovery provision in the SPA. They also argued that certain additional warranty claims subsequently specified by N in the particulars of claim were invalidated because they were not specifically identified in the written notices, and that N had failed to issue and serve proceedings by the required deadline.

Decision. The court found in favour of N. It held that it was entitled to judgment in the sum of £783,325 under the funding indemnity or £5,211,625 as damages for breach of warranty.

L's liability extended to the full amount as it fell below the amount of consideration that he had received for his 95% shareholding in A, while P's liability was capped at £840,650, which was the consideration that she had received for her 5% shareholding in A.

The negotiated SPA terms were sufficiently clear to permit N to claim under the funding indemnity or the warranties and there was no basis for precluding a warranty claim. In particular, the SPA specified that the funding indemnity was without prejudice to any other rights or remedies available to N and that the warranties were not limited or restricted by any other term of the SPA. The no double recovery provision in the SPA did not prevent N from pursuing either type of claim: it simply prevented N from recovering more than once in relation to the same matter.

The court rejected L's and P's argument that certain warranty claims specified in the particulars of claim were invalidated because the relevant warranties were not specifically identified in the earlier written notices. The SPA required N to provide such detail as was reasonably available to it at the time of the nature of the claim and the circumstances giving rise to it, which N had done. The SPA did not require the written notices to specify all the warranties that were alleged to have been breached. The warranties subsequently identified in the particulars of claim neither changed the nature nor rested on different facts from those previously notified.

The court also rejected L's and P's argument that N's estimate of loss specified in the second written notice constituted a cap preventing it from subsequently specifying an increased amount in its particulars of claim. The SPA required N to provide an estimate of its alleged loss in the written notice. There was nothing in the SPA obliging N's loss to be held to the original lower sum. L and P knew that the original sum was an estimate as at the date made and the higher sum later sought in the particulars of claim did not reflect a different type of damages claim.

L and P had sought to rely on an interpretive provision in the SPA to argue that the requirement for N to issue and serve proceedings by 14 February 2023 should be read as excluding the final day, meaning that proceedings should have been issued and served by 13 February 2023. The court rejected this argument, noting that as there was nothing in the interpretative provision of the SPA about when a time period ended, and that the delivery of the particulars of claim on 14 February 2023 was valid.

The SPA did not define the meaning of service of proceedings. In these circumstances, the Civil Procedure Rules (CPR) govern claims. L and P had argued that the delivery of the particulars of claim on 14 February 2023 was defective as CPR 6.14 deemed service by hand to occur two business days after delivery, which would mean that service took place on 16 February 2023 in contravention of the SPA. The court rejected this argument, noting that N's delivery by hand on 14 February 2023 did not contravene CPR 6.14 as the date of deemed service under that provision was relevant only in that it established a timetable for the recipient of the notice to respond.

Comment. It is important for the parties to an SPA to agree on the commercial principles underpinning the relevant provisions in the agreement. The decision highlights the court's reluctance to amend or imply terms where the express terms of an SPA are sufficiently comprehensive and clear, as well as serving as an important reminder of the need for careful and precise drafting in the SPA, and the need to ensure consistency across the various provisions of it. The decision also provides useful guidance on the construction and interpretation of several common SPA provisions, including the interaction between warranties and indemnities, limitations on the seller's liability, claims notification and the service of proceedings. In particular, if a seller wishes to preclude warranty claims being brought against it by a buyer regarding the subject matter of an indemnity, it should attempt to explicitly negotiate and specify that in the SPA.

The wording of a claims notification clause can also be critical and the decision shows that there is considerable scope for negotiating this too. In addition, the decision shows the importance of time periods. It is critical for a buyer to strike the correct balance between giving itself as much time as possible to formulate its claim and serving the claim notification or legal proceedings on the seller within the time specified in the SPA, being mindful of any wording specifically excluding the first or last day of a time period.

Case: Learning Curve (NE) Group Ltd v Lewis [2025] EWHC 1889 (Comm).

2. Transfer of LLP property: lack of unanimous consent

Summary. The High Court has held that a declaration to transfer all of the properties of a limited liability partnership (LLP) was invalid as it represented a change in the nature of the business, which required unanimity under the LLP default rules.

Background. It is strongly advisable but not mandatory for an LLP to have an LLP agreement in place that sets out the relationship between the LLP and its members. Where there is no LLP agreement or where an LLP agreement is silent about a particular issue, the Limited Liability Partnerships Regulations 2001 (SI 2001/1090) (2001 Regulations) include default rules that apply to the LLP.

Any difference arising as to ordinary matters connected with the business of the LLP may be decided by a majority of the members, but no change may be made in the nature of the business of the LLP without the consent of all the members (regulation 7(6), 2001 Regulations) (regulation 7(6)). Section 24(8) of the Partnership Act 1890 contains similar language regarding general partnerships.

A change in the nature of a general partnership's business includes a decision to convert it into an LLP (Lindley & Banks on Partnership 21st Edition, 15-15).

Facts. R and P were members of an LLP, which owned three properties. R and P were also directors and shareholders of a company, H, which was a purported third member of the LLP. The LLP operated without an LLP agreement.

In 2015, the LLP purportedly made a declaration of trust (the declaration) under which beneficial ownership of the properties was transferred to another entity controlled by P. The declaration was not signed by R. The LLP was struck off and dissolved in 2015.

In 2022, the LLP was restored to the register by R. R brought a derivative claim on the LLP's behalf, arguing that the declaration was invalid because:

It required unanimous consent as it represented a change in the nature of the LLP's business under regulation 7(6).

There was not even majority consent, as the appointment of H was obtained by undue influence.

Decision. The court held that the declaration was invalid as it involved a change in the nature of the LLP's business which, under regulation 7(6), required unanimous consent. It ordered declarations that the properties be held on trust for the LLP, with R and P entitled to share equally in the capital and profits of the LLP as members under the default rule in regulation 7(1) of the 2001 Regulations.

The LLP's business was the holding of the three properties and that business ended with the declaration and the LLP's subsequent dissolution. Stripping out all, or virtually all, of a partnership's assets and bringing about its dissolution could not be regarded as an ordinary matter (Lindley & Banks).

The court rejected P's claim that there was a written or oral LLP agreement displacing the default rule, finding his evidence on this point to be unreliable.

Even if unanimity was not required, the declaration was still invalid as it was not a decision by a majority of members. H's purported appointment as a third LLP member was invalid, as R's signature on relevant documents had been obtained by undue influence.

The court rejected P's argument that the claim was barred under the Limitation Act 1980, finding that the limitation period was postponed until R discovered the attempted transfer in 2018 or 2019.

Comment. This decision is interesting as there is little case law on the LLP default rules. It highlights the importance of having a written LLP agreement. It also highlights the application of the default rules in the absence of a bespoke LLP agreement so that fundamental decisions, such as asset transfers ending the LLP's business, cannot be made by a majority of the members and will require unanimous approval.

Case: Ross v Phillips [2025] EWHC 2058 (Ch).

The above articles are a selection of those first published in Q3 2025 in the company law section of PLC Magazine, the leading monthly magazine for business lawyers advising companies in the UK.