Does the seller's work end when the company is sold and payment arrives? Even after ceasing to be a shareholder, indemnities, personal loan guarantees, transition duties, and noncompete commitments may remain.

When reading the definitive agreement, summarize on one page both the price and what must be done after sale, including circumstances requiring payment. Sale terms can be compared only by considering price and liability together.

Separate signing, closing, and the period afterward

Signing executes the contract; closing completes the transaction by exchanging shares or business assets for payment. They may occur together or on different dates.

If separated, specify who does what in between. Obtain permits and counterparty consents, coordinate guarantee releases with banks, and verify closing conditions. The contract should also address postponement, termination, and who can waive which conditions if they are unmet.

An item deferred until after closing is not resolved merely because closing occurs. Specify who completes it, by when, and with what documentary evidence.

What do representations and warranties promise?

Representations and warranties state and assure that specified facts are true and accurate at designated times. They may cover lawful share ownership, financial information, and material contracts.

Do not assume they are an unlimited assurance that the company has no problems. Liability varies with scope, materiality, knowledge limitations, and disclosed exceptions. Whether future revenue or profits are guaranteed also depends on the wording.

For example, placing a customer dispute in the data room is not enough by itself. Check whether it qualifies as contractual disclosure and an exception to the warranties. Buyer due diligence alone does not necessarily eliminate all seller liability.

Disclosure is not an exercise in minimizing bad news. It identifies issues so parties can negotiate whether to price them in, resolve them before sale, or provide specific indemnities.

Read company debt separately from the seller's indemnity obligations

In an independent hypothetical, JPY6 million of unpaid pre-sale wages is discovered after a share sale.

First examine the company's debt to employees. Separately consider what the buyer or company can claim from the seller: whether there is a breach or specific indemnity, who suffered what loss, and whether the amount was already reflected in price. The JPY6 million figure alone does not establish an equal seller repayment.

Review at least the following indemnity terms together.

• Covered breaches and liabilities, and parties entitled to claim
• Notice deadlines, methods, and required content
• Per-claim de minimis amounts, aggregate thresholds, and liability caps
• Separate treatment of tax, share title, fraud, and similar matters
• Adjustments for insurance and other recoveries, and handling third-party disputes

Even if liability is described as capped, not every claim necessarily shares the same cap. Read the amount with its exceptions. English terms such as cap and basket are explained in Part 13: English Terms in M&A Negotiations with PE Funds.

Even after the warranty claim period ends, separate obligations such as transition and confidentiality may remain. General and specific indemnities can also have different deadlines and limits. Do not infer from one clause that all liability has ended; list and review surviving obligations.

Does the buyer's promise release a personal guarantee?

Where an owner guarantees company debt, distinguish the seller–buyer agreement from the guarantee relationship with the lender.

Writing that the buyer will take over the guarantee differs from the bank releasing the former owner. Even if a claim exists against the buyer for breach, that alone should not be assumed to extinguish liability to the bank.

The Small and Medium Enterprise Agency's SME M&A Guidelines page also addresses failed transitions of owner guarantees leaving former owners liable. The 2024 third edition expanded guidance on definitive-agreement risks and unsuitable buyers.

Sellers should list lenders and guaranteed obligations, then verify release, refinancing, or repayment methods, bank approval, effective timing, and completion evidence. If release cannot occur by closing, evaluate proceeding with the guarantee against payment terms and closing conditions. Selling shares does not make a remaining guarantee safe.

Review continued service and noncompete terms across agreements

If remaining as president or adviser, the title alone does not define the role. Check duties, authority, compensation, term, and departure or termination conditions. Ensure consistency between the share sale agreement and management or employment contracts.

For noncompetes, specify prohibited businesses, geography, duration, and whether directorships or investments are covered. “Do not compete” alone does not explain post-sale options. Enforceability depends on terms, applicable law, and parties' positions, so broad, lengthy restrictions deserve review before acceptance.

If reinvesting and remaining a shareholder, a separate shareholders' agreement may require share sales or set prices on departure. The ability to leave and to liquidate shares at a desired price are separate. For reinvestment decisions, see Part 11: How PE Funds Make Money from Acquiring Companies will handle.

The final question on sale terms is: What obligations and risks remain the day after payment? Assemble signed agreements, disclosures, proof of guarantee release, and transition records so you can answer specifically at closing.