Asset and liability warranty (GAP)
A clause by which the seller of a company warrants to the buyer that declared assets and liabilities accurately reflect reality at the transfer date. If undisclosed liabilities emerge post-transfer, the seller compensates the buyer according to agreed terms.
In practice
The asset and liability warranty is standard practice in any SME or group sale. It typically covers undisclosed tax, social, and legal liabilities. Duration is generally 3 to 5 years for tax risks — aligned with the French tax authority’s prescription period — and 10 years for latent defects. The guarantee amount is often capped at the sale price, with a trigger threshold to avoid petty disputes.