Sudan Eyes Due Diligence Protocol for Financial Transactions as Liabilities Loom

As the Sudanese economy continues to evolve, experts are emphasizing the importance of thorough due diligence procedures for financial transactions.

The Importance of Thorough Due Diligence

In a recent report, it was highlighted that purchasers in the country typically undertake comprehensive legal and financial reviews of target companies before entering into agreements. This includes:

• Scrutinizing constitutional documents to identify potential restrictions and third-party consents required for material agreements concluded by the target company
• Assessing employees’ rights and compliance with Sudanese laws
• Conducting financial due diligence to gauge the financial health of the target company

Liability for Pre-Contractual Statements Raises Concerns

The report also highlighted the potential liability faced by sellers who make misleading pre-contractual statements. Under Sudanese law, such statements can result in imprisonment or fines. Additionally:

• Article 138 of the Civil Transaction Act of 1984 stipulates that a person who causes damages to third parties through false statements shall be liable for compensation

Publicly Available Information Proves Elusive

Despite efforts by buyers to gather information on private companies and their assets, publicly available data is limited. The company’s file in the general commercial register is accessible, but further details are often difficult to obtain. Buyers may review:

• Major lawsuits published in newspapers or online news websites
• Company files in the general commercial register

Actual or Deemed Knowledge May Limit Recourse

The report cautioned that a buyer’s actual or deemed knowledge of a transaction can limit its recourse against the seller for claims related to representation and warranties. However, subject to court discretion and the terms of the share purchase agreement, buyers may still be able to seek damages if they prove that the seller provided false information or concealed defects.

Experts Stress Importance of Thorough Due Diligence

The report emphasized the need for thorough due diligence procedures in Sudan’s financial transactions, citing the potential liabilities faced by buyers who fail to conduct adequate research. As the country’s economy continues to evolve, it is essential that parties involved in financial transactions prioritize transparency and accountability to avoid costly disputes down the line.

Correct as of: 22 July 2020

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