Understanding the Indemnity Agreement

What Is Indemnity?

Indemnity is a legal guarantee that protects you against claims, liability, or financial loss after the sale. In the context of selling a VAT company, it means: Once we take ownership of your company, you're completely protected from any future tax or compliance issues.

Think of it as insurance. If SARS discovers something wrong after the transfer, they go after us—not you. That's what indemnity does.

Why You Need Indemnity

Without indemnity protection, here's what could happen:

• SARS audits the company 5 years post-sale and finds unreported income from 2015
• SARS issues a demand to the previous owner (you) for back taxes
• You're liable for penalties and interest, even though you no longer own the company

This is a real risk in South Africa. Indemnity prevents this nightmare scenario.

What the Indemnity Agreement Covers

What Indemnity Does NOT Cover

Indemnity has limits. It doesn't cover:

• Pre-sale known issues: Anything you already knew about when selling
• Fraud you committed: If you personally committed fraud, indemnity doesn't shield you
• Criminal conduct: Criminal liability remains yours
• Issues disclosed at sale: If you told us about a compliance gap, you're not protected against it

The key: Indemnity protects against unknown issues discovered after sale. It's not a license to sell a compromised company.

How Indemnity Is Enforced

1. It's a Signed Legal Document

Our indemnity agreement is drafted by qualified attorneys and signed by both parties. It's a legally binding contract recognized by South African courts and SARS.

2. SARS Recognizes It

When we file the directorship change, SARS receives notification that WeBuyVatCompanies now owns the company. Any SARS correspondence after that goes to us. Your protection is automatic.

3. You Can Enforce It

If SARS contacts you about the company after the sale, you simply:

• Provide SARS with our contact details
• Reference the indemnity agreement
• We handle all SARS communication

Real-World Example

Scenario: You sell us a 2012 VAT company. Everything is clean at sale. Two years later, SARS audits the company and finds that VAT returns from 2014–2015 have unreported income.

What happens:

• ✗ SARS does NOT contact you
• ✓ SARS contacts us (we're the owner)
• ✓ We respond to the audit
• ✓ We pay any assessments or penalties
• ✓ You're completely unaffected

This is indemnity in action.

What to Do Before Signing

Here's what we recommend:

1. Have your attorney review it. We encourage this. Your attorney can confirm the indemnity protects you comprehensively.
2. Disclose any known issues. If you know about compliance gaps, tell us before signing. Once disclosed, indemnity won't cover it.
3. Verify it's from us. Only accept indemnity agreements bearing our official letterhead and signed by our directors.
4. Keep a copy forever. Even after we take over, keep your signed indemnity agreement safely. You may need it for reference decades later.

The Bottom Line

An indemnity agreement is your legal shield. It transfers all post-sale liability to us. Without it, you remain exposed to SARS for years after selling. With it, you're protected completely.

Any reputable buyer will provide a comprehensive indemnity agreement. If they don't, walk away.