Transactions in business happen every single day, and this includes the sale of actual businesses. For the most part, these deals go through smoothly and are beneficial to all parties.
However, this isn’t always the case. The integrity of any business deal relies on all parties having access to accurate financial information. In some cases, the finances may be misrepresented.
What is misrepresentation in business transactions and when does it become fraudulent?
Innocent errors
Just because someone has been given inaccurate financial information, this doesn’t mean they have necessarily been intentionally deceived. Business transactions and the finances associated with them are notoriously complex, and someone involved in the deal could make an innocent mistake. For instance, if they have misread a valuation or financial projection, and given these figures to the buyer.
Misrepresentation also occurs when a seller has been careless with their claims. For example, they may have told the buyer about financial projections based on no facts at all. In any business deal, it is pivotal that everyone acts in good faith and quotes figures that can be substantiated.
Fraudulent misrepresentation
Fraudulent misrepresentation involves intentionally deceiving another party during a transaction. For example, financial documents may have been purposely altered to make the business look more profitable and raise its valuation. This is by far the most serious type of misrepresentation during business deals.
Contracts must be entered into voluntarily and all of the pertinent information should be available. The factors mentioned above could result in civil disputes and even criminal accusations. If you are facing accusations of fraudulent misrepresentation, it’s vital to seek legal guidance as soon as possible.