Entrepreneurs are often required to provide assurances or guarantees in the agreement documents of the accuracy of information.
It is difficult, if not impossible, in practice, to rescind an investment decision, the responsibility arising for providing adequate information to the company’s shareholders and management. In this context, a sanction clause may be included in the shareholder agreement specifying a penalty and a rectification period during which a shareholder has the opportunity to rectify or compensate loss or damage incurred. Sanctions included in entrepreneurial assurances or guarantees are more preventive than anything else. Their main aim is to encourage entrepreneurs to inform investors also about any risks associated with the company.