On the basis of the above, the IRS decided that the original transaction would not be taxed and that the stock was held by the sellers until the second sale transaction came into effect. Accordingly, the judge ruled that the purchaser had the right to revoke the sales contract because of a fraudulent misrepresentation. Two conditions must be met for a decision to resign to be made available. First, the parties to the credit must be reduced to the status quo; in other words, the buyer and seller must be reassigned to their original legal and financial position. Note that a taxpayer who does everything in his power to reinstate both parties to his or her original positions does not meet this requirement if the parties are not fully referred to those initial positions. The revocation of a share transfer agreement or transaction after the conclusion is rare and, given the singularity of this case, namely the fact that the misrepres shot was revealed within hours of the conclusion of the agreement and that the right of withdrawal was exercised within a week, this should not change. It stresses, however, that there is a positive obligation for key people within a company to correct misleading information that a third-party acquirer relies on, even if the person who has the information is not directly involved in the sales process. The “Nelsonian blind eye” is not a defense in such a scenario. Hours after the purchase of shares was completed, Erlson learned that a major HPA Ltd customer had notified the company of its intention, a few months earlier, to terminate its business relationship and not to place any further orders with the company. This information made false forecasts of revenues and substantial customers provided to Erlson over a period of approximately 10 months prior to the transaction. Hampson Industries has made every effort to ensure that Erlson was not aware of these developments, including by asking the customer concerned to keep the information confidential.
Hampson`s CEO did not inform Erlson, although he had many opportunities to do so.