Disclosure Letter – Guide and Template

Limit your warranty exposure on a sale by disclosing known issues properly – with a plain-English guide and a full template letter.

Editable Word document
13
10pages
Guidance notes included
aml consultancy solutions

Selling or exiting a business

Disclosure Letter – Guide and Template

About this document

What it’s for

On a share or asset sale the seller gives warranties about the business. The disclosure letter is the seller’s chance to tell the buyer, before signing, about anything that makes a warranty untrue. A matter that is fairly disclosed generally cannot later found a warranty claim. Part 1 explains how it works; Part 2 is a complete letter to adapt.

When to use it

  • Once the buyer’s solicitor has issued the draft sale agreement and warranties
  • Alongside the data room and replies to due diligence enquiries
  • Final version delivered and signed immediately before exchange or signing

What’s inside

The document is laid out in the sections below. Each one comes with a plain-English guidance note explaining what it does and what to change.

  1. Introduction
  2. Basis of disclosure
  3. General disclosures
  4. The Data Room
  5. Specific disclosures
  6. Supplemental disclosure
  7. Acknowledgement and governing law

Also included

  • Part 1 – How disclosure works
  • 1. What the disclosure letter does
  • 2. Where it fits in the sale timetable
  • 3. The fair disclosure standard
  • 4. General and specific disclosures
  • 5. Deemed disclosure of the data room
  • 6. Indemnities, the tax covenant and insurance
  • 7. Asset sales
  • 8. Checklist before you deliver the letter
  • Buyer’s acknowledgement
  • Capacity, shares and constitution
  • Accounts and financial position
  • Borrowing, grants and guarantees
  • Trading and ordinary course since the Accounts Date

How to complete it

  • Read Part 1 first, then work through the warranties one by one
  • Agree the general disclosures and the data room wording (paragraphs 3 and 4)
  • Fill in Annex 1 with specific disclosures cross-referenced to warranty numbers and data room documents
  • Have your solicitor review it before it goes to the buyer

Key points to check

  • Vague or “catch-all” disclosures may not count as fair disclosure
  • Disclosure normally does not reduce liability under indemnities or the tax covenant
  • Use with the Heads of terms, Buyer NDA and Data room index and disclosure checklist in this library

Our templates are professionally structured starting points for UK businesses, not legal advice. For anything complex, unusual or high-value, have your final version checked by a solicitor.

Included in the pack

Selling or exiting a business

£20

for every document in this category

Editable Microsoft Word files

Guidance notes in every document

Written for UK businesses

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