When selling your business, you’ll encounter several critical legal elements that can have a lasting impact on your sale—and your future. Among the most important are the representations and warranties in the purchase agreement and the accompanying disclosure schedule. These legal components determine what you promise to the buyer and how you are protected once the deal is done. An experienced M&A attorney to guide you through these complex areas can save you from potential risks and ensure you’re fully protected.

What Are Representations and Warranties?

In the sale of a business, representations, and warranties are essentially the promises and assurances you, as the seller, make about the state of your business. These promises cover everything from the accuracy of your financial statements to the absence of pending lawsuits. For example, you might state, “All material contracts are valid and enforceable,” or “There are no undisclosed liabilities.”

While these may seem like straightforward statements, the implications are significant. If it turns out that something you’ve represented is incorrect or incomplete, the buyer could hold you liable—even after the sale closes.

The Role of the Disclosure Schedule

The disclosure schedule acts as your safety net. It allows you to list any exceptions or qualifications to the representations and warranties in the purchase agreement. For instance, if one of your material contracts is up for renegotiation or there’s an ongoing minor legal issue, you would disclose that information in the schedule. This way, you’re not promising the buyer something that isn’t 100% accurate.

The disclosure schedule ensures transparency, but it also serves to limit your post-sale liability. If an issue is appropriately disclosed, the buyer cannot claim that you misrepresented the business and come back to demand compensation after the sale.

Why You Need an M&A Attorney for This Process

Reviewing and negotiating representations, warranties, and the disclosure schedule is one of the most complex parts of an M&A transaction. Without expert legal guidance, you could inadvertently expose yourself to unnecessary risks.

An experienced M&A attorney plays a vital role in:

  • Reviewing the Representations and Warranties: We ensure your promises accurately reflect your business and minimize your risk of future liability.
  • Crafting the Disclosure Schedule: We work with you to compile a detailed and accurate disclosure schedule, listing any potential issues or exceptions to the representations. This ensures transparency and helps protect you from future legal claims.
  • Negotiating with the Buyer: Buyers often push for broad representations and warranties that increase their protection at your expense. We help negotiate more favorable terms that limit your exposure and ensure you’re not overpromising.

Why Accuracy Matters

The accuracy of your representations, warranties, and disclosures is crucial. Missing something in the disclosure schedule or being vague in your representations can lead to post-sale disputes, potentially costing you significant money and time. An experienced M&A attorney ensures that nothing is overlooked and you’re fully protected throughout the process.

In Conclusion

The representations, warranties, and disclosure schedule are essential components of a business sale, but they’re also some of the most complex. Ensuring these elements are carefully reviewed, negotiated, and documented can protect you from future claims and liabilities, making your sale smoother and safer.

Working with an experienced M&A attorney is essential if you’re selling your business. Contact InPrime Legal today to help you navigate this process and safeguard your future.