When selling your business, you’ll encounter a lot of legal terminology and documents that may seem overwhelming. One of the most critical — yet often misunderstood — components of an M&A (mergers and acquisitions) transaction is the disclosure schedule. But what exactly is a disclosure schedule, and why is it so important?

Understanding Disclosure Schedules

In the purchase agreement of a business sale, you, as the seller, will make several promises, known as representations and warranties. These are broad statements about your business, ensuring the buyer that the business they’re purchasing is exactly as it seems. You might represent that “all contracts are valid” or “there are no pending lawsuits.”

However, in the real world, things are rarely so perfect. This is where disclosure schedules come into play.

What Do Disclosure Schedules Contain?

The disclosure schedule is a detailed document attached to the purchase agreement that allows you to list exceptions to your representations and warranties. Think of it as your way to clarify or explain any areas where the initial broad statements might not be entirely accurate. For example, suppose you’re renegotiating a contract, dealing with a minor legal issue, or have certain liabilities that need to be addressed. In that case, the disclosure schedule is where you disclose this information.

Some of the key areas a disclosure schedule might cover include:

  • Contracts: Any agreements in progress, under renegotiation, or with unusual terms.
  • Legal Matters: Ongoing or potential lawsuits or claims against the business.
  • Assets: Specific details about assets being sold, especially if there are liens or other encumbrances.
  • Employees: Any employment agreements, pending disputes, or contractual obligations.

Why Accuracy Matters

Disclosure schedules are more than just an add-on; they’re critical for protecting yourself from future legal or financial repercussions. You could be held liable after the sale if you fail to include an important detail — such as a pending lawsuit or an expiring contract. This is why accuracy is crucial. You don’t want to leave anything out that could come back to haunt you later.

How an M&A Attorney Helps

Navigating disclosure schedules can be tricky, especially if you’re unfamiliar with the legal complexities of selling a business. This is where an experienced M&A attorney becomes essential. They’ll help you prepare and review the disclosure schedules, ensuring that every exception and detail is appropriately listed and explained.

Your attorney’s goal is to ensure the buyer has a clear and accurate picture of your business while minimizing your future liabilities. With their guidance, you can rest assured that you’re protected — and that the buyer won’t come knocking with costly claims after the deal is closed.

In Conclusion

Disclosure schedules may seem like just another stack of paperwork, but they’re vital in ensuring that your sale goes smoothly and that you’re protected after the transaction. If you’re preparing to sell your business, don’t leave this crucial step to chance. Work with an experienced M&A attorney who can help you navigate every detail, protect your interests, and guide you toward a successful sale.

Need help with disclosure schedules or other parts of your M&A transaction? Contact InPrime Legal today, and we’ll ensure you’re fully prepared for every step of the process.