The Exit Toolkit · Sheet 11 of 20
The disclosure letter explained
The document that protects you after the sale
What it is
A letter from you to the buyer setting out every way in which the warranties in the sale agreement are not 100% true.
Why it protects you
Anything fully and fairly disclosed cannot come back as a warranty claim. The buyer entered the deal knowing about it.
'We discussed it' is not disclosure
Assume nothing counts unless it is written in the disclosure letter. Conversations, emails and meetings do not protect you.
How small is too small?
It isn't. However minor the issue, put it in. A licence audit that flagged four minor points last year is exactly the kind of thing to disclose.
Worked example
Warranty: 'All licences required for the business are in place and in full force.' If a regulator raised issues at last year's inspection, disclose it against that warranty, and you cannot be sued on it.
The process
Your solicitor walks through every warranty with you and builds the disclosure list, supported by documents in the data room.
Bottom line
Sellers are sometimes reluctant to go into this detail. Don't be. A thorough disclosure letter is the difference between a clean break and a worry-filled retirement.
Related
General information only, not legal advice. Steven Mather Solicitor is a trading name of Kesters Nook Limited; legal work is carried out through Nexa Law Limited, authorised and regulated by the SRA (number 633024).