Disclosure Letter (Business/Asset Purchase)

This Disclosure Letter (Business/Asset Purchase) is issued by a seller (or the seller’s solicitors) before completion of a sale of assets or a business to a buyer.

It is designed to protect the seller against future claims by the buyer for breach of warranties in the relevant Business Purchase Agreement, and it is also a mechanism for the seller to provide information about the business or assets being sold that may be material to the buyer.

What does Disclosure Letter (Business/Asset Purchase) do?

It allows the seller to disclose matters against the warranties in the Business Purchase Agreement, so that the buyer cannot later claim for breach of warranty in respect of matters that have been properly disclosed.

It can also assist the buyer by highlighting issues that may not have been identified during due diligence and which may affect pricing or risk allocation.

What does Disclosure Letter (Business/Asset Purchase) cover?

• An introduction explaining the purpose of the letter and identifying the applicable Business Purchase Agreement.
• General disclosures of a standard nature that could apply to many transactions, including disclosures by reference to information available on certain public registers (for example, Companies House or the Intellectual Property Office) within a stated period before completion.
• Specific disclosures tailored to the transaction, typically cross-referencing particular warranties in the Business Purchase Agreement.

When should you use Disclosure Letter (Business/Asset Purchase)?

Use this disclosure letter where the Business Purchase Agreement contains warranties and the seller needs to qualify those warranties by making disclosures before completion.

It may also be appropriate where the parties want a structured way for the seller to provide transaction-specific information that could be relevant to the buyer’s assessment of the business or assets being acquired.

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