News and Events

Corporate Transaction Series (4/5): Disclosure

  • Posted

Having considered warranties in the context of the share purchase agreement (SPA), we now look at how the disclosure process naturally follows on from this and the necessity of considering the two together.

What is the disclosure process?

Disclosures are usually made in the form of a letter (the ‘disclosure letter’) from the seller to the buyer. The letter details various facts related to the transaction which have the effect of qualifying the warranties given by the seller.

Why is the process important?

If the seller makes inadequate disclosures and a warranted fact transpires to be false, the buyer may be able to issue a claim for a breach of contract. Conversely, if the buyer fails to review the disclosure letter in sufficient detail, they may be caught out by information unbeknownst to them. It will normally be the case that only those matters disclosed in the disclosure letter are actually deemed to be disclosed – irrespective of the buyer’s knowledge.

A comprehensive and accurate disclosure is in the interests of both parties. For the seller, it provides protection from a breach of warranty claim, whilst for the buyer it can supplement the due diligence exercise by giving them a more detailed picture of the business and can provide the buyer with leverage to renegotiate the purchase price.

Approaching completion

The affairs of the business will not stand still during negotiations, and the disclosure letter will therefore need to be updated throughout. Simultaneously, a disclosure bundle will be compiled. This will constitute copies of all of the relevant documents referred to in the disclosure letter.

At this stage, as we are approaching completion, it will hopefully be becoming clear how the various facets of the transaction fit together.

If you are looking to buy or sell a business or shares in a company and would like to discuss how we can help you with this process, please contact Simon Porter in BakerLaw’s Company and Commercial department at or call 01252 730754.