A more recent version of these Disclosure notes – written by Cambridge And Oxilp And College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Disclosure NATURE AND PURPOSE OF THE DISCLOSURE LETTERMost the info the buyer requests is in the form of disclosures by the seller. Qualifies the warranties.The incentive for seller in making disclosures = avoidance of breach of warranty in relation to the matters disclosed.Is scrutinised by both parties due to its importance in determining seller's potential liability and buyer's risk.Seller is advised to make full and early disclosure of potential issues. Late disclosures carry risk that buyer will either: o refuse to accept the disclosure as fully limiting the seller's liability in the relevant area, or
o that the buyer will withdraw from the deal at a stage when significant professional costs have been incurred.
FORMAT OF THE DISCLOSURE LETTER?
Will be in the form of a letter from the seller to the buyer.Buyer must consider whether it is prepared to accept every disclosure without further info or contractual protection.If disclosure relates to a matter of significance to the buyer, it may decide to require an indemnity from the seller to: o cover any identified potential liability;
Bundle of docs (the disclosure bundle) will be attached to the letter, comprising all the docs referred to in the letter as providing information which qualifies the warranties (e.g. distribution agreements, pension details etc.)
o to reduce the purchase price it is prepared to pay; or, o if the matter is very significant, to withdraw from the purchase.On exchange, 2 copies of agreed form of disclosure letter & bundle available; 1 given to buyer
& 1 retained by seller.The letters and associated bundles will be initialled by the parties as evidence that they are identical. o Thus in the event of claim for a breach of warranty, each party will be able to refer to the agreed disclosure docs.The disclosure letter itself will generally be divided into two sections:
1. General matters of which the buyer will be deemed to be aware (see below); and
2. Details of specific disclosures (see p2). DEEMED DISCLOSURESGeneral disclosures relate to publicly available info which buyer can be expected to find out for itselfCan also, occasionally, relate to info that has been made available to the buyer during the DD investigation.Effect of deemed or general disclosure = Limit seller's liability post-acquisition by making buyer aware of the risks.
TYPE OF INFO IN DEEMED DISCLOSURE INFO
Info on a target's file at the Companies Registry
Buyer generally accepts. May want clarification on date
& exclude audited accounts older than 3 years ago (see
Buy the full version of these notes or essay plans and more in our Private Acquisitions Notes.