Disclosure—share and asset purchases

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Disclosure—share and asset purchases
  • The purpose of disclosure
  • Limiting the seller’s liability
  • Eliciting information and price adjustment
  • The disclosure letter
  • Standard of disclosure
  • Nature of disclosure
  • 'Fair' disclosure
  • Standard of disclosure after Infiniteland
  • Buyer's knowledge
  • More...

Disclosure—share and asset purchases

This Practice Note provides an overview of the purpose, nature and scope of the disclosure exercise that is carried out by a seller in connection with the acquisition of shares in a private limited company or the acquisition of a business and its assets (the target). The disclosure process is a fundamental part of the sale transaction and the parties should not underestimate the time and resources required to carry it out effectively. By obtaining appropriate professional advice, the parties can help to avoid or mitigate any potential risks that may arise.

The seller will need to review each warranty in detail with its advisers and consider what disclosures it needs to make against each warranty, as inadequate disclosures may mean that the seller is exposing itself to potential breach of warranty claims.

The seller’s solicitors will co-ordinate the disclosure exercise and draft the disclosure letter in conjunction with the seller and its management team. This can be a lengthy and time-consuming process. The disclosure exercise is usually started early on in the transaction and is conducted at the same time as the share purchase agreement (SPA) or asset purchase agreement (APA) is negotiated, given the interdependence between the warranties in the SPA/APA and the disclosure letter. As the buyer may raise additional queries arising from the disclosures, both due diligence and disclosure

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