A Disclosure Letter is a document that details exceptions to the warranties provided in the Shareholders Agreement (SHA). It protects the company by clarifying any inaccuracies or special conditions, reducing the risk of potential legal claims from investors.
What is the purpose of a Disclosure Letter?
The Disclosure Letter clarifies specific exceptions to the warranties in the SHA, providing transparency and protecting the company from potential liability due to undisclosed facts.
What types of information are included in a Disclosure Letter?
A Disclosure Letter includes exceptions or modifications to the warranties, such as known liabilities, pending disputes, or any facts that differ from the general statements in the SHA.
How does a Disclosure Letter benefit the company?
By detailing exceptions, the Disclosure Letter helps prevent future legal claims from investors, as they are made aware of any discrepancies upfront.
Who is responsible for preparing the Disclosure Letter?
Typically, the company's legal team prepares the Disclosure Letter, with input from relevant departments to ensure all necessary exceptions are disclosed.
Is the Disclosure Letter legally binding?
Yes, the Disclosure Letter is legally binding once agreed upon by both parties, as it forms an integral part of the transaction documents.
Or want to know more about pre-seed funding?
