Disclosure Letter Template for England and Wales

A Disclosure Letter accompanies a sale and purchase agreement (SPA), letting sellers formally reveal important facts about their business to potential buyers. It acts as a safeguard by listing exceptions to the warranties in the main agreement and sharing details that might affect the deal's value or terms.

When selling a company in England and Wales, the Disclosure Letter helps protect sellers from future breach of warranty claims by documenting everything from ongoing disputes to minor contract issues. Buyers rely on these disclosures to understand exactly what they're purchasing, while sellers use them to limit their liability under the SPA's warranties.

Use a Disclosure Letter when selling a business or company to protect yourself from future warranty claims. This document becomes essential during the due diligence phase, particularly when buyers start asking detailed questions about your company's contracts, employees, and potential liabilities.

The perfect time to prepare your Disclosure Letter is right after agreeing on the main sale agreement's warranties but before completion. This timing lets you respond to specific warranty requirements, document any known issues, and give buyers a complete picture of your business. Many sellers start gathering disclosure information early, working closely with their solicitors to ensure thorough coverage.

• General Disclosure Letter: The standard format listing all exceptions to warranties, typically organized by warranty section numbers from the main agreement
• Bundle-Style Letter: Includes extensive supporting documents as numbered appendices, common in complex corporate sales
• Specific Disclosure Letter: Focuses on particular areas like property or intellectual property rights, often used alongside a general letter
• Updated Disclosure Letter: Supplemental version covering new information discovered between signing and completion
• Industry-Specific Letter: Tailored format addressing sector-specific warranties, such as regulatory compliance in financial services or NHS contracts in healthcare

• Sellers: Business owners or company directors who prepare and sign the Disclosure Letter to protect themselves from future warranty claims
• Corporate Solicitors: Draft and review the letter, ensuring all relevant disclosures are properly documented and legally sound
• Buyers: Review disclosures to understand risks and exceptions before completing the purchase, often through their legal team
• Due Diligence Teams: Analyze disclosed information and cross-reference it with warranties in the main agreement
• Company Accountants: Provide financial information and verify accuracy of financial disclosures

• Review Warranties: Carefully read each warranty in the main sale agreement to identify exceptions or qualifications needed
• Gather Documents: Collect contracts, licenses, property deeds, employee records, and financial statements relevant to the warranties
• List Known Issues: Document ongoing disputes, regulatory concerns, or potential problems that buyers should know about
• Check Accuracy: Verify all disclosed information with department heads and key employees who know the business details
• Organize Clearly: Structure disclosures to match warranty numbering in the main agreement for easy cross-referencing
• Bundle Evidence: Attach supporting documents as numbered appendices, creating a clear audit trail

• Introduction: Clear statement identifying the parties, transaction, and related sale agreement
• General Disclosures: Standard exceptions applying to all warranties, like public records and filed accounts
• Specific Disclosures: Detailed exceptions organized by warranty number from the main agreement
• Basis of Disclosure: Statement defining what constitutes fair disclosure and knowledge standards
• Non-Prejudice Clause: Protection ensuring disclosures don't expand warranty scope
• Appendix References: Clear numbering system linking to supporting documents
• Execution Block: Signature sections for seller and buyer acknowledgment

A Disclosure Letter differs significantly from a Disclosure Agreement, though they're often confused. While both deal with sharing sensitive information, their purposes and contexts are quite different.

• Purpose and Timing: A Disclosure Letter is specifically used during company sales to reveal exceptions to warranties, while a Disclosure Agreement protects confidential information in ongoing business relationships
• Legal Effect: Disclosure Letters qualify warranty statements and protect sellers from breach claims, whereas Disclosure Agreements create mutual obligations to keep information confidential
• Structure: Disclosure Letters follow the warranty numbering of a sale agreement and include supporting evidence, while Disclosure Agreements focus on defining confidential information and permitted uses
• Duration: A Disclosure Letter's effect continues indefinitely post-sale for those specific disclosures, but Disclosure Agreements typically have defined time limits