Disclosure Letter Template for United States

A Disclosure Letter accompanies major business contracts to spell out important facts, exceptions, and potential issues that might affect the deal. When selling a company or making other significant transactions, sellers use this document to protect themselves by revealing everything from pending lawsuits to intellectual property claims.

Think of it as a safety net that helps both parties avoid surprises later. Buyers get a clear picture of what they're getting into, while sellers reduce their risk of future lawsuits by being upfront about potential problems. Under U.S. securities laws, accurate disclosures are especially crucial for public companies and regulated industries to meet their legal obligations and maintain transparency.

Use a Disclosure Letter when preparing for major business transactions like mergers, acquisitions, or significant investments. It's essential during due diligence, especially when selling your company or entering partnerships where hidden issues could impact the deal's value.

This document becomes crucial before finalizing purchase agreements, when negotiating stock sales, or during preparations for an IPO. Companies also rely on Disclosure Letters when transferring valuable assets, licensing technology, or dealing with complex regulatory requirements. The timing matters - create it early in the transaction process to protect both parties and allow time for thorough review and negotiation of any revealed issues.

• Non Disclosure Letter: The most common type, used to protect confidential information during business negotiations and due diligence
• General Disclosure Schedule: A comprehensive list of exceptions to seller warranties in M&A deals
• Supplemental Disclosure Letter: Updates or adds new information to an existing disclosure after the initial filing
• Industry-Specific Letters: Tailored versions for sectors like healthcare or finance, addressing unique regulatory requirements
• Stand-Alone Disclosures: Focused letters addressing specific issues like litigation, IP rights, or environmental matters

• Company Sellers: Draft and provide the letter to disclose material facts, risks, and exceptions about their business during transactions
• Corporate Buyers: Review and rely on these disclosures when making investment decisions or acquiring businesses
• Legal Counsel: Prepare, review, and negotiate the content to protect their clients' interests and ensure legal compliance
• Investment Bankers: Use disclosures for deal valuation and due diligence processes
• Corporate Officers: Sign and verify the accuracy of disclosures, often bearing personal liability for misstatements

• Review Agreements: Gather all relevant contracts, warranties, and representations that need disclosure exceptions
• Collect Documents: Compile financial statements, legal records, permits, pending litigation details, and material contracts
• Identify Issues: List potential risks, compliance concerns, and business matters requiring disclosure
• Structure Content: Organize disclosures to match the main agreement's warranties and representations
• Verify Details: Check accuracy with department heads, confirm dates, and validate financial figures
• Draft Clearly: Use our platform to generate precise, compliant language that protects your interests

• Introduction: Clear statement identifying parties and the main agreement this letter supplements
• Scope Declaration: Define exactly which warranties and representations the disclosures modify
• Disclosure Schedule: Organized sections matching each warranty in the main agreement
• Material Facts: Detailed descriptions of exceptions, risks, and relevant business information
• Time Reference: Specific dates when disclosures are effective and any update mechanisms
• Signature Block: Authorized signatures, titles, and execution date
• Governing Law: Statement specifying applicable state law and jurisdiction

A Disclosure Letter differs significantly from a Disclosure Statement in several key ways, though both relate to sharing important information. While they may seem similar, understanding their distinct purposes helps choose the right document for your situation.

• Timing and Context: Disclosure Letters typically accompany specific transactions like mergers or acquisitions, while Disclosure Statements are standalone documents often used for ongoing regulatory compliance
• Legal Structure: Letters are transaction-specific and reference particular warranties in a main agreement, while Statements provide broader, general information about a company or situation
• Scope of Protection: Letters specifically protect sellers from breach of warranty claims, while Statements fulfill broader regulatory requirements or public information duties
• Update Requirements: Letters usually remain fixed after a transaction closes, while Statements often need regular updates to maintain compliance