"6" Golden Rules That Guide The Disclosure Letter In M&A Processes

In mergers and acquisitions (M&A) transactions, one of the most important sections of share purchase agreements consists of the representations and warranties provided by the seller to the buyer. The accuracy of these representations directly affects the risk associated with the transaction for both the buyer and the seller. The disclosure letter, as an integral part of share transfer transactions, plays a crucial role in determining the allocation of risks related to the seller's representations and warranties.

A.             What Is a Disclosure Letter?

The representations and warranties ("Representations") provided by sellers transferring their shares in the target company to the buyer cover a broad range of matters, including key contracts affecting the target company's operations, employees, permits obtained from relevant authorities necessary for the company to continue its operations, loans and debts, and pending litigation. The section dedicated to these Representations,