The sale agreement gets the attention, the negotiation and the fees. The disclosure letter is what actually determines what a seller can be sued for afterwards — and it is routinely treated as an administrative annex to be finished at the last minute.
How the Mechanism Works
The sale agreement contains warranties — statements of fact about the business that the seller gives, running to many pages. If one is untrue and the buyer suffers loss, the buyer may have a claim against the seller personally. The disclosure letter is the seller’s answer: matters properly disclosed in it are generally carved out of the warranties, so the buyer cannot later claim in respect of something they were told about. A warranty says “there is no litigation”; the disclosure letter says “except the following”. The consequence, and it is the whole point of this page: a seller’s exposure is defined not by the warranty schedule but by the quality of the disclosure. Two sellers can sign identical warranty schedules and end up in completely different positions depending on what each disclosed. Hours spent on the disclosure letter are hours spent reducing personal liability, which makes them the best-value hours in the transaction.
Doing It Properly
Start early, alongside due diligence rather than after the agreement is settled — the information gathered for diligence is largely the same information the disclosure letter needs, so doing them together is efficient and doing them sequentially wastes weeks. Work through the warranty schedule line by line, asking of each: is this true, and if not, or not entirely, what is the actual position? That is tedious and it is the job. Be specific. A vague or general disclosure may not be effective; the buyer is entitled to fair disclosure of the actual position, and something too woolly to inform them of anything may not carve anything out. Attach the documents where the disclosure depends on them. And do not be selective out of embarrassment: the instinct to leave out an awkward matter is the instinct that creates a warranty claim, because an undisclosed matter is one the seller has effectively warranted against. Alongside all this, negotiate the four standard limitations — a cap on total liability, time limits for claims, a de minimis threshold, and conduct provisions on third-party claims. Those are the difference between bounded and unbounded exposure.
If the disclosure letter is being left to the final week, push back. That timetable serves the buyer, not you — hurried disclosure is incomplete disclosure, and incomplete disclosure is exposure that survives completion.
Been sent a warranty schedule? 01 5827148.
Richard O’Shea — Solicitor & TEP
Solicitor at Mary Molloy Solicitors, established 1981, and a TEP of the Society of Trust and Estate Practitioners. The firm acts for buyers and sellers on business sales and acquisitions — structure, heads of terms, due diligence, the sale agreement, warranties and disclosure, completion and what follows it. Because a substantial share of Irish business sales are retirement exits, the firm’s estate and succession practice sits alongside the transactional work: the deal and what happens to the proceeds are usually the same client’s problem. Nothing here is tax advice — structure is tax-driven and that belongs with your accountant and Revenue, before heads of terms are signed. 01 5827148 · richardoshea@marymolloysolicitors.com · LinkedIn
General information, not legal advice. This website contains general information about Irish law on business sales and acquisitions. It is not legal advice and does not create a solicitor—client relationship. Every transaction turns on its own facts — the structure, the documents, the parties, the consents required — and advice on yours requires a consultation.
Nothing here is tax advice, and tax drives structure. The choice between an asset sale and a share sale is very largely a tax question, and it should be settled with your accountant or tax adviser, and by reference to Revenue’s own guidance, before heads of terms are signed rather than afterwards. This firm does not advise on tax, does not state rates, thresholds, reliefs or conditions, and does not indicate any tax outcome.
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Never both sides of the same deal. The firm acts for buyers and, in separate transactions, for sellers — but never for both parties to the same sale. Conflicts are checked at first contact, before any substantive discussion, which is why the first email should name every individual and entity involved.
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