What Happens When the Reps are no Longer True at Closing?

When the parties executed the transaction agreement and shook hands, the parties set a course for closing. But things happen and the seller’s representations and warranties that were true at signing may not be true and correct as of the closing. This could give rise to the buyer’s right to terminate the transaction. Avoid this predicament on the sell-side by negotiating for the ability to update the disclosure schedules prior to closing. Check out this annotated clause for practical guidance on updating disclosure schedules.  

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Related Content

• Key Drafting Considerations for Disclosure Schedules (Chart)
  Review buyer and seller preferences when negotiating disclosure schedules and the related introductory language outlining the rules of interpretation.

• Disclosure Schedules: Preparation and Review
  Refresh your knowledge of the key points to consider when reviewing or preparing disclosure schedules.

• Bring-Down Condition (with Materiality Scrape)
  Consider the drafting nuances that modify the condition that all representations and warranties made in the acquisition agreement be true and correct at closing.

• Termination Triggering Events in M&A Transaction Agreements
  Learn more about how a breach of representation or warranty could be a termination-triggering event.

• M&A Ruling Holds Lessons on Post-Termination Rights
  Note the importance of drafting a provision that specifies which liabilities (if any) may survive termination of the acquisition agreement.

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