Understanding the Importance of Disclosure Schedules

Disclosure schedules are a series of lists that are attached to an acquisition agreement that carve-out exceptions to the representations and warranties in the agreement. Properly drafted disclosure schedules are essential. The seller must provide complete and accurate disclosure information or the seller will be in breach of its representations and warranties, which may lead to the buyer suing for indemnification or even terminating the sale. At the same time, if a buyer doesn’t adequately review the disclosure schedules, it may get stuck with liabilities that it didn’t account for.


Disclosure schedules serve a few objectives. The buyer gets organized information about the target business. The disclosure schedule also helps to structure the information for the buyer. In turn, the seller gets some liability protections in that the disclosure schedules are exceptions to the seller’s representations and warranties.

Buyer’s Response to Concerning Information

Oftentimes, the purchase agreement is signed prior to the seller finalizing and delivering all disclosure schedules. In this case, the seller prepares the disclosure schedules while the buyer is performing due diligence and the purchase agreement terms will require that the seller provide complete and accurate disclosure schedules prior to the closing. Thus, there is a possibility that the buyer gets concerning information from the seller on a disclosure schedule a few days prior to the closing date. If this happens, the purchase agreement terms should allow the buyer to terminate the purchase agreement or to take several alternative actions, including:

  • The buyer can choose to accept the schedules as they are and continue with closing the transaction.

  • The buyer may request an adjustment to the purchase price to reflect the discovered liability.

  • The buyer may request additional due diligence to get more information about the problematic disclosure.

  • The buyer and seller may agree to a closing condition, where the closing does not happen unless the liability is resolved.

When you are buying or selling a business, having an experienced legal team on your side to handle issues such as the disclosure schedules is critical. Contact us today to help your transaction go as smoothly as possible.

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