The Corporate Law Group

Reps and Warranties

reps-and-warrantiesOne feature of almost every merger, acquisition, stock purchase, etc. agreement is a sometimes over-long section entitled “Representations and Warranties.” Reps and warranties for short. Corporate lawyers have most standard reps and warranties memorized, having worked with them hundreds of times.

They can include everything from toxics on company property, to taxes, to intellectual property. Sometimes there are just a few reps concerning things like the agreement having been authorized by the company. Sometimes there are dozens including reps that the company is not union organized, even when there are only three founders. No one ever mistook lawyers as efficient.

The reps and warranties usually anticipate several schedules, listing your patents here, your key employees there, and a “schedule of exceptions” listing the things in the reps that are not true. The rep says that, “The company owns ten percent of the outstanding stock in Facebook”? No problem. Just say on the schedule of exceptions that, “The company owns no stock in Facebook.”

Want to get ahead of the curve? Set your company up so that there is no ‘hair’ on your deal? No Sweat. Get a copy of a sample reps and warranties and see what your investors and acquirers will be asking you to say when your deal arrives. Fix a couple of things. Repeat.