Asset Purchase Agreement Disclosure Schedules
While a disclosure schedule is usually part of the sales contract, it is usually set after the signing date. As a result, the seller may continue to carry out activities concerning the entire operation of the business, including hiring or terminating staff or contractors, entering into new contracts with suppliers or customers, and dealing with legal issues in the event of a development. For this reason, a seller wishes to be able to continuously update the disclosure schedule between signing and closing periods. There is often some time between the signing of the agreement and the actual conclusion, which can range from a few days to a few months. Ultimately, it all depends on compliance with the conditions necessary to complete the transaction. An exception is made where the merger or acquisition agreement provides for simultaneous signature and conclusion, which means that the transaction is effectively concluded at the time of signing.  Most sales contracts have agreements that, prior to closing, require that the target transaction be managed in the normal course. Sales contracts also often require the seller to inform the buyer if he has years of knowledge before the conclusion of facts or circumstances that constitute a violation of the seller`s insurance and guarantees. Information plans are an integral part of any merger or acquisition transaction. Disclosure plans contain information that is required in the acquisition agreement – usually a list of important contracts, intellectual property, employee information and other key issues, as well as exceptions or qualifications regarding the detailed submissions and guarantees of the selling company contained in the acquisition agreement.
An erroneous or incomplete disclosure plan may lead to a breach of the acquisition agreement and possibly to significant liability to the selling entity or its shareholders. A well-developed disclosure plan will provide essential protection against allegations after closing that the selling company has violated its representations and guarantees. The buyer cannot terminate the sales contract due to an update. Since information plans are so important, but time-required, here are some tips based on my experience: ABA studies generally show that: (1) Authorization or requirement of disclosure plans is permitted in only about one-third of reported accounts (i.e. in a minority position); (2) In the case of agreements authorizing the updating of the information plan (a), approximately half of the financial statements notified limit updates to post-signing information and (b) 40 to 60% limit the buyer`s compensation rights with respect to the updated issues.