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Representations and warranties

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Quick Answer

Representations and warranties are the seller's statements of fact about the business, made as of signing and usually again as of closing.1,2

What it is

They cover capitalization, financial statements, material contracts, taxes, intellectual property, employee benefits, environmental matters, cyber and data privacy, and more. Their function is allocation, not description: a rep that turns out to be wrong shifts the loss to the seller through the indemnification package, and anything the seller will not warrant is a risk the buyer has agreed to hold.1,2

Operational context

What good looks like

Why It Matters

The negotiation over reps is a negotiation over who owns which unknown. Reading them as disclosure rather than as risk allocation is how buyers accept exposure they never priced.1

Frequently Asked Questions

What is Representations and warranties in venture capital?

They cover capitalization, financial statements, material contracts, taxes, intellectual property, employee benefits, environmental matters, cyber and data privacy, and more.

Why is Representations and warranties important for startups?

Understanding Representations and warranties is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.T2-03 — ABA Business Law TodayAnnouncing the ABA's 2025 Private Target M&A Deal Points StudyABA Business Law Today(Representations and warranties are the seller's statements of fact about the business, made as of signing and usually again as of closing.)primary · T2 · deal-documents · concept
  2. 2.T2-04 — ABA Business Law SectionModel Stock Purchase Agreement with Commentary, 2d ed. (2011), ISBN 9781604429985, 2 vols., 648 pp.ABA Business Law Section(Representations and warranties are the seller's statements of fact about the business, made as of signing and usually again as of closing.)primary · T2 · deal-documents · concept

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