What is a disclosure letter?
A disclosure letter is a document a seller gives a buyer alongside a sale agreement, setting out exceptions to the warranties - the specific facts that would otherwise make a promised statement untrue.
In a company or business sale, the seller gives the buyer 'warranties': contractual statements that certain things are true, such as 'there is no ongoing litigation' or 'all tax has been paid'. The disclosure letter is where the seller lists the real-world exceptions to those statements - the actual dispute, the outstanding filing - so the buyer goes in with eyes open.
The letter does real legal work. A properly disclosed fact generally means the buyer cannot later claim the seller broke that warranty over it, because it was flagged before completion. So the disclosure letter shapes who carries the risk of each known issue, which is why it is negotiated carefully and tied precisely to the warranties and the supporting documents.
Disclosure is only as good as its evidence. Each disclosed fact usually points to documents in the data room that back it up, so the letter and the disclosure bundle are prepared together and reviewed against each other.
In 99 Data Rooms
How it works here.
In 99 Data Rooms the documents behind each disclosure live in the data room, shared as tracked links gated by verified email, passcode or NDA acceptance. The page-by-page view log gives a record of which supporting documents the buyer's side actually opened, contributing to a defensible account of what was disclosed - all UK-hosted and encrypted at rest. This is general information, not legal advice.
Common questions
Disclosure letter, in short.
What is the point of a disclosure letter?
It lets the seller qualify the warranties by flagging known exceptions before completion. A fact that is properly disclosed generally cannot found a later warranty claim, so the letter allocates the risk of known issues between the parties.
How does a disclosure letter relate to the data room?
Each disclosure typically references supporting documents held in the data room. Preparing the letter and the disclosure bundle together, and keeping a record of what the buyer reviewed, is central to due diligence. Take legal advice on the letter itself.
Related terms
What is due diligence?
Due diligence is the structured investigation a buyer, investor or lender runs before a deal, checking a company's finances, contracts, legal standing and risks against what has been claimed.
DefinitionWhat is a heads of terms agreement?
Heads of terms is a document setting out the main points of a proposed deal that the parties have agreed in principle, before full contracts are drafted - largely non-binding, but with some clauses that bind.
DefinitionWhat is a virtual data room?
A virtual data room (VDR) is a secure online space for sharing sensitive business documents with outside parties, where every viewer is controlled and every view is tracked.
Try it on a real document. Turn a PDF into a tracked, revocable link in a couple of minutes. Three rooms stay free for as long as you want them, no card required.