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A Disclosure Letter works like a detailed safety net in Canadian business deals, especially during mergers and acquisitions. It lets sellers officially reveal important facts about their company that might affect the deal's value or terms - from ongoing lawsuits to potential environmental issues.

The letter pairs with the main purchase agreement and protects sellers from future claims by documenting exceptions to their warranties. Under Canadian securities laws and provincial regulations, it serves as a crucial risk management tool, helping both parties avoid disputes and ensuring transparency in commercial transactions. Most Canadian M&A lawyers consider it essential for protecting their clients' interests.

Create a Disclosure Letter when selling your business or completing major corporate transactions in Canada. This document becomes essential during due diligence, particularly when buyers are reviewing your company's warranties and representations. Use it to reveal any exceptions to your standard warranties, potential liabilities, or unique circumstances that could impact the deal.

Time your Disclosure Letter early in negotiations - ideally while drafting the purchase agreement. This allows buyers to properly assess risks and prevents disputes about undisclosed issues later. Canadian courts generally respect well-drafted disclosure letters as valid defenses against future warranty claims, making them valuable risk management tools.

• Non Disclosure Letter: Basic version focused on protecting confidential information in standard business dealings
• Mutual Non Disclosure Agreement Form: Two-way protection where both parties share sensitive information
• Employee Confidentiality Agreement Form: Specialized version for protecting company secrets in employment relationships

• Selling Companies: Usually draft the Disclosure Letter to reveal exceptions to warranties and potential liabilities
• Corporate Lawyers: Review and refine the letter's content to ensure legal compliance and proper risk disclosure
• Buying Companies: Review disclosures to assess risks and adjust deal terms accordingly
• Investment Bankers: Help identify material information requiring disclosure during M&A transactions
• Company Directors: Sign off on disclosures and bear responsibility for their accuracy under Canadian securities laws
• Due Diligence Teams: Verify disclosed information and identify any gaps requiring further investigation

• Review Purchase Agreement: Examine all warranties and representations to identify areas needing disclosure
• Gather Company Records: Collect financial statements, contracts, permits, and compliance records from past 3-5 years
• List Exceptions: Document all warranty exceptions, pending litigation, and material issues affecting the business
• Organize Supporting Documents: Create a clear system for referenced exhibits and attachments
• Draft Systematically: Use our platform's templates to ensure complete coverage of required disclosures
• Internal Review: Have key department heads verify accuracy of disclosures in their areas
• Final Check: Confirm all referenced documents are attached and properly labeled

• Identification Details: Full legal names of all parties and reference to main purchase agreement
• Purpose Statement: Clear declaration that this letter qualifies and supplements warranties
• Disclosure Schedule: Organized sections matching warranty clauses in the main agreement
• Material Facts: Specific exceptions to warranties with supporting documentation
• Governing Law: Express statement of applicable Canadian jurisdiction
• Fair Disclosure: Statement confirming information is accurate and not misleading
• Authorization: Proper signing authority and corporate approval confirmation
• Execution Block: Date, signatures, and witness provisions per provincial requirements

A Disclosure Letter differs significantly from a Disclosure Agreement in several key ways. While both deal with sharing information, their purposes and legal effects are quite distinct under Canadian law.

• Primary Purpose: Disclosure Letters specifically document exceptions to warranties in M&A transactions, while Disclosure Agreements set ongoing rules for handling confidential information
• Timing and Duration: Disclosure Letters are one-time documents tied to a specific transaction, whereas Disclosure Agreements create continuing obligations that last for a defined period
• Legal Effect: Disclosure Letters protect sellers from future warranty claims by documenting known issues, while Disclosure Agreements create mutual obligations to maintain confidentiality
• Structure: Disclosure Letters follow the structure of purchase agreement warranties, while Disclosure Agreements focus on defining confidential information and permitted uses