skip to Main Content
Cannabis M&A: Disclosure Schedules

by Griffen Thorne, Attorney at Harris Bricken

My last post in this series, which ran a few weeks ago, went over some of the more common representations and warranties you’d see in the average cannabis M&A transaction. In that post, I briefly mentioned disclosure schedules, which are an integral part of a purchase agreement and its reps and warranties. Today, I’ll get into the in more detail.

The purpose of a disclosure schedule is – no surprise – to disclose things to the other party to the transaction. Usually, disclosures are made by the seller but sometimes a buyer may make them. These are used in addition to standard due diligence inquiries and basically bridge due diligence disclosures directly into the purchase agreement.

There are a lot of ways disclosure schedules can be used, but I’ll focus on two of the more common ones. First, a disclosure schedule may be used to provide a specific list of something that is referred to in a provision of the purchase agreement (including in a rep and warranty). For example, a purchase agreement may state something like “Company owns the assets identified in Schedule X”. Then, the schedule would list out the assets. This allows parties to keep purchase agreements streamlined without listing all the assets in the body of the agreement.

Second, a disclosure schedule will allow parties to explain situations or provide exemptions from a contractual representation. For example, its common for buyers to require seller to represent that neither it nor the company is in litigation. If the company or seller is in fact being sued, the rep and warranty may say something like “Except in Schedule Y, neither the Seller nor Company is a party to any litigation”. Then, the schedule would list that litigation.

You may be asking why not just eliminate the rep and warranty altogether in that example if the seller or company is in litigation. The point of still having it is so that the seller is promising that apart from that one litigation matter, neither it nor the company is a party to another suit. This is key for buyers, because if it turns out there was other, non-disclosed litigation, they would have recourse against the seller.

Sometimes, you can see hybrid sorts of disclosure schedules. So for example, you may see something like “Company owns the assets identified in Schedule Z, which are free and clear of any and all encumbrances except as disclosed in Schedule Z.” In that case, the schedule would list the assets, and identify which (if any) were encumbered.

Disclosure schedules are extremely important for the buyer for obvious reasons. From the seller’s point of view, they should be taken extremely seriously because they could lead to legal exposure for sellers if they turn out to contain inaccurate information.

Re-published with the permission of Harris Bricken and The Canna Law Blog


This Post Has 0 Comments

Leave a Reply

Your email address will not be published.

Recent Stories

Cannatrol Wins Grow Up Industry Award For Drying And Curing

PRESS RELEASE NORTH SPRINGFIELD, VERMONT – September 29, 2022 – Cannatrol the new disruptive innovator in precision cannabis drying and curing systems, today announced that it has been awarded a…

Marijuana legalization could bring Arkansas $460M, study finds

Marijuana legalization could bring $460 million to the state’s budget, according to a new study, but opponents said new revenue doesn’t overcome increased costs. Voters will get a chance in…

More than 2,500 apply for pardon under Pa. marijuana pardon project

More than 2,500 Pennsylvanians with minor, nonviolent marijuana criminal convictions have applied for a pardon under a new program launched by Democratic Gov. Tom Wolf and Lt. Gov. John Fetterman…

State politicians are growing concerned about NY’s legal marijuana rollout

Sparked by a NY Cannabis Insider story from earlier this month, New York’s Legislative Commission on Rural Resources has asked the Office of Cannabis Management for clarification and updates on the state’s rollout…

More Categories

Back To Top
×Close search