What is a disclosure letter?
By SuLe · Updated 20 June 2026
A disclosure letter is the document that qualifies the warranties in your investment agreement by listing the real-world exceptions to them — in effect, "the warranties are all true, except for the following". A fact fairly disclosed in it cannot later found a warranty claim, which makes it the founders' single most important protection at closing.
Key facts
- The disclosure letter qualifies the warranties by disclosing exceptions to them.
- A fact fairly disclosed cannot found a warranty claim — this is its whole purpose.
- It has two parts: general disclosures (deemed disclosed to all) and specific disclosures (tied to particular warranties).
- Disclosure must be fair: clear and specific enough for the investor to understand the issue.
- It is the founders' document to get right, because only they know the true state of the business.
What is a disclosure letter for?
The disclosure letter is the bridge between the broad promises in the warranties and the messy reality of a real company. The warranties say everything is in order; the disclosure letter admits, precisely, where it is not.
Its legal effect is simple and powerful. A fact fairly disclosed against a warranty cannot found a claim on that matter. Disclosure converts a potential breach into something the investor knowingly accepted.
That is why lawyers treat the disclosure letter as the founder's main shield. The warranties are largely fixed by the time you reach the disclosure letter; the disclosure letter is where you actually manage your risk.
What is the difference between general and specific disclosures?
The letter has two halves. General disclosures are matters deemed disclosed to everyone — the contents of public registers like Companies House, and often everything in the data room. They set a baseline of things the investor is treated as knowing.
Specific disclosures are the exceptions tied to individual warranties. Against the warranty that all IP is assigned, for example, you might disclose a named contractor who never signed an assignment, with the relevant dates and documents.
Specific disclosure is where the protection really lives. A precise, documented exception tied to the right warranty is far more robust than a vague reliance on the general disclosure of a crowded data room.
What counts as fair disclosure?
Disclosure only protects you if it is fair — clear and specific enough for the investor to understand both the issue and its extent. A vague gesture at a problem does not do the job.
"There may be some IP issues" is not fair disclosure. Naming the contract, the parties, the problem and pointing to the supporting document is. The test is practical: could the investor, reading it, actually grasp what they were accepting?
Get this wrong and you keep the exposure you were trying to remove. Founders sometimes disclose too vaguely for fear of alarming the investor — but a vague disclosure leaves the warranty claim fully alive, which is the opposite of what they intended.
| Type of disclosure | Example | Protection given |
|---|---|---|
| General | Companies House filings; data room contents | Baseline — deemed known to the investor |
| Specific | Named contractor without a signed IP assignment | Strong, if fair and documented |
| Vague specific | "There may be some IP issues" | Weak — usually not fair disclosure |
| No disclosure | Known problem left unmentioned | None — warranty breach if untrue |
Worked example
Sofia and Marcus close a £550,000 seed for Northwind Energy Ltd. The warranties include a promise that the company is not involved in any dispute. In fact, a former supplier has sent a letter threatening a small claim over an unpaid invoice.
Rather than hope it goes away, they disclose it specifically: the supplier's name, the amount, the date of the letter and a copy in the data room. Because the dispute is fairly disclosed, the investor cannot bring a warranty claim on it later. Had they stayed silent and the claim materialised, the "no disputes" warranty would have been breached — a self-inflicted liability worth far more than the awkward conversation they avoided.
Where founders go wrong
Rushing the disclosure letter at the last minute
— it is your main protection, and a hurried letter leaves warranties effectively unqualified.Disclosing too vaguely
— fair disclosure must be specific; a hint is not enough to defeat a claim.Assuming the data room does all the work
— general disclosure of a crowded data room is weaker than a precise specific disclosure tied to the right warranty.Leaving known problems out to avoid scaring the investor
— an undisclosed known issue is exactly what turns into a warranty claim after completion.
Related questions
Why is the disclosure letter so important?
Because a fact fairly disclosed in it cannot found a warranty claim. The warranties in the investment agreement are broad promises; the disclosure letter is where you carve out the real-world exceptions. A thin or rushed disclosure letter throws away the founder's single best protection against a later claim. [More: What are warranties in an investment agreement?]
What is the difference between general and specific disclosures?
General disclosures cover things deemed disclosed to everyone — public registers like Companies House, or documents in the data room. Specific disclosures are exceptions tied to particular warranties, like naming a contractor who never signed an IP assignment. Specific, documented disclosure is what most reliably defeats a claim.
What counts as fair disclosure?
Disclosure has to be clear and specific enough for the investor to understand the issue and its scope. A vague hint that "there may be some IP issues" is not fair disclosure. Naming the contract, the parties and the problem, with supporting documents, is. Vague disclosure leaves you exposed to the very claim you were trying to head off.
Who prepares the disclosure letter?
The company and its solicitor, because only the founders know the true state of the business. The investor's side reviews it and may push back on vague entries. It is one of the few closing documents that is genuinely the founders' responsibility to get right, so it deserves real time rather than a last-minute dash.
The disclosure letter is the rare closing document where the founders, not the lawyers, hold the crucial knowledge — and a vague or rushed one quietly leaves every warranty fully exposed. A SuLe solicitor can help you draft disclosures that are specific enough to actually protect you. Book a free investment readiness check
Keep reading: What are warranties in an investment agreement? · What happens if we breach an investment warranty? · What is due diligence — and what will investors ask for? · What is a data room and what should be in it? · What documents do I need to close a seed round in the UK? · What happens at completion of a funding round?
Primary sources: Companies Act 2006 · GOV.UK — Running a limited company
