Legal & Compliance
Representations and Warranties
Last updated
Quick Answer
Statements of fact made by a seller in an M&A transaction that the buyer relies on — breaches can result in indemnification obligations.
Representations and warranties (reps and warranties) are factual statements made by a company (and sometimes its founders) in a purchase agreement. Common reps: the company is duly organized, financial statements are accurate, there are no undisclosed liabilities, IP is owned by the company, no pending litigation, employees have signed IP assignment agreements. If a rep turns out to be false (breach), the seller must indemnify the buyer for resulting damages. This creates post-closing liability for startup founders in acquisitions — one reason deal counsel reviews reps carefully. Representations and warranties insurance (RWI) transfers the risk of rep breaches to an insurer rather than sellers, allowing founders to receive full proceeds at close.
Further Reading
How a Series A Actually Works: From First Meeting to Wire Transfer
The Series A process is opaque, exhausting, and often takes three to six months. Here's exactly what happens at every stage — from the first intro email to the moment the money hits your account.
Startup M&A: What the Acquisition Process Actually Looks Like
Most founders don't learn how startup acquisitions work until they're already in one. Here's a clear, phase-by-phase breakdown of the M&A process — from first contact to closing.
Frequently Asked Questions
What is Representations and Warranties in venture capital?
Representations and warranties (reps and warranties) are factual statements made by a company (and sometimes its founders) in a purchase agreement. Common reps: the company is duly organized, financial statements are accurate, there are no undisclosed liabilities, IP is owned by the company, no...
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.
What category does Representations and Warranties fall under in VC?
Representations and Warranties falls under the legal category in venture capital. This area covers concepts related to the legal frameworks and compliance requirements in venture capital.
Newsletter
The VC Beast Brief
Join thousands of founders and investors. Every Tuesday.
The VC Beast Brief
Master VC terminology
Get smarter about venture capital every week. Our newsletter breaks down the terms, concepts, and strategies that matter.
VentureKit
Ready to launch your fund?