Representations serve two functions: diligence, by forcing disclosure, and risk allocation, by supporting an indemnity claim.

Fundamental representations. Organization and good standing; authority and enforceability; capitalization and title to the equity; no conflict with the governing documents or material contracts; brokers.

Business representations. Financial statements prepared consistently and fairly presenting; no undisclosed liabilities; absence of changes since the balance sheet date; title to and condition of assets; sufficiency of assets to operate the business; real property and leases; intellectual property ownership and non-infringement; material contracts listed and in force; customers and suppliers; litigation; compliance with law and permits; employees, benefits and labor matters; taxes; environmental; insurance; related party transactions; and data privacy and security.

Sufficiency of assets is the most valuable and most negotiated business representation in a carve-out transaction.

Knowledge qualifiers. Whose knowledge, and whether it means actual knowledge or knowledge after reasonable inquiry. The definition should name the individuals.

Materiality qualifiers on individual representations, interacting with the scrape.

Full disclosure representations — that no representation omits a material fact — are resisted by sellers and are worth asking for.