Mergers & Acquisitions · Question

Should I disclose pending litigation to a buyer early?

Short answer

Yes, in most cases, but in a measured way: disclose known material litigation in summary once a confidentiality agreement is signed and serious interest is clear, then give full detail during due diligence. Concealment usually surfaces anyway, and then it can reduce the price, trigger claims under the sale agreement or end the deal. Take your lawyer's advice on wording.

In more detail

Buyers expect some disputes in any operating business. What worries them is surprise. A case disclosed early with facts and context becomes a negotiable risk; the same case found late looks like a character problem.

Why staging works

Before a confidentiality agreement is in place, share nothing sensitive. After it, a short summary is enough: the forum, the nature of the claim, the stage and your counsel's general view. Detailed pleadings, orders and exposure estimates go to the data room when the buyer is committed.

What to prepare

A one-page note per matter covering parties, subject, amount at stake in words, status and next hearing stage.
Your lawyer's assessment of likely outcomes, framed as an opinion and not a promise.
Whether provisions have been made in the accounts.
Any related tax disputes, notices or regulatory enquiries.

How the buyer may respond: typical responses include a price adjustment, a specific indemnity from the seller, a retention of part of the price until the matter ends, or a requirement to settle before closing. These are negotiations, not penalties, and you can only negotiate what you have disclosed.

Disclosure also protects you

Sale agreements usually contain statements from the seller about the absence of undisclosed disputes. Failing to disclose a known case can expose you to claims after closing, so list it properly against those statements.

This is general information, not legal advice. Ask your lawyer to review how and when each matter is described before it reaches any buyer.

Key points

Known material litigation should normally be disclosed, in stages, after confidentiality is in place.
A disclosed case is a negotiable risk; a discovered one damages trust and price.
Prepare a short factual note and your lawyer's assessment for each matter.
Disclosure against the sale agreement's statements protects you from later claims.

Who this applies to

Sellers with pending civil, tax or regulatory disputes.
Promoters unsure how much to reveal at first contact with a buyer.
Legal and finance teams preparing the dispute folder.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.