---
title: "What Is Reps and Warranties?"
term: "Reps and Warranties"
description: "Reps and warranties (representations and warranties) are factual statements and promises in a purchase or financing agreement — about cap table, contracts, litigation, IP, and compliance — that if wrong give the other party indemnity or termination rights."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/reps-and-warranties
---

# What Is Reps and Warranties?

> Reps and warranties (representations and warranties) are factual statements and promises in a purchase or financing agreement — about cap table, contracts, litigation, IP, and compliance — that if wrong give the other party indemnity or termination rights.

**Reps and warranties** are contractual statements that certain facts are true — and promises they remain true through closing — forming the factual backbone of stock purchase, merger, and credit agreements.

## How it works

Company reps cover organization, capitalization, material contracts, IP ownership, employee matters, tax, and absence of undisclosed liabilities. Buyers and investors give reciprocal reps on authority and funds. Schedules list exceptions — known litigation, [/glossary/related-party-transaction](/glossary/related-party-transaction)s, option grants pending board approval. Breach triggers indemnification claims, often funded from [/glossary/escrow](/glossary/escrow) holdbacks in M&A.

Venture rounds use shorter rep sets than billion-dollar acquisitions, but cap table and IP reps still matter. [/glossary/legal-diligence](/glossary/legal-diligence) verifies rep support before signing.

## Why it matters

- **Founders:** Start data room hygiene early; reps are only as safe as underlying records.
- **Investors:** Reps define what risks were transferred vs retained post-close.
- **Counsel:** Survival periods and caps negotiate how long sellers remain liable.

## Common mistake

Signing broad reps without reading disclosure schedules. "We didn't know" rarely defeats indemnity if management signed knowingly incomplete schedules.

## Related ideas

[/glossary/escrow](/glossary/escrow), disclosure schedules, [/glossary/legal-diligence](/glossary/legal-diligence), and indemnification.

## FAQ

### What are reps and warranties in simple terms?

They are lists of claims the company makes in a contract — we own our IP, we have no secret lawsuits, this cap table is correct — and if a claim is false, the buyer or investor can seek damages or walk away.

### Why do reps and warranties matter?

They allocate risk in financings and M&A. Founders disclose exceptions on schedules; buyers hold escrow or insurance when scared of hidden liabilities.


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Source: https://venturecapitaltracker.com/glossary/reps-and-warranties