Classification: Deal Driver
Section: Representations and Warranties of Buyer
Negotiation Time: Minimal
Transaction Costs: Insignificant
Major Impact: Transaction Completion

Authority of Buyer

What is This? The Representations and Warranties of Buyer portion of the Agreement is used to save the Seller time and money. Rather than require the Seller to go through third parties to find certain information, the Buyer provides the information and must reimburse the Seller for any Losses it suffers if the information is false or misleading. Here, the Buyer provides information regarding its legal ability to enter into the Agreement.

The Middle Ground: In this representation, the Buyer states that it has the power and authority to enter into the Agreement, and that it has taken the necessary corporate action to authorize the transaction.

Purpose: In order for the Seller to be paid the agreed upon amount of cash at Closing, the Buyer must have the power and authority, and take the requisite corporate procedural steps, to transfer the payment. This representation provides the Seller with assurance that the Buyer will make the Closing payment in a legally valid way, ensuring that it will not be recalled later on the grounds that it was never properly approved.

Buyer Preference: If the Seller’s “Authority” representation was changed in any way from the middle ground term, the Buyer wants the same change(s) made to this representation.

Seller Preference: The Seller is likely content with the middle ground term for this representation, but it does want any changes that were made to the Seller’s own Authority representation to also be made here.

Differences in a Stock Sale Transaction Structure: None.


We want The Middle Ground to be an ongoing dialogue for and resource to the lower middle market M&A community. The outline above is generally applicable, but there is always specific case law and nuance around certain industries that can be useful in helping buyers and sellers come together. If you are a lawyer or deal professional, we encourage you to add your perspective below.