Information undertakings: Overview, definition, and example
What are information undertakings?
Information undertakings refer to a party’s obligation to provide specific data, reports, or disclosures as required under a contract. These obligations ensure transparency, accountability, and compliance with legal or financial requirements. They are commonly found in loan agreements, business contracts, and regulatory filings.
For example, a borrower may be required to submit quarterly financial statements to a lender as part of a loan agreement to demonstrate ongoing financial health.
Why are information undertakings important?
Information undertakings are important because they help ensure that all parties in an agreement have access to relevant and accurate information. This transparency is critical for decision-making, risk management, and compliance with legal or financial regulations.
For lenders, investors, and business partners, information undertakings reduce uncertainty and provide assurances that contractual obligations are being met. Without these obligations, a party could withhold key information, leading to disputes, financial risk, or regulatory penalties.
Understanding information undertakings through an example
Imagine a company secures a business loan from a bank. The loan agreement includes an information undertaking requiring the company to submit audited financial statements every six months. This allows the bank to monitor the company’s financial health and ensure it remains capable of repaying the loan. If the company fails to provide these reports, the bank may consider it a breach of contract.
Similarly, in a merger agreement, one party may have an obligation to provide regular updates on business performance, regulatory approvals, or key financial metrics. This ensures that the acquiring company has full visibility into the target company’s operations before the deal is finalized.
An example of an information undertakings clause
Here’s how an information undertakings clause might appear in a contract:
"The Borrower shall provide the Lender with quarterly financial statements, annual audited accounts, and any other information reasonably requested to assess the Borrower’s financial condition. Failure to provide such information within the agreed timeframe shall constitute a breach of this Agreement."
Conclusion
Information undertakings define a party’s obligation to disclose key data, ensuring transparency, compliance, and informed decision-making. These obligations are crucial in financial agreements, business contracts, and regulatory compliance frameworks.
By including clear information undertakings in contracts, parties can protect their interests, reduce risks, and maintain accountability throughout the agreement’s duration.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.