One owner will speak for all of you after closing.

Most purchase agreements signed by more than one owner name one person to act for all of them after closing. That person can settle the true-up, resolve indemnity claims, direct the escrow, and litigate. In a merger, Delaware courts have bound owners who never signed. Negotiate the limits before closing, because the clause is drafted to leave almost none.

What is a seller representative clause, and why do most multi-owner purchase agreements have one?

A seller representative clause appoints one person as agent and attorney-in-fact for all of the sellers after closing. It exists because no buyer wants to negotiate a post-closing claim with nine former owners separately. It gives the buyer one signature to rely on and the sellers one decision maker. Not every deal has one.

Two or three owners who all sign can sometimes close without one. Add owners, estates, or trusts and the buyer will insist. The clause sits near the back, headed “Securityholder Representative” or “Members’ Representative,” drafted as an irrevocable power of attorney. It reads like boilerplate. It decides who controls the last slice of your money.

What can the seller representative do without asking you?

The representative’s authority in a typical purchase agreement is drafted as broadly as the drafter can make it. The grant is not a list of permitted acts. It is a general delegation followed by examples. Unless you cut it down in negotiation, the representative acts alone and the result binds you.

• Settle the working capital true-up at any number.
• Investigate, compromise, and settle indemnification claims.
• Direct the escrow agent to release funds to the buyer.
• Waive conditions, grant extensions, and amend the purchase agreement itself.
• Commence, defend, and settle litigation for all sellers.
• Hire lawyers and accountants and pay them from money withheld from your proceeds.
• Take any action the representative deems necessary or appropriate. That is the sentence that swallows the list.

I read the power of attorney and the liability allocation before I read the purchase price.

Do Delaware courts enforce the representative’s decisions against an owner who disagreed?

In a merger, yes. The Court of Chancery has enforced a stockholders’ representative’s authority against former holders who never signed the merger agreement, including roughly 110 who purported to revoke the appointment after closing. The court held they were bound as a matter of corporate merger law, not of ordinary agency law.

That distinction cuts both ways. The same opinion accepted that agency principles alone would not have bound holders who never consented, because a principal can revoke an agent. Merger law supplied the binding force, because the consideration was allowed to depend on facts ascertainable outside the agreement, including a representative’s determination. The court also enforced the exclusive Delaware forum clause against holders who sued elsewhere, and a later decision held an escrow funded from sale proceeds binding on objectors.

If your sale is an asset sale or a purchase of your equity, that merger reasoning is not available to the buyer. What binds you is your own signature. Check the governing law clause and your entity’s home state; Delaware law is a choice, not a default.

Cases: Aveta, Inc. v. Cavallieri, 23 A.3d 157 (Del. Ch. 2010) (Puerto Rico target; its merger statute tracked an earlier version of 8 Del. C. 251); Houseman v. Sagerman, C.A. No. 8897-VCG (Del. Ch. July 20, 2021).

The structure can also work in your favor. When a buyer in Chancery demanded documents from more than fifty former selling stockholders as parties, the court refused. Under that agreement, appointing the representative made the representative the real party in interest, so the buyer was limited to third-party subpoenas. It keeps the buyer off your doorstep and keeps you out of the room.

Case: Fortis Advisors LLC v. Allergan W.C. Holding Inc., 2020 WL 2498068 (Del. Ch. May 14, 2020).

The wall that stops the buyer from reaching you is the same wall that stops you from reaching the negotiation.

Can you sue the representative for a bad settlement afterward?

Suing the representative for a decision you dislike is hard, because the standard comes from the clause itself. Where a merger agreement let the representative act in its sole and absolute discretion, Chancery in Houseman measured the conduct by subjective good faith. Honest and wrong survives that test. Tighten the language if you want a stricter one.

Apply that to a real fight. The buyer claims a six-figure working capital shortfall. The representative, also the operating partner staying on as a consultant to the buyer, settles in the middle rather than fight. You call the number unreasonable. Under discretionary language, unreasonableness is not the test; you are left attacking honesty. Fraud and willful misconduct stay carved out, and a representative who misapplies money owes an accounting. That is a backstop, not a plan.

Joint and several or several and pro rata: which allocation protects a fifteen percent owner?

Liability allocation decides whether a fifteen percent owner can be made to pay the whole of a claim. Joint and several liability lets the buyer collect the entire amount from whichever seller is easiest to reach. Several and pro rata liability, capped at each seller’s share of proceeds, limits each owner to that percentage. Insist on the second.

There is a middle position buyers in this market do accept. Company representations are backed severally and pro rata; each seller backs its own title and authority alone, in full. A claim that you did not own what you sold is yours. A claim about the company’s inventory is everybody’s, in proportion.

Also fix the ceiling. Your maximum exposure across every claim should be a stated number tied to what you received, with escrow as first and ideally only recourse. Published data on larger private-target deals shows separate adjustment escrows in roughly 58 percent of agreements, about 42 percent of which make that escrow the sole source of recovery. That sample starts well above an owner-operated sale. The drafting ideas transfer; the percentages do not.

Source: ABA Business Law Section, Market Trends Subcommittee, Private Target Mergers and Acquisitions Deal Points Study, 2025 edition (139 agreements closed in 2024 and early 2025, purchase prices roughly $25 million to $900 million). Current edition as of October 2026.

What do the expense fund and the representative’s indemnity commit you to?

The expense fund is cash withheld from your proceeds at closing for the representative to spend on post-closing costs, usually at sole discretion. The indemnity beside it is your promise to cover the representative personally for losses and costs incurred in the role. Both reduce what you keep. Neither is capped unless you cap it.

Expense funds are routine where a professional representative is engaged and less common in owner-operated sales, but when one appears it arrives with no budget and no release date. Many clauses also let the representative recover overruns from the sellers or from the escrow, turning a capped contribution into an open one. A firm serving as professional representative reported average funds in the low-to-mid six figures for 2020 deals, in transactions far larger than yours. Import the discipline, not the number: size the fund to the risk, cap recourse beyond it, and write a release date.

Source: SRS Acquiom, published M&A Deal Terms Study materials on expense funds, figures for 2020 deals. Checked October 2026.

Read the indemnity for three things: several or joint, capped or unlimited, and whether recourse stops at the expense fund and remaining escrow.

Delaware will not always rescue you from a bad post-closing obligation, but there is a limit. In one Chancery decision the court refused to enforce an indemnification obligation imposed through a letter of transmittal that was unlimited in duration and reached the entire merger consideration, and refused to enforce a release unsupported by separate consideration. The court called that holding limited, and it turned on merger mechanics. Do not assume it reaches a deal you signed. Read the transmittal letter with the purchase agreement open beside it.

Case: Cigna Health and Life Insurance Co. v. Audax Health Solutions, Inc., 107 A.3d 1082 (Del. Ch. 2014).

How does a minority owner lose money without ever hearing about it?

A minority owner loses money quietly because every step after closing runs through one person who, unless the contract says otherwise, owes no duty to report. The true-up statement goes to the representative. So does the claim notice. The escrow agent takes instructions from the representative. You find out when the wire is short.

Add the conflict present in most owner-operated sales. The representative is usually the majority holder or the operating partner, who is also the person most likely to have caused the breach the buyer is claiming, and often the person holding an earnout or a role with the buyer. The incentive to settle fast out of shared escrow money is structural.

The person deciding how much of your money to hand back to the buyer is frequently the person whose conduct the buyer is complaining about.

Appraisal is not the answer. In a Delaware corporate merger, a stockholder who does not vote in favor has a statutory appraisal remedy, but it runs on fixed steps: written demand before the vote, or within twenty days after notice where the merger is approved by written consent or under the tender offer provision; continuous holding; and a petition in the Court of Chancery within one hundred twenty days of the effective date. Miss a step and it is gone. It values your shares as of closing, so it does nothing about a settlement a year later and nothing for an owner who voted yes and took the wire. In an LLC sale there is no statutory appraisal unless the operating agreement or merger documents create it.

Law: 8 Del. C. 262; 6 Del. C. 18-210.

What should you negotiate, and where does each ask belong?

Authority thresholds, notice rights, and liability allocation are the three edits that change a minority owner’s position, and they belong in the documents before signing. After closing, the representative’s authority is effectively irrevocable and the standard for challenging a decision is whatever the clause says. Expect the buyer to resist anything that makes its settlements less final.

That resistance tells you where each ask goes: allocation and notice into the purchase agreement, limits on the representative into a sellers’ agreement the buyer never signs.

• Several and pro rata liability, capped at your share of the proceeds, with escrow as first and ideally only recourse. Your own title representations stand alone; you do not back a partner’s.
• Notice rights with teeth. Copies of every claim notice, the buyer’s closing statement, and any settlement term sheet, within stated days.
• A hard cap on the representative indemnity, limited to the expense fund and remaining escrow, with a release date tied to the final escrow release.
• A dollar threshold on settlement authority. Ask in the purchase agreement; if the buyer refuses, put it in the sellers’ agreement, where a breach gives you a claim against the representative.
• No amendment without seller consent. The power to amend is the power to rewrite your deal.
• A sellers’ agreement signed by every owner before closing, covering allocation among yourselves, the expense fund waterfall, a duty to report, contribution, and a forum for fights among you. Bind successors and estates; owners die and move interests into trusts while escrows run.

What should you do first?

Start with the documents, not the conversation. Read the representative section, the indemnification article, and the escrow provisions as one connected machine, then the transmittal letter if the deal is a merger. Those four places hold nearly all of your post-closing exposure. Work in this order.

• Write down your percentage and what you expect to receive at closing, net of escrow and any expense fund. That is your real number.
• Find the word “joint” in the indemnification article. If it appears, that is the first edit.
• Mark every verb in the grant of authority. Each can happen without you.
• List the proposed representative’s other economic interests: earnout, consulting agreement, rollover equity, employment with the buyer.
• Ask for the draft sellers’ agreement in writing, while everyone still needs your signature.

I ask for the cap table and the draft sellers’ agreement before I mark up the indemnity, because allocation among owners decides what the indemnity actually costs each of them.

Your leverage exists on one day: the day before you sign. After that, one owner speaks for all of you, and the clause you skipped decides what that costs.