Disclaimers

By THIS IS MONEY
Updated:

 

The Daily Mail City team explains disclaimers - legal text used to lower liabilities.

Scottish pop duo?

No, not the Proclaimers. Disclaimers are hunks of legalese that are intended to reduce liability.

Companies are particularly fond of sticking disclaimers relating to 'forward-looking statements' in their financial documents.

Why use them?

What looks like a solid forecast by a firm today can turn out to be an unholy pile of rubbish tomorrow.

Irate shareholders watching the value of their investment go down may sue if they feel a company made a misleading prediction.

What to do?

Get the lawyers in to draft some tightly worded rubric to reduce the threat of court action.

This will tell investors to treat any 'forward-looking statements' with asbestos gloves. It will instruct them to beware of anything introduced by words such as 'expects', 'anticipates', 'intends', 'plans', or 'believes'.

When are they used?

As often as possible. When a big company makes a presentation to analysts they will first display a page of densely packed legal rhetoric. The firm's representative will often accompany this with a quip about pesky lawyers.

But this is deadly serious - there's nothing more likely to spoil a director's bowl of corn flakes than a writ.

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