We had a minor partner exit contentiously several years ago, and we still have loose ends regarding historical equity claims and IP ownership. How do we clean up these legal and financial legacy issues on our exit runway before a buyer's due diligence team flags them?

Question

Tyler Smith · Accepted Answer

Legacy legal and financial disputes are deal-killers. If a buyer’s due diligence team uncovers an unresolved dispute with a former partner, or discovers that a past contractor never signed a formal intellectual property assignment, they will walk away or demand a massive escrow holdback. You must resolve these issues before you go to market.

On your exit runway, conduct a thorough internal audit of your cap table, corporate bylaws, and intellectual property agreements. Identify any past employees or contractors who developed software, designs, or key processes for your company. Ensure you have signed IP assignment agreements for every single one of them.

If a former partner exited without a clean, fully executed settlement and release agreement, hire a specialized corporate attorney to draft and secure one now. Do not wait for a buyer to ask for it. It is far cheaper and easier to resolve a lingering dispute while the company is operating normally than it is when a multi-million dollar transaction is hanging in the balance.

By completely purging these legacy legal liabilities and documenting a clean, undisputed cap table on your exit runway, you show buyers that your business has zero legal baggage, allowing them to proceed to close quickly and without hesitation.