Weinstein Clause

The #MeToo movement has found its way into M&A.  Companies are taking steps to prevent liability for the inappropriate behavior of its executives by including in contracts a “Weinstein Clause” or a “MeToo Rep”.

What Is It

A Weinstein Clause allows a buyer to recover proceeds in the event allegations of misconduct arise with respect to those in leadership. The purchase agreement will include a representation of the seller that no misconduct or allegations of misconduct have been made against executives. A portion of deal proceeds is then subject to escrow or holdback in the event that representation is found to be false. Deal proceeds may also be subject to clawback. The Weinstein Clause is intended to shift the liability of bad actors from the buyer to the seller


Aside from providing recourse to buyers, the Weinstein Clause has the benefit of incentivizing the seller to do social due diligence on itself. Sellers and their counsel will provide due diligence materials for all aspects of the business but often this does not include information on the key employees and leadership. People can be more important than the technology or product behind the company (see previous post on acquihires) so it makes sense to protect against the liability that can arise from misconduct.

New Standard?

Misconduct in the workplace is not a new phenomenon but the #MeToo movement has certainly brought light and greater scrutiny to the issue. The inclusion of the Weinstein Clause is still in its early stages and it will be interesting to see how disclosures are made to address this representation.

Leave a Reply

Your email address will not be published. Required fields are marked *