How to Track a Special Indemnity After Close

How to track a special indemnity is a matter-specific recovery ledger after close, not the general basket and not the general cap. For each named risk, log the matter description copied from the agreement, whether it is stand-alone (no breach required), the separate survival or resolution clock, whether the general basket and cap apply, any dedicated escrow or holdback, claims and reserves against that matter, and whether the matter is resolved or still open. Raziel's indemnity basket tracking page is the general-claim threshold. Raziel's indemnity cap tracking page is the general ceiling. This page is the known-risk row that often sits outside both.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the signed special-indemnity schedule. Do not invent a matter.

What this special-indemnity ledger is (and is not)

A special (or stand-alone) indemnity covers a specific topic outside the ordinary representation-breach path, often without requiring a separate breach of a general warranty. Goulston & Storrs (JD Supra), reviewing ABA Private Target M&A Deal Points Studies, reports that stand-alone indemnities in surveyed private deals rose from 69% in the 2007 study to 100% in the 2023 study. Common stand-alone topics in that survey stream include taxes, ERISA, environmental issues, unpaid seller expenses, covenant breaches, dissenters' claims, indebtedness, and excluded liabilities. Fasthoff Law Firm notes that a special escrow is often sized to an identified exposure (pending litigation, tax audit, environmental obligation) and releases on resolution of that issue rather than on the general survival date. Those are practice notes and study tallies. Your schedule controls.

Seven columns on one special-indemnity row

Open one row per named special indemnity (not one row for "all specials"). Attach the schedule and any related escrow agreement.

• Matter copied. Short label plus the exact schedule language (tax period under audit, Case No. X, Site Y remediation, key-customer change-of-control consent). Do not broaden the label into a second general indemnity.

• Stand-alone vs breach-tied. Whether recovery requires a representation breach, or whether the seller indemnifies for the matter as such. Goulston & Storrs: stand-alone indemnities usually sit outside the general breach path. Copy your structure.

• Survival / resolution clock. Fixed end date, statute-plus-buffer (common for tax), or "until the matter is finally resolved." Fasthoff: special-escrow release should follow the identified issue, not the general survival period. Copy the signed clock.

• Basket and cap treatment. Outside the general basket, outside the general cap, under a specific cap, or sharing the general pot. Acquisition Stars commentary: special indemnities are often dollar-for-dollar up to a negotiated maximum for that risk, with their own survival. Copy yours. Do not assume "always uncapped."

• Dedicated escrow or holdback (if any). Amount, holder, release conditions, and remaining balance. Keep this separate from the general indemnity escrow on the escrow-holdback row.

• Claims, reserves, and payments. Date noticed, amount asserted, reserve booked, amount paid, and defense-control notes if the agreement assigns control. Update when the underlying audit, case, or remediation moves.

• Status. Open, partially resolved, released, or expired. When status flips to resolved, close the row and free any unused special escrow on its own release terms.

Copy the schedule, not a diligence memo headline

Do not turn every diligence flag into a special indemnity in your book. Only the matters the agreement actually schedules belong here. Do not fold a special-indemnity claim into the general basket tally "to keep one number." That is how a tax special that was supposed to be dollar-for-dollar disappears under a deductible that never applied. Keep RWI exclusions in view: known scheduled matters are often outside the policy, which is why the special row and its escrow exist.

Keep special escrows off the general holdback row

If the purchase agreement funds a dedicated special escrow, track its balance here and leave the general indemnity escrow on the escrow-holdback row. Mixing them makes a resolved litigation special look like unused general protection, or the reverse. When RWI covers unknown breaches but excludes the scheduled matter, the special row is often the only cash path for that risk. Say so in the status cell when the binder exclusion is clear from the policy or the deal memo attached to the row.

When the ledger holds

The row holds if the seven cells are copied from the PDFs (or marked missing). It fails when you invent a matter, mix special dollars into the general cap, or release a special escrow on the general survival date without reading the release trigger. Raziel's MOIC calculator is only honest if those recoveries and shortfalls have dates and labels. Raziel does not interpret your special-indemnity schedule. Copy the seven columns.