This post is part of our First Year Associate series, where we’ll provide explanations to simple issues faced by first year corporate associates. We’ll focus on the basic problems that you might be embarrassed to ask a senior attorney. And if you already asked, the answer was so brief it provided just enough context to bring you here.

The Closing Binder: A Closer Look

If you’re a junior associate in a transactional practice—like M&A, venture capital or commercial finance and lending—you’ve probably already been asked to create a closing binder after a deal closes. Let us help you get your head around what that means. A formal definition of a closing binder might be a final, compiled record of the fully-executed transaction documents that will be delivered to the parties after closing. But really, it’s a way to make sure parties can quickly reference important information and terms from a deal.

Origins

The term “binder” is the remnant of a time when these final records were compiled into three-ring binders and physically mailed to clients—you’ve probably seen copies lining the dark corners of your law firm. Today, closing binders are delivered electronically (via email, thumb drive or even compact disc) and are often referred to, appropriately, as electronic closing binders. Depending on where you practice, they may also be called closing transcripts or closing bibles.

The Anatomy of a Closing Binder

A closing binder is typically composed of three parts: 1) a cover page, 2) an index (or table of contents) and 3) the transaction documents. In most cases, these components are all combined into a single PDF file; however, some clients prefer for the cover page, index and each compiled transaction document to be a separate PDF file (so make sure you ask!).

I. Cover Page

The cover page will list the name of the transaction, the parties involved in the transaction and the closing date—here is a sample. Often times law firms will add their firm branding to the cover page. In other instances attorneys might add the client’s logo to the cover page for additional flair.

II. Index

The index is exactly what it sounds like: a list of all of the transaction documents that are included in the closing binder. Following the cover page, it numerically orders documents so they can be located within the closing binder. It may also group documents under common document type (e.g., Indemnification Agreements, Employment Agreements) or transaction stage (e.g., Formation Documents, Post-Closing Documents). Here is a sample page.

You’ll notice that unlike other indices, a closing binder index does not include page numbers. Why? Well, each individual document typically has page numbers of its own, so adding page numbers to a closing binder means page numbers on top of page numbers. You can imagine why this would be a bad idea.

A top-notch closing binder will also include hyperlinks in the index as well as PDF bookmarks. Hyperlinked document names let a client click on a document name and jump directly to that document in the closing binder. Bookmarking the documents allows a client to locate particular documents using any PDF viewing software.

III. Transaction Documents

Following the index are the transaction documents, included in the order set out in the index. Each document should be the executed, compiled version—this means it contains all of the signed signature pages and has each attachment, exhibit or annex inserted, where necessary. If an attachment or exhibit appears elsewhere in a document, consider using a cross-reference page rather than inserting the entire document as an attachment (this will reduce the size of the closing binder!).

Do all parties get the same closing binder?

Great question, and while it depends on the transaction, often times they receive different versions. In many cases, documents related to the transaction may be internal to one party and do not need to be disclosed to other parties.

For example, if the buyer in an M&A transaction obtains third-party financing to fund the acquisition, that financing documentation might be included in the buyer’s closing binder, but would not be included in the seller’s closing binder. Board resolutions and post-closing consents (that are not closing conditions) are other examples of documents that may differ between closing binders.

When does a closing binder go out?

Ideally, a closing binder should be delivered as soon as possible after closing. But if everything in this article sounds like it might take a lot of time, it’s because it does—which means closing binders often get pushed weeks or months after closing. And here is where we insert our warning label: the closing binder gets markedly more difficult to build the further you are from the closing date. No matter how well you understand the transaction at closing, your working knowledge of the details becomes fuzzier by the day.

So if you can spare the time, knock it out quickly. “Future you” will be very thankful.

If you are looking to improve your electronic closing binder process, there are some software tools out there, like SimplyAgree, that will automate many of these manual processes for you. For example, SimplyAgree will compile your documents, generate indexed and bookmarked indices, and automatically build branded closing binders in different formats for each transaction party.