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Simple English definitions for legal terms
cold-comfort letter
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A quick definition of cold-comfort letter:
A cold-comfort letter is a type of letter that is used in the world of finance and business. There are two types of comfort letters. The first type is used in securities offerings and is written by a certified public accountant. This letter certifies that the financial statement accompanying the securities offering does not contain any false or misleading information. However, this letter has limited effect because the CPA only attests to certain representations and warranties that the issuer has authorized the CPA to rely on. The second type of comfort letter is used in corporations and is a letter of support (but not a guarantee) from a parent corporation on behalf of a subsidiary.
A more thorough explanation:
A cold-comfort letter is a type of comfort letter. In the context of securities, it is a letter from a certified public accountant (CPA) that certifies that the financial statement accompanying a securities offering does not contain any false or misleading information. However, the letter usually has limited effect because the CPA only attests to certain representations and warranties that the issuer has authorized the CPA to rely on.
For example, if a company is issuing stocks to the public, they may include a financial statement in the offering documents. To assure potential investors that the financial statement is accurate, the company may ask a CPA to provide a cold-comfort letter.
In the context of corporations, a cold-comfort letter is a letter of support (but not a guarantee) from a parent corporation on behalf of a subsidiary. The letter states that the parent corporation supports the activities and commitments of the subsidiary.
For example, if a subsidiary of a corporation is entering into a new business venture, the parent corporation may provide a cold-comfort letter to assure potential partners or investors that they support the subsidiary's activities.