CALL US ON 08456 800 727

Although, as a buyer, you will have come to an agreement with the seller regarding the purchase price for the shares in the target company, this will most likely have been based on certain assumptions. There is a risk that these assumptions prove to be incorrect and so you may seek to manage that risk by way of an earn-out arrangement or a retention.

A retention can give a buyer some reassurance that should a warranty or indemnity given by the seller prove to be untrue, the cash is there to pay for the warranty claim without having to pursue the seller for it (who may no longer have the proceeds of the share sale or have left the jurisdiction) or use it as a negotiating tool to reduce the amount of deferred consideration ultimately paid.

Another reason a buyer may prefer not to pay the full purchase price upfront is to help with cash-flow. This can be achieved by way of a deferred cash payment or loan notes. However, a seller is almost always likely to prefer payment in cash upon completion and, if that is not forthcoming, they may well seek some form of security for any deferred consideration.

See also our Consideration Glossary.


The information provided on this website is intended as a general guide only. It is not exhaustive or tailored to your individual circumstances. Please consult our Website Terms of Use for further information.


Helpful Information

About Legal Clarity


View details of our service here.


View details of our service here.

Free Company Name Check

Is your choice of company name available?

Click here to check.

© 2019 Legal Clarity Limited: Corporate & Commercial Legal Services - Company Formation - Company Secretarial Registered in England and Wales (number 6452925) and authorised and regulated by the Solicitors Regulation Authority (SRA number 573589). 1st Floor, Charles House, 148-149 Gt Charles Street, Birmingham, B3 3HT. Tel: 08456 800 727. VAT registration number 925709016.