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As a seller of a business, payment in cash on completion is almost always going to be preferable, unless there are tax advantages to accepting alternative forms of payment, such as deferred consideration.

Deferred Consideration

However, a buyer may not be in a position to pay the entire purchase price at the time of completion for cash-flow reasons. In this case, deferred consideration may be utilised whereby the purchase price is paid in a number of instalments.

A seller should consider seeking some form of security before agreeing to any form of deferred payment if there is any risk that the buyer may not be able to (or willing to) make the deferred payments. This could include taking security or entering into an escrow arrangement.

External Funding

If a buyer is using external finance to fund the acquisition, their funder will most likely take security over the buyer and the target company. This security will take priority over any other form of security, including any that a seller obtains.

Therefore, in these circumstances, it may be advantageous not to have any security in order to prevent the funder restricting the seller's ability to bring a claim against the buyer.

Additional Methods

Loan notes are another form of deferred payment but are unlikely to be attractive to a seller of a business by way of an asset sale due to the unfavourable tax treatment.

In addition, a buyer may want to tie a seller into working with them for a period post-completion in order to assist in the handover of assets, particularly if liaison with third parties is required. This could be achieved by way of an earn-out arrangement

A buyer may also require a "retention", which is where some of the purchase price retained as security for potential claims under the Business Purchase Agreement.

We recommend that you try to resist agreeing to a retention unless you really have to, as the buyer often uses the retention account as a negotiation tool to reduce the level of deferred consideration payable to the seller.

For further guidance on the different ways to structure the purchase price, see our Consideration Glossary.

It is important to ensure that the proceeds of a sale are treated in a tax efficient manner. We strongly recommend that a seller obtains appropriate tax advice from a specialist advisor prior to completing any transaction.


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.


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