The deferral of part of the price in the sale and purchase of companies is a common practice, but it may entail risks if adequate guarantees are not established.
When a company is sold, it is common for part of the price to be paid on a deferred basis, especially if the transaction involves significant sums. The buyer usually proposes payment in several installments, conditioned to the occurrence of certain events or the fulfillment of future objectives. For this reason, it is essential that the seller carefully negotiate these terms to ensure collection of the agreed price.
Negotiation Strategies for Deferred Payment
To protect against possible defaults, it is important for the seller to require collateral. This may include pledge the balance in a bank account, creating a notarized deposit or obtaining a bank guarantee. In addition, it is not enough to ensure that the money is reserved; it is vital to agree that, once the agreed conditions are met, the seller can access those funds directly without relying on further action by the buyer. This prevents unnecessary delays and potential problems in the future.
How to manage deadlines according to each situation
The conditions for releasing payment may vary depending on the agreement reached. For example, if payment is conditional on the company achieving a specific volume of sales, the seller must be able to monitor the evolution of turnover. This is especially relevant if the buyer retains the salesperson as part of the team to ensure continuity of customer contracts. If the salesperson is no longer part of the company, it is essential to agree on monthly reporting and access to accounting, as well as the possibility of intervening in negotiations if issues arise.
In another case, if payment depends on the signing of contracts with important customers, it is crucial that the salesperson can actively participate in the commercial and recruitment efforts, establishing a clear deadline for meeting this objective.
Protection against unforeseen debts
Another common practice is for the buyer to withhold the deferred price if debts arise that were not known at the time of the sale, such as the result of a tax inspection. In these situations, it is essential that the parties negotiate how and when payment may be withheld, ensuring that these debts predate the transaction and setting specific deadlines for the seller’s liability. It is equally important that the seller is informed immediately of any incident to be able to exercise his right to plead; otherwise, his liability should be exonerated.
Clear instructions for the release of funds
When agreeing to deposit the money in a bank or notary account, it is crucial to leave precise instructions on when and how the payment will be released. In this regard, it is necessary to establish the date from which the seller will be able to claim the funds, as well as the documents to be presented to validate the request, such as a certificate from the administrator or a signed contract. These documents must be duly legitimized to facilitate the process.
If a bank guarantee is chosen as a guarantee, it is important that it be joint and several and on first demand. This ensures that, if the buyer does not comply with the payment, the seller can claim the amount immediately, without additional complications.
You can contact this professional firm for any questions or clarification you may have in this regard.
For more information, please consult with Tax consulting
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