![173349](https://www.taxation.co.uk/images/default-source/woodwing/173349.png?sfvrsn=594997ba_2)
Key points
- The use of deferred consideration structures in share sales can have various commercial advantages for both buyers and sellers.
- Sellers can achieve a (potentially) higher total consideration for their business.
- Buyers can bridge the valuation gap by offering a lower upfront payment and deferring a portion of the consideration.
- It will be important to accurately assess the market value of the earn-out right at the time of the sale of the shares.
- Where deferred consideration is payable to shareholders who are also employees or directors of a company consider whether that consideration could be reclassified as employment income.
The use of deferred consideration structures in share sales has become increasingly relevant in the current market environment. This can have various commercial advantages for both buyers and sellers for example allowing sellers to achieve a (potentially) higher total consideration for their business while enabling buyers to bridge the...
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