Corporate Matters — January 2014: validity of an earn-out notice
The negotiation of earn-out provisions is often one of the pinch points in the negotiation of a share purchase agreement. The preparation and service of the earn-out notice tends to attract less attention. This can be costly, as a recent High Court judgment demonstrates.
In Barratt v Treatt plc, a share purchase agreement (SPA) provided for an earn-out to be calculated by reference to the pre-tax profits of the target group as shown in the audited accounts. The agreement also required the purchaser to carry out the initial calculation of the earn-out and to provide notice of that calculation to the seller. Failure to do so by the purchaser would result in the calculation of the earn-out being referred to an independent accountant for determination.
The purchaser duly served notice of its earn-out calculation on the sellers. However, it was apparent from the notice that the calculation had been determined, at least in part, by reference to management accounts rather than the audited accounts as required by the SPA. The seller sought a declaration that the notice was invalid…
If you are registered and logged in to the site, click on the link below to read the rest of the Walker Morris briefing. If not, please register or sign in with your details below.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from Walker Morris
News from The Lawyer
Briefings from Walker Morris
When a housing association sought possession against a tenant with severe mental health problems…
The aim of the directive is to ensure that consumers who purchase a property are protected against the risks. It also introduces EU harmonisation requirements on lenders.
Analysis from The Lawyer
Which firms are cutting it in this era of slimline rosters, and who are the GC new brooms making clean sweeps? The Lawyer can reveal all
The law school war shows no signs of ending. But we have, perhaps, reached the end of the beginning.