A comprehensive guide to price adjustment provisions in share purchase agreements (part 1)

This article provides a detailed overview of price adjustment provisions in share purchase agreements, focusing on two common methods: Closing Accounts and Locked Box. The Closing Accounts method adjusts the purchase price based on the target company’s financial status at completion, considering factors like net debt/cash, working capital, and profit. Pros include reflecting the company’s value at completion, while cons involve time-consuming preparation and potential disagreements. It also explores practical examples of adjustments for debt, cash, and working capital, highlighting the need for careful consideration in defining these terms. Additionally, the article touches on adjustments based on profit or net asset value (NAV) and the importance of agreed accounting principles in the share purchase agreement. The article concludes by mentioning ContractNinja’s services for creating comprehensive share purchase agreements.