Dispute regarding the payment of deferred consideration

Acting in a dispute regarding the payment of deferred consideration for a manufacturing company whose directors had sold their shares to an international company but had not been paid.

The Share Purchase Agreement had incorporated a clause under which the payment of Deferred Consideration was linked directly to future performance. It was felt that the measurement of the performance was being manipulated to reduce the figures and avoid the payment of consideration. This led to a significant loss for the directors who were relying upon the deferred sums for their pension.

The use of a forensic accountant to consider the issues raised was going to be very costly and was a deterrent to the international company from the outset. By setting out clearly the contractual and legal entitlements of the directors and the future costs of any action, the commercial and legal implications of the dispute were clear for all from the outset. This enabled the parties to communicate on a more equal footing without prejudice to agree a way forward.

The parties were able to find a solution to stagger payments in a revised way whilst preserving the directors entitlement but supporting the cash flow needs to the company. The costs of accountants and lawyers to further the dispute were therefore avoided.

In conclusion

At times it is important at the outset of a commercial negotiation to be very clear on your contractual and legal rights. We can provide that overview advice which enables you to enter into negotiations with all the information to hand and having considered all options available. Being informed then supports finding the best solution without potentially compromising your position in open and not without prejudice communications.

For further information and advice, contact the Dispute Resolution Team on 01604 828282 / 01908 660966 or email Litigation@franklins-sols.co.uk.