Deferred consideration

Not a term of art, instead a somewhat vague term which practitioners use to refer to consideration that will or may be payable sometime in the future rather than at completion. It is usually encountered in connection with asset and share sales. Deferred consideration may be payable in a number of different ways including:

It may also take a number of forms including earn-outs ( , completion accounts ( , retentions ( . In addition, potentially, there are many other situations where the payment of consideration is deferred either in respect of:

  • Circumstances existing at completion but which with are unascertained at that time; or

  • Future events which may or may not occur.

For example, the buyer and seller may agree that if (but only if) a contract is completed with a major customer, then a further sum of money becomes payable.

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