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Closing Balance Agreement

However, depending on the wording of the sales contract, one party may have to write a cheque to the other. The buyer is usually the one who writes the check; Sellers usually insist that downward adjustments to money be made in the fiduciary department instead of paying for them out of pocket. Similarly, the contracts at issue in Matria Healthcare, Inc./Matria Healthcare, Inc. are at issue. Coral SR LLC24 and OSI Systems25 were both subject to two separate arbitrations, under which adjustments to the working capital were to be submitted to arbitration after the closure of the accounting arbitration and other claims (e.g.B. In any event, the court had to determine whether the disputes at issue should be the subject of accounting or judicial arbitration. And in all cases, the court took a narrow view of the disputes that were to be submitted to accounting arbitration, and found that the claims in question included potential misrepresentations, unlike pure accounting disputes related to the calculation of working capital – and had to be subject to judicial arbitration. Overall, closing adjustments cover any number of potential adjustments to the purchase price of a transaction. These most often take the form of working capital adjustments; adjustments based on final liquidity, indebtedness and transaction costs; Population adjustments and/or inventory adjustments. In most cases, the purchase price is adjusted upwards or downwards to the amount for which one of these balances may deviate from a target balance previously traded at closing. Ultimately, the objective would be to avoid separate disputes regarding the scope of the arbitration clause and/or procedural issues relating to the correct or timely commencement of arbitration proceedings, the resulting in delaying and necessarily increasing the costs of settling actual disputes with respect to final adjustment. In order to avoid the uncertainty exemplified by Nash,26 it is necessary to explicitly state in the agreement who is entitled (i.e.

the accounting arbitrator, arbitrator or tribunal) to request whether the arbitration was initiated in a timely manner or whether the parties could collect “new points” in the arbitration. If the agreement provides for both legal and accounting arbitrations in order to avoid litigation before the courts, the agreement could clarify that all disputes relating to whether a claim falls under accounting or judicial arbitration are settled by the arbitrator, who is probably better able to resolve such questions of contract interpretation.27 It is customary for the agreement to set out a post-closing process: final adjustment and settlement of disputes between the parties in the context of the final adjustment. . . .

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Posted: 09/14/2021

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