Until now, the general approach has been that a company cannot claim privilege against its own...
When it comes to selling your company, one crucial element that contributes to a smooth transition of ownership is the use of Completion Accounts. These financial snapshots play a pivotal role in defining the final financial terms of the deal. In this concise guide, we unravel the essence of Completion Accounts.
What Are Completion Accounts?
Completion Accounts are typically prepared after the completion date but with reference to the completion date. They provide an accurate picture of the company's financial position at the moment of transfer, and therefore determine the purchase price based on the company's actual financial position at the completion date.
Why Completion Accounts Matter
- Transparency: They offer a transparent view of the company's financial health at the closing date, minimising the chances of disputes later.
- Fair Valuation: Completion Accounts determine the final price of the transaction, ensuring both parties get their fair share of the deal.
- Risk Mitigation: They help identify any unexpected surprises, such as undisclosed debts or unaccounted-for assets, allowing for appropriate adjustments.
- Compliance: Following industry standards and regulations, Completion Accounts are a fundamental part of a legally sound transaction.
How Completion Accounts Work
In a situation where completion accounts come into play, the involved parties reach an initial purchase price agreement by concurring on an estimate of the anticipated equity value as at the completion date. Any discrepancies stemming from changes in cash, liabilities, assets, working capital or value generally between the agreed date and the completion date are typically the responsibility of the seller and are adjusted in the completion accounts.
Common adjustments may include:
- Accounting for outstanding debts and liabilities.
- Recognising additional assets not previously disclosed.
- Calculating working capital adjustments.
Once all adjustments are made, and the completion accounts have been completed, the final purchase price is determined, ensuring that both buyer and seller are in alignment regarding the company's actual financial position post-completion.
For precise and tailored guidance on Completion Accounts or generally in relation to any other corporate matter, please call Sarah Ward, a Partner in our Corporate Team, on 01384 340 596 or e-mail Sarah at sward@georgegreen.co.uk for advice and assistance.