Locked Box Accounts

Introduction

The purchase price is of fundamental importance to any share sale or purchase, there must be a willing buyer and a willing seller both of whom are "happy" (or equally unhappy) with what is being paid.

A locked box is a mechanism through which the price is based on a balance sheet (the "locked box accounts") drawn up and agreed by the parties before completion (the "locked box date").

Locked box accounts v completion accounts

A locked box mechanism sets the purchase price based on historical financial information and there is no post-completion adjustment to the price; whereas the alternative completion accounts mechanism establishes the purchase price by reference to the financial position of the business as at completion, with a post completion accounting exercise.