Completion accounts are a contractual mechanism through which the parties to a sale and purchase agree to adjust the purchase price after the transaction has completed.

Use of completion accounts varies by sector and jurisdiction according to market practice and bargaining power. They can also be used on any transaction where the target may have significant debt or fluctuations in working capital. 

The mechanism will typically operate as follows.

• The SPA will set out a provisional figure for the purchase price, which will be paid at completion.
• The SPA will identify the relevant metrics that will serve as the reference point for the adjustment (see below for more on this) and will fix a figure for each reference point based on the seller’s estimate of the likely position at completion. This is typically termed the “estimated” amount for that reference point (e.g. the estimated working capital). These estimated amounts are used to calculate the provisional purchase price paid at completion.
• After completion, the buyer will review the target business and draw up a set of draft completion accounts, which will include the buyer’s calculation of the actual amount for each reference point (e.g. the actual working capital) at completion.
• If the actual amount for a reference point differs from the estimates, the price will be adjusted and there will be a balancing payment. This could require the buyer to make an additional payment to the seller, or require the seller to pay an amount back to the buyer, depending on the reference point in question and whether the actual amount is higher or lower than the estimate.
• Completion accounts can (and often do) incorporate more than one reference point, in which case the various differences in amounts will be netted out to create a single balancing payment.
• Once the buyer has prepared draft completion accounts, it sends them to the seller.
• The seller will then have a prescribed period to dispute the draft completion accounts. If the seller does not validly dispute the draft completion accounts within that period, the draft will become final and binding on the parties and determine the amount of the adjustment.
• If the seller does validly dispute the draft completion accounts, there will be a mechanism for resolving the dispute. This might require the parties to act in good faith to try to resolve the dispute themselves. However, as a fallback, the contract will allow the parties to refer the dispute to an expert, whose decision will be binding and create the final completion accounts.
• Once the completion accounts have been finalised, the SPA will require the relevant party to make the balancing payment within a prescribed period.

The parties are free to choose the metrics they would like to serve as the reference point(s). Metrics commonly seen on sales include:

• net asset value (NAV). This is the value of the entirety of the target’s asset base less all its liabilities (although it is possible to exclude certain assets, or classes of asset, from the valuation perimeter); 
• working capital. This is the capital used by the target in its day-to-day business (normally calculated as its current assets less its current liabilities); and
• net debt. This is normally calculated as the target’s total debt obligations (its gross debt) less its cash and cash equivalents.

It is common to see working capital and net debt used alongside each other as parallel reference points in a completion accounts mechanism. In this case, the mechanism needs to be drafted carefully to avoid double-counting.

Although these are probably the most common completion accounts reference points, it is possible to use other metrics. This will often depend heavily on the business, but reference points we might expect to see include:

• assets under management (AUM). This is quite common for an investment business or fund vehicle, where the value of the target is reflected in the amount invested;
• regulatory capital. This is common for financial services businesses, which may be required to maintain a certain amount of capital for capital adequacy purposes;
• specific revenue streams. This may be relevant for businesses whose profit depends on long-term customer relationships or subscriptions, such as utilities and telecommunications providers, streaming services, or sports and leisure businesses;
• specific assets. This may be relevant to businesses that deal significantly or predominantly in a particular type of stock, such as a clothing retailer or an oil and gas business;
• work in progress (WIP). This often arises with professional services businesses, such as law or accountancy firms, whose value may be tied up in work carried out for clients but not yet billed; and
• property-related items. Where the target’s principal (or sole) asset is a parcel of real estate, as well as cash, the mechanism may refer to metrics such as rent receivables. Often this will be bound up in a broader NAV valuation, with the value of the real estate itself fixed.

A commercial contract may envisage that the contract parties will send each other notices or other communications from time to time in connection with the contract.

Notices may be useful or necessary under various types of contract. This could include to notify a claim under the contract, to put in a purchase order, to request a change to the services being provided, to request consent to a matter, to determine a calculation or price, and so forth.

To ensure that the procedure for giving notices is clear and the parties know what to expect, it is typical to include a notices clause in the contract. That clause will normally spell out (among other things):

• how the parties can send notices (e.g. by post or by email);
• who notices must be addressed to;
• the language notices must be written in; and
• when notices are deemed to be received.

Historically, the courts have approached the notices clause very strictly and held parties to the precise requirements of the contract. In some cases, a court may tolerate a minor defect in a notice, but, generally speaking, failure to comply exactly with a notices clause renders a notice wholly invalid.

This is because judges will assume that the contract parties are in the best position to determine what notice arrangements are most appropriate for their circumstances.

This has historically produced results that may at first glance seem harsh.

• In Teoco UK Ltd v Aircom Jersey 4 Ltd [2018] EWCA Civ 23, a notice of claim for breach of warranty was invalid because it did not refer to the relevant clauses of the sale agreement.
• In TP ICAP Ltd v NEX Group Ltd [2021] EWHC 1375 (Comm), a claim notice under an SPA was invalid because it stated that the circumstances “may” give rise to a claim, not that the buyer was actually making a claim.
• In Zayo Group International Ltd v Ainger [2017] EWHC 2542 (Comm), a claim notice was ineffective because it had not been served on all the sellers in accordance with the contractual requirements. Indeed, the court went so far as to say that, if complying with a notice clause meant leaving a notice on the rubble of a former building, that is what must be done.

It is therefore critical to ensure that, where a notice clause specifies one or more methods for service, the notice is served using at least one of those methods.

Notice clauses always apply to “notices” (as that term is used in the contract), but they can also capture other communications relating to the contract (such as order forms, calculations and so forth).

For example, in Hughes v CSC Computer Sciences Ltd [2025] EWHC 302 (Comm), the court said that statements of calculations of earn-out payments fell within the scope of the notices clause and had to be delivered in accordance with its requirements. You can read more about whether earn-out calculations were validly served under contractual notice provisions in our separate piece.