Introduction

The shares have been transferred. The buyer controls the company. The seller has completed the closing.

But part of the purchase price has not yet been paid.

Instead, the Share Purchase Agreement (“SPA”) provides that the seller will receive an additional payment if the target company reaches certain post-closing performance targets.

For example:

• EUR 5 million payable at closing;
• additional EUR 2 million if EBITDA exceeds EUR 1.5 million during the following financial year.

The target subsequently performs well.

The seller believes the earn-out has become payable.

The buyer disagrees.

It may argue that:

• EBITDA was calculated differently;
• certain expenses must be deducted;
• the revenue target was not achieved;
• the seller breached another provision of the SPA;
• the earn-out conditions never legally occurred.

An even more serious situation arises where the seller claims that the buyer deliberately managed the target company in a way designed to prevent the earn-out from becoming payable.

This raises a critical post-M&A question:

What can a seller do when the buyer refuses to pay an earn-out under a Turkish company sale?

Under Turkish law, the answer usually requires much more than simply filing a debt collection claim.

A successful earn-out dispute requires analysis of:

the SPA wording, the legal character of the earn-out, the relevant financial metric, the buyer’s post-closing conduct, accounting evidence, maturity, default, interest, security and the agreed dispute-resolution mechanism.

1. What Is an Earn-Out?

An earn-out is a deferred and usually performance-dependent element of the purchase price in an M&A transaction.

Instead of fixing the entire purchase price at closing, the parties agree that part of the consideration will become payable if predetermined post-closing events occur.

A simplified transaction may look like this:

Purchase price at closing: EUR 10 million

Earn-out 1: EUR 1 million if 2027 revenue exceeds EUR 8 million

Earn-out 2: EUR 2 million if 2027 EBITDA exceeds EUR 2 million

Maximum purchase price: EUR 13 million

Earn-outs are especially common where the parties disagree about the target company’s future value.

The seller may believe:

“The company will grow rapidly.”

The buyer may respond:

“I will pay for that growth if it actually happens.”

The earn-out bridges that valuation gap.

Turkish law does not regulate earn-outs as a separate statutory contract type. In practice, however, Turkish contract law permits purchase-price obligations to depend on future conditions, and earn-out provisions are commonly analysed through the Turkish Code of Obligations (“TCO”) rules on conditional obligations.

2. The Earn-Out Is Usually Part of the Purchase Price — Not a Bonus

This distinction should be made clearly in the SPA.

An earn-out should normally be drafted as:

additional or deferred consideration for the transferred shares

rather than as a vague post-closing consultancy fee.

Why does this matter?

Because the legal nature of the payment determines:

• what must be proven;
• when the claim becomes due;
• which contractual remedies apply;
• how the court interprets the transaction.

A Turkish commercial court has previously examined an additional agreement signed in connection with a share transfer and emphasised that an additional amount can legally constitute additional share-transfer consideration if that is what the contract clearly provides. In that particular dispute, however, the court concluded from the wording that the payment was actually linked to future consultancy services rather than simply being additional purchase price.

The drafting lesson is important:

If the amount is an earn-out purchase price, say so expressly.

Do not disguise it as a “consulting payment,” “service fee” or another artificial structure unless that genuinely reflects the parties’ agreement.

3. Earn-Out Payments Are Often Subject to a Suspensive Condition

Article 170 et seq. TCO regulate conditional obligations.

Where the earn-out obligation depends on an uncertain future event, it may frequently operate as a suspensive condition.

For example:

“The Buyer shall pay EUR 2,000,000 to the Seller if the Target’s 2027 EBITDA equals or exceeds EUR 3,000,000.”

Until the relevant condition occurs, the seller may not yet have an immediately payable EUR 2 million claim.

Once the condition occurs and any additional contractual calculation process is completed, the earn-out may become due.

This distinction is crucial when deciding whether litigation should seek:

• immediate payment;
• declaratory relief;
• an accounting determination;
• expert determination;
• or damages.

4. The First Question in Every Earn-Out Dispute: Has the Payment Actually Become Due?

Before sending a payment demand, the seller should reconstruct the contractual mechanism.

An SPA may require several stages.

For example:

1. Earn-Out Period ends on 31 December 2027.
2. Buyer prepares Earn-Out Statement within 30 days.
3. Seller has 20 business days to object.
4. Parties negotiate disputes for 15 business days.
5. Accounting disagreements go to an Independent Accountant.
6. Final amount becomes payable within 10 business days after determination.

In that situation, the seller should not simply argue:

“The financial year ended, so the money is automatically due.”

The SPA may establish a detailed contractual procedure before maturity.

Ignoring these procedural steps can weaken an otherwise valid claim.

5. The SPA Is the Starting Point

In a serious earn-out dispute, lawyers should first isolate the complete earn-out provisions.

The following provisions must be read together:

• definition of Earn-Out;
• calculation formula;
• accounting principles;
• EBITDA definition;
• revenue definition;
• excluded expenses;
• extraordinary items;
• related-party transactions;
• earn-out period;
• reporting procedure;
• objection mechanism;
• expert determination;
• payment date;
• set-off rights;
• indemnification provisions;
• limitation-of-liability provisions;
• governing law;
• arbitration or jurisdiction clause.

An earn-out dispute is rarely decided by one sentence.

It normally requires interpretation of the SPA as an integrated contractual mechanism.

6. The Seller Should Recalculate the Earn-Out Independently

Assume the SPA provides:

Earn-Out = 4 × EBITDA above EUR 1 million

Maximum earn-out: EUR 4 million.

The buyer calculates:

EBITDA = EUR 900,000

Earn-out = EUR 0.

The seller calculates:

EBITDA = EUR 1.8 million.

Potential earn-out:

EUR 800,000 × 4 = EUR 3.2 million.

Before commencing proceedings, the seller should obtain an independent financial analysis explaining exactly where the EUR 900,000 difference comes from.

Possible adjustments may include:

• management fees;
• shareholder charges;
• extraordinary legal fees;
• acquisition costs;
• depreciation;
• provisions;
• related-party transactions;
• one-off restructuring expenses.

The dispute must therefore be converted from:

“The buyer is cheating.”

into:

“The buyer reduced contractual EBITDA by EUR 900,000 through the following five accounting adjustments, each of which is inconsistent with Schedule 7 of the SPA.”

That is a much stronger case.

7. EBITDA Must Be Defined — Not Assumed

“EBITDA” sounds objective.

It often is not.

Two accountants may calculate different EBITDA figures depending on:

• accounting standards;
• normalisation adjustments;
• extraordinary expenses;
• management charges;
• treatment of leases;
• group charges;
• provisions;
• accounting policy changes.

Therefore, an SPA should not merely state:

“Earn-out shall be based on EBITDA.”

A professionally drafted clause should define:

• which accounting standards apply;
• whether historical accounting policies must be preserved;
• treatment of exceptional items;
• treatment of intra-group transactions;
• management fees;
• acquisition expenses;
• changes in provisions;
• restructuring costs.

Many earn-out disputes are actually definition disputes, not payment disputes.

8. Revenue-Based Earn-Outs Can Also Be Manipulated

Revenue may appear easier to calculate than EBITDA.

But even revenue can be influenced after closing.

A buyer may:

• postpone invoicing;
• move customers to an affiliate;
• terminate a profitable distribution arrangement;
• bundle the target’s products with group products;
• change transfer pricing;
• recognise income in another group company.

Suppose the target needs EUR 10 million revenue to trigger the earn-out.

Actual business generated through the target’s customer network:

EUR 12 million.

But EUR 3 million is invoiced through another group entity.

The target therefore reports only:

EUR 9 million.

Buyer says:

“The threshold was missed.”

Seller says:

“You moved the revenue outside the target precisely to avoid paying me.”

That turns the dispute into a question of contractual good faith and manipulation.

9. The Most Important Turkish-Law Protection: TCO Article 175

Article 175 TCO is particularly important for earn-outs.

The provision states that if a party prevents a condition from occurring contrary to the rules of good faith, the condition is deemed to have occurred.

Conversely, if a party improperly causes the condition to occur contrary to good faith, the condition is treated as not having occurred.

For earn-outs, this can be extremely powerful.

The buyer normally obtains operational control of the target after closing.

If the earn-out depends on company performance, the buyer may also control the conditions determining whether it must pay additional purchase price.

This creates an obvious conflict.

10. Example: Buyer Deliberately Prevents the Earn-Out

Suppose the SPA provides:

Seller receives EUR 3 million if the target achieves EUR 5 million revenue during 2027.

After closing, the buyer:

• reduces the sales team by 70%;
• eliminates the marketing budget;
• stops supplying the target’s best-selling product;
• redirects major customers to another group company.

Revenue falls to:

EUR 4.4 million.

The buyer argues:

“The condition did not occur.”

The seller may respond:

“You prevented the condition from occurring.”

Depending on the SPA and evidence, TCO Article 175 may support the argument that the relevant condition should be treated as fulfilled because the buyer acted inconsistently with good faith. Turkish M&A commentary specifically identifies Article 175 as a potentially important protection where the buyer controlling the target improperly prevents an earn-out condition from being achieved.

11. But Article 175 Does Not Guarantee the Seller the Earn-Out

The seller must distinguish:

bad business performance

from

bad-faith interference.

The target may genuinely fail.

A buyer is generally not automatically prohibited from making ordinary business decisions merely because those decisions may indirectly affect an earn-out.

For example:

• market demand may collapse;
• a major customer may leave;
• raw-material prices may increase;
• a new competitor may enter;
• the buyer may make commercially reasonable investments.

The relevant question becomes:

Did the buyer exercise legitimate business judgment, or deliberately manipulate the contractual earn-out mechanism?

Evidence becomes decisive.

12. What Evidence Can Prove Manipulation?

A seller should seek evidence comparing the business before and after closing.

Potential evidence includes:

Financial Statements

Compare:

• revenue;
• EBITDA;
• gross margins;
• marketing expenditure;
• employee costs.

Management Accounts

Monthly management reporting may reveal changes hidden by year-end financial statements.

Related-Party Transactions

Investigate:

• management fees;
• licence fees;
• shared-service charges;
• transfer pricing.

Customer Transfers

Determine whether customers were redirected to affiliated entities.

Board and Management Decisions

Internal decisions may explain why particular expenses were incurred.

Budgets

Compare the budget prepared at closing with what the buyer actually implemented.

Emails and Communications

Statements such as:

“If we book this cost in the target, we avoid the earn-out”

would obviously be highly relevant if lawfully obtained and admissible.

13. Historical Comparison Can Be Extremely Persuasive

Suppose the target historically paid:

Group management fees: EUR 50,000 annually.

After the acquisition:

Group management fees: EUR 1.2 million.

The buyer then argues EBITDA did not reach the earn-out threshold.

That does not automatically prove manipulation.

But it raises an obvious question.

Similarly:

A forensic comparison can expose changes directly affecting the earn-out.

14. Related-Party Transactions Should Receive Special Scrutiny

The buyer may control a group containing multiple companies.

After closing, it may cause the target to enter transactions with affiliates.

For example:

Target earns:

EUR 3 million operating profit.

Buyer introduces:

EUR 1 million “head-office management fee.”

Reported EBITDA becomes:

EUR 2 million.

Earn-out threshold:

EUR 2.5 million.

No earn-out is paid.

The seller should ask:

• Was the fee provided for in the SPA?
• Was it incurred historically?
• Was an actual service provided?
• Was the amount market-based?
• Should it be excluded from contractual EBITDA?

Earn-out clauses should ideally contain explicit restrictions concerning such related-party charges.

15. The Buyer May Be Required to Preserve Historical Accounting Policies

Another common source of manipulation is changing accounting treatment.

Suppose the company historically recognised revenue when products were delivered.

After closing, the buyer adopts a more conservative recognition method.

Reported earn-out revenue falls.

A well-drafted SPA should specify a hierarchy such as:

1. specific earn-out accounting rules in the SPA;
2. accounting principles historically applied by the target;
3. applicable accounting standards.

Otherwise, post-closing accounting-policy disputes can become extremely difficult.

16. Expert Determination May Come Before Litigation

Many sophisticated SPAs distinguish between:

accounting disputes

and

legal disputes.

For example:

“Any disagreement concerning calculation of EBITDA shall be finally determined by an independent accounting firm.”

That mechanism may be called:

• Independent Accountant;
• Expert Determination;
• Expert Referee;
• Accounting Expert.

The SPA may then separately provide:

“All legal disputes shall be resolved by arbitration.”

The distinction matters.

A dispute about:

“Was depreciation correctly calculated?”

may belong to the independent accountant.

A dispute about:

“Did the buyer deliberately manipulate EBITDA in breach of the SPA?”

may belong to an arbitral tribunal or court.

Recent Turkish M&A analysis highlights precisely this jurisdictional difficulty in post-closing disputes, including earn-out and completion-account disputes.

17. Do Not Immediately Start Arbitration Before Reading the Expert Clause

Suppose the seller commences arbitration seeking EUR 4 million.

The buyer responds:

“The tribunal lacks jurisdiction over the accounting calculation because Schedule 8 requires independent expert determination.”

A procedural dispute may then begin before anyone even addresses the earn-out itself.

Therefore, before proceedings:

Step 1: identify the nature of each disputed issue.

Step 2: assign each issue to the contractual mechanism.

For example:

Accounting issue: Independent Accountant.

Contract interpretation: Arbitration.

Bad-faith manipulation: Arbitration.

Payment of final amount: Arbitration or court/enforcement depending on the agreement.

18. What If the Expert Determines the Earn-Out but the Buyer Still Refuses to Pay?

Then the dispute becomes considerably simpler.

Example:

Independent Accountant determines:

Earn-Out = EUR 2.7 million.

SPA provides:

Payment due within 10 business days.

Buyer does not pay.

At that point, the seller may have a matured contractual monetary claim.

The appropriate remedy will depend on the dispute-resolution clause, but may involve:

• formal payment demand;
• arbitration;
• commercial court proceedings;
• enforcement proceedings;
• provisional attachment.

19. Send a Proper Default Notice

Article 117 TCO provides that a debtor of a matured obligation generally falls into default upon notice by the creditor.

However, where a specific payment date has already been agreed, expiry of that date can place the debtor in default without a separate notice.

Even where the SPA appears to contain a fixed maturity date, a formal notice is often strategically useful.

The notice should identify:

• SPA date;
• relevant earn-out provision;
• calculation;
• triggering event;
• amount due;
• maturity date;
• bank details;
• applicable contractual interest;
• deadline for payment;
• reservation of rights.

For high-value transactions, the notice should be prepared with the expectation that an arbitral tribunal or judge may read it years later.

20. Demand Specific Performance: Pay the Earn-Out

Once the earn-out is due, the seller’s most straightforward remedy will normally be:

payment of the contractual earn-out amount.

TCO Article 125 recognises continued performance plus compensation for delay as one of the remedies available where a party is in default under a reciprocal contract.

Where the transaction has already closed and the shares have been transferred, seeking payment will often be commercially more practical than attempting to unwind the entire transaction.

The exact remedies must nevertheless be tested against:

• SPA provisions;
• limitation-of-remedies clauses;
• exclusive-remedy provisions;
• contractual termination rights.

21. Damages May Also Be Available

Article 112 TCO establishes the general rule that where an obligation is not performed at all or is improperly performed, the debtor is liable for the resulting loss unless the debtor proves absence of fault.

Article 122 additionally allows recovery of loss exceeding default interest where the statutory requirements are satisfied.

This may matter where failure to pay the earn-out causes measurable losses exceeding ordinary interest.

However, sophisticated SPAs often contain:

• liability caps;
• exclusions;
• exclusive-remedy clauses;
• consequential-loss exclusions.

Those provisions must be analysed before calculating damages.

22. Default Interest Should Not Be Forgotten

If the earn-out is a matured monetary obligation and the buyer does not pay, default interest may arise.

First check the SPA.

It may contain:

“Any overdue Earn-Out Payment shall accrue interest at EURIBOR + 5%.”

If no valid contractual rate applies, statutory rules become relevant.

Turkey amended Law No. 3095 concerning statutory and default interest in July 2026. The statutory mechanism now links the applicable rate, where the parties have not contractually fixed it, to specified Central Bank re-discount rates and contains separate rules for commercial default interest.

Because rates may change over time, the applicable rate should be determined for the relevant default period rather than assumed from an old percentage.

23. What If the Earn-Out Is in EUR or USD?

Cross-border M&A agreements frequently calculate consideration in foreign currency.

Article 99 TCO contains the general framework for foreign-currency obligations.

Where a foreign-currency obligation is not paid on time and the agreement does not require payment exclusively in kind in the foreign currency, the creditor may have statutory choices concerning payment in the foreign currency or its Turkish-lira equivalent based on the legally relevant exchange rate.

The SPA wording is therefore critical.

Check whether it says:

• “payable in EUR”;
• “payable exclusively in EUR”;
• “aynı para birimiyle aynen ödeme”;
• or equivalent wording.

Foreign-currency claims should also be carefully formulated when litigation or enforcement is commenced because the creditor’s chosen form of relief may have procedural consequences.

24. Can the Buyer Set Off an Indemnity Claim Against the Earn-Out?

This is extremely common.

Seller says:

“Pay the EUR 3 million earn-out.”

Buyer responds:

“You breached the tax warranty. We have a EUR 2 million indemnification claim, so we are withholding the earn-out.”

Whether this is permitted depends heavily on the SPA.

Some agreements expressly provide:

Buyer may set off any indemnification claim against deferred consideration.

Others prohibit set-off unless:

• liability is admitted;
• or finally determined by a court/arbitral tribunal.

This difference can fundamentally alter the litigation.

The seller should therefore check:

• contractual set-off rights;
• escrow provisions;
• warranty claim procedures;
• limitation periods;
• whether the counterclaim is quantified or merely alleged.

25. A Buyer Should Not Be Able to Create an Artificial Counterclaim Merely to Withhold Payment

Consider:

Earn-out due:

EUR 5 million.

One week before payment, buyer sends:

“We believe there may be an environmental liability of approximately EUR 5 million. We therefore withhold the entire earn-out.”

There is:

• no assessment;
• no regulatory claim;
• no expert report;
• no actual payment.

Whether such withholding is permissible depends on the SPA’s set-off and claims provisions.

Where the SPA only permits withholding of finally determined claims, the buyer may not be entitled to retain payment merely because it has raised an allegation.

This is why deferred-price security and set-off drafting matter so much.

26. Can the Seller Obtain Provisional Attachment?

Where the earn-out has become a matured monetary debt, provisional attachment (ihtiyati haciz) may become an important tool.

Article 257 of the Turkish Enforcement and Bankruptcy Law provides, as a general rule, that a creditor holding an unsecured matured monetary claim may seek provisional attachment over the debtor’s property, receivables and other rights, subject to the statutory requirements.

For unmatured claims, the statutory grounds are considerably narrower.

This can be strategically important where there is evidence that the buyer:

• is disposing of assets;
• has significant financial difficulties;
• is transferring funds abroad;
• is restructuring to avoid payment.

The evidentiary standard, security requirement and competent forum should be assessed in the specific case.

27. Interim Injunctions May Also Be Relevant

Article 389 of the Code of Civil Procedure allows interim injunctions where changes in the existing situation could make enforcement of the right substantially more difficult or impossible, or where delay could create serious harm, subject to statutory conditions.

However, a distinction must be made between:

protecting a specific disputed right through injunction

and

securing a monetary claim through provisional attachment.

For pure earn-out payment claims, provisional attachment may often be the more directly relevant remedy.

The correct application depends on the precise relief sought.

28. Arbitration Clauses Must Be Checked Before Going to Court

Cross-border SPAs frequently contain arbitration provisions.

For example:

“Any dispute arising out of or in connection with this Agreement shall be finally resolved by arbitration under the ISTAC Rules.”

Or:

• ICC;
• LCIA;
• Swiss Arbitration;
• ad hoc arbitration.

If a valid arbitration agreement covers the earn-out dispute, filing the substantive claim before a state court may produce a jurisdictional objection.

Before proceedings, counsel should therefore identify:

• governing law;
• arbitration institution;
• seat;
• language;
• number of arbitrators;
• expert-determination carve-outs.

In many high-value transactions, these provisions determine litigation strategy before the merits are even analysed.

29. If There Is No Arbitration Clause, Commercial Court Litigation May Apply

A dispute concerning unpaid purchase consideration arising from a commercial share sale will commonly have a commercial character.

Where the substantive claim seeks payment of money through Turkish commercial litigation, mandatory pre-action mediation must also be considered.

Article 5/A TCC makes mediation a condition for filing commercial lawsuits concerning payment of a sum of money in the categories covered by the provision. The Ministry of Justice continues to describe monetary commercial claims and compensation actions as falling within this mandatory mediation framework.

Accordingly, commencing court proceedings without first checking mediation requirements may cause avoidable procedural problems.

30. Enforcement Proceedings May Be Possible — But Expect an Objection

If the earn-out is a straightforward matured monetary claim, the seller may consider enforcement proceedings.

The buyer may, however, object by arguing:

• the condition never occurred;
• the amount was wrongly calculated;
• the debt is not due;
• set-off applies.

The dispute may then continue through the relevant objection-removal or annulment proceedings.

Where complicated EBITDA calculations and contractual interpretation are involved, a direct commercial action or arbitration may sometimes provide a more suitable procedural framework.

The choice should depend on the evidence and SPA structure.

31. Statute of Limitations Should Be Checked Early

Under Article 146 TCO, claims are generally subject to a ten-year limitation period unless a different statutory period applies.

However, the precise legal character of the claim may affect the applicable limitation rules.

The limitation period generally requires particular attention to when the earn-out claim actually became due.

Do not calculate limitation merely from:

• signing;
• closing;

if the earn-out only became claimable years later.

Contractual claim-notification periods in the SPA must also be distinguished from statutory limitation periods.

32. Practical Example: EBITDA Target Achieved, Buyer Refuses Payment

Assume:

Company sold for:

EUR 12 million at closing.

Additional earn-out:

EUR 4 million if EBITDA reaches EUR 2 million.

During earn-out year:

Operating EBITDA before group charges:

EUR 2.7 million.

Buyer imposes:

Group management fee: EUR 900,000.

Reported EBITDA:

EUR 1.8 million.

Buyer says:

“No earn-out.”

Seller investigates and discovers:

• no similar fee existed before closing;
• SPA requires consistent accounting policies;
• the target received no identifiable EUR 900,000 service;
• buyer’s other subsidiaries were not charged equivalent fees.

Seller’s potential case may include:

1. the EUR 900,000 fee should be excluded under the SPA;
2. contractual EBITDA therefore exceeds EUR 2 million;
3. alternatively, the buyer improperly prevented the earn-out condition under TCO Article 175;
4. EUR 4 million became payable;
5. buyer is in default;
6. payment plus applicable interest and proven additional loss should be ordered.

That is a far stronger claim than simply asserting:

“The buyer did not pay me.”

33. Practical Example: Revenue Has Been Moved to Another Group Company

Earn-out threshold:

EUR 20 million revenue.

Target’s historical customers generate:

EUR 23 million.

Buyer causes EUR 6 million of those sales to be invoiced through a newly established affiliate.

Target’s financial statements show:

EUR 17 million.

The legal analysis should examine:

• contractual definition of revenue;
• treatment of affiliate sales;
• buyer’s operational covenants;
• historical business practice;
• commercial justification for restructuring;
• TCO Article 175.

If the restructuring was deliberately designed to prevent the earn-out condition, the seller may have a materially stronger claim.

34. Practical Example: The Target Simply Fails

Not every unsuccessful earn-out is actionable.

Suppose:

Threshold:

EUR 15 million revenue.

Actual revenue:

EUR 9 million.

Evidence shows:

• market demand collapsed;
• the buyer maintained historical marketing expenditure;
• sales staff remained employed;
• no revenue was diverted;
• accounting policies did not change.

The seller cannot usually convert an earn-out into a guaranteed price merely because the business underperformed.

The entire commercial purpose of an earn-out is that part of the consideration is contingent.

The seller therefore needs either:

actual fulfilment of the agreed trigger

or

a valid legal basis for treating the condition as fulfilled despite the numerical result.

35. The Seller Should Demand Access to Earn-Out Information Before Closing the Deal

The best earn-out dispute is the one the SPA prevents.

A seller should negotiate explicit rights to receive:

• monthly management accounts;
• annual financial statements;
• budgets;
• underlying calculation schedules;
• access to accounting records;
• explanations of material adjustments;
• information concerning related-party transactions.

Without those rights, the seller may be forced to prove manipulation while the buyer exclusively controls the evidence.

36. Include Conduct Covenants for the Earn-Out Period

A strong SPA may provide that during the earn-out period the buyer must:

• operate the target in the ordinary course;
• maintain accounting policies consistently;
• avoid artificially shifting revenue;
• avoid extraordinary group charges;
• avoid transferring material business without adjustment;
• avoid actions principally designed to reduce the earn-out.

The SPA must balance this with the buyer’s legitimate right to operate the acquired business.

No buyer wants to purchase a company and then discover that the seller effectively controls management for three years merely to protect the earn-out.

The drafting must therefore protect the seller without creating operational paralysis.

37. Include a Hypothetical Calculation for Buyer-Caused Distortion

One particularly effective contractual mechanism is to state that:

if the buyer takes specified actions affecting the earn-out, the earn-out shall be calculated as though the relevant negative effect had not occurred.

Example:

Actual EBITDA:

EUR 1.7 million.

Improper group charge:

EUR 600,000.

Adjusted contractual EBITDA:

EUR 2.3 million.

This approach can reduce the need to prove the entire counterfactual business performance.

38. Independent Accountant Provisions Must Be Detailed

The SPA should specify:

• who appoints the accountant;
• how appointment occurs if the parties disagree;
• scope of jurisdiction;
• whether the determination is final;
• whether the accountant acts as expert or arbitrator;
• cost allocation;
• document-production rights;
• timetable;
• standard of review.

Simply stating:

“Disputes shall be decided by an accountant”

creates a second dispute about the dispute-resolution mechanism.

39. Escrow or Security Can Prevent the Payment Problem Entirely

A seller negotiating a significant deferred purchase price should ask:

“Why should I become an unsecured creditor after transferring my company?”

Possible protections include:

• escrow;
• bank guarantee;
• parent-company guarantee;
• share pledge;
• other contractual security.

The commercial importance is obvious.

Without security:

Seller transfers 100% of company.

Buyer obtains control.

Seller waits three years.

Buyer later refuses payment.

The seller must litigate against the buyer.

With security, the enforcement position may be substantially stronger.

40. What Should a Seller Do Immediately When the Buyer Refuses the Earn-Out?

A practical sequence may be:

Step 1 — Preserve the SPA Timeline

Identify all objection and dispute-resolution deadlines.

Step 2 — Obtain the Financial Data

Secure the earn-out statement and underlying accounts.

Step 3 — Hire a Financial Expert

Recalculate the earn-out independently.

Step 4 — Identify Manipulative Adjustments

Separate ordinary business decisions from suspicious transactions.

Step 5 — Follow the Contractual Objection Process

Do not accidentally waive objections.

Step 6 — Use Expert Determination Where Required

Resolve accounting questions.

Step 7 — Send a Formal Payment Notice

Place the buyer in default where necessary and reserve all rights.

Step 8 — Examine Security

Escrow, guarantees and pledges should be activated where contractually available.

Step 9 — Consider Provisional Protection

Particularly where the buyer’s ability or willingness to pay is deteriorating.

Step 10 — Commence the Correct Proceeding

Depending on the SPA:

• arbitration;
• commercial court litigation;
• enforcement proceedings.

41. The Seller’s Case Should Tell a Financial Story

The strongest earn-out claim does not merely cite contractual provisions.

It reconstructs what happened economically.

For example:

At closing

Expected EBITDA: EUR 4 million.

↓

Buyer takes control

↓

EUR 1.5 million new affiliate management fee

↓

EUR 700,000 revenue shifted to affiliate

↓

Reported EBITDA: EUR 1.8 million

↓

Earn-out denied

That chronology can be considerably more persuasive than dozens of pages of abstract allegations.

42. The Main Defences Available to the Buyer

A buyer facing an earn-out claim may argue:

• the relevant condition never occurred;
• seller used the wrong accounting methodology;
• extraordinary adjustments are expressly permitted;
• business decisions were commercially justified;
• the seller caused the underperformance;
• payment is not yet due;
• independent expert proceedings have not been completed;
• seller failed to object within the contractual period;
• valid set-off rights exist;
• the claim is time-barred.

The seller should anticipate these defences before commencing proceedings.

43. Conclusion: Selling the Shares Is Not the End of the Deal When an Earn-Out Remains Outstanding

An earn-out transforms a completed acquisition into a continuing economic relationship.

The seller may have transferred:

• ownership;
• voting control;
• management control;

while still depending on the buyer for part of the sale price.

That is exactly why earn-outs create so many post-closing disputes.

When an earn-out is not paid, the legal analysis should proceed in the following order:

What exactly does the SPA define as the earn-out?

Has the contractual condition occurred?

Has the claim become due?

Was the financial calculation performed correctly?

Did the buyer change accounting policies?

Were extraordinary or related-party expenses introduced?

Was revenue transferred elsewhere?

Did the buyer improperly prevent the earn-out condition from occurring?

Does TCO Article 175 apply?

Is independent expert determination required?

Does the buyer have a legitimate right of set-off?

What interest is payable?

Is provisional attachment available?

Must the dispute proceed through mediation, court litigation or arbitration?

The seller’s strongest argument is rarely:

“I sold the company, therefore I deserve more money.”

The legally relevant argument is:

“Under the agreed purchase-price mechanism, the earn-out condition was satisfied — or must legally be treated as satisfied — the additional consideration became due, and the buyer has failed to perform its payment obligation.”

For that reason, earn-out disputes are not merely debt-collection disputes.

They are usually a combination of:

contract interpretation + corporate finance + forensic accounting + post-closing conduct + commercial litigation or arbitration.

The best protection therefore begins before closing.

A carefully drafted SPA should ensure that the buyer cannot obtain complete operational control of the target while simultaneously having unrestricted power to determine whether the seller will ever receive the remaining purchase price.