Meaning
A contractually binding dispute resolution mechanism employs an independent third-party practitioner to resolve financial disagreements arising from transaction adjustments. In share purchase agreements, accounting expert determination resolves conflicts over net debt, working capital, or earn-out calculations. This pathway avoids formal court litigation by appointing an auditor whose decision is final.
Dispute Trigger
When disagreements arise over post-closing statements, the buyer and seller first enter a negotiation period. If they cannot agree on the balance sheet items, the dispute clause mandates accounting expert determination to break the impasse. This trigger prevents prolonged standoffs and ensures that disputed funds held in escrow can be released or adjusted.
Procedural Pathway
The designated practitioner receives written submissions and supporting workpapers from both parties before conducting an independent review. This process differs from arbitration because the expert carries out a technical analysis of the accounting standards rather than a legal hearing. The specialist holds the power to request further transaction ledger files or to schedule meetings with both finance teams.
Final Settlement
Decisions made under this procedure bind both sides in the absence of fraud. The expert determines the final purchase price, and the parties divide the fees of the practitioner according to the degree to which their respective positions were rejected.
