Purchase price retention (escrow)

With a purchase price retention, the buyer does not pay the full price to the seller at closing but deposits a partial amount — typically 5–15% — into a notarial or bank escrow account. The funds are released only after an agreed period or once open items are resolved.

In ordinary M&A deals, the retention secures the buyer's warranty claims (misstated accounts, unknown liabilities). Out of insolvency this only transfers in limited form: the administrator typically sells under broad warranty exclusion and wants the proceeds paid to the estate fully and promptly so they can be distributed. An escrow is therefore usually agreed only for concretely quantifiable, known residual risks — a disputed tax claim, an open environmental obligation, a pending avoidance action — not as a general warranty buffer.

For buyers, it pays to raise the escrow question early in the bidding process: an administrator insisting on immediate full payment is more likely to accept a small, tightly scoped retention for a named risk than a blanket security buffer. Raising a retention only in the final purchase-agreement draft costs valuable negotiating time.