Letter of Direction Payment of Acquisition Price Template

In plain language: States the date the letter is issued and identifies the sender and the recipient — typically the buyer, escrow agent, or closing attorney — by full legal name.

Common mistake: Addressing the letter to a contact person by name rather than the legal entity. If the contact changes, the instruction may be questioned as addressed to the wrong party.

In plain language: Cites the specific purchase agreement — by title, parties, and date — that gives rise to the acquisition price being directed.

Common mistake: Referencing the agreement by a generic description instead of its exact title and date, which creates ambiguity if multiple transactions are in progress simultaneously.

In plain language: Confirms that the issuing party is authorized under the agreement or applicable corporate resolution to direct the payment.

Common mistake: Omitting the authority statement entirely. Without it, the recipient has no written basis to confirm the instruction is legitimate and may delay payment pending verification.

In plain language: States the exact dollar amount to be remitted, including currency, so there is no ambiguity about the sum being directed.

Common mistake: Writing the amount in words only without the numerical figure — or vice versa. Discrepancies between word and number representations create processing errors.

In plain language: Names the specific individual, company, or creditor to whom the funds should be paid — which may differ from the seller named in the purchase agreement.

Common mistake: Using a trade name or abbreviated entity name instead of the full registered legal name, causing banks to reject the wire or delay processing for verification.

In plain language: Provides the complete banking details — bank name, account number, routing or SWIFT number, and any reference memo — required to execute the transfer.

Common mistake: Providing incomplete banking details — for example, omitting the SWIFT code for an international transfer — causing the wire to be returned or credited to the wrong account.

In plain language: Asks the recipient to acknowledge receipt of the direction and confirm their intent to comply, creating a paper trail of acceptance.

Common mistake: Not requesting confirmation at all. Without a written acknowledgment, you have no evidence the instruction was received before the closing deadline.

In plain language: Closes the letter with the issuing party's signature block, including the signatory's name, title, and the legal entity on whose behalf they are signing.

Common mistake: Signing without stating the signatory's title or the entity they represent. A bare signature without corporate authority identification can be challenged as personally binding rather than binding on the company.

A letter of direction for payment of acquisition price is a formal written instruction issued by the seller — or an authorized representative — telling the buyer, escrow agent, or closing attorney exactly where to send the acquisition funds at closing. It specifies the payee, the amount, and the banking details required to execute the transfer, and it may redirect payment to a party other than the seller named in the purchase agreement, such as a lender receiving a payoff.

It should be issued at or immediately before the closing of a business acquisition — typically on the closing day or the business day before. The letter should be confirmed in writing by the recipient before funds are released to ensure the instruction has been received and will be followed.

A properly issued letter of direction is generally treated as a binding instruction when it is signed by an authorized party and references the underlying agreement. However, it does not replace the purchase agreement — it supplements it. Consider having counsel review the letter when large sums or multiple payees are involved.

In most commercial transactions, notarization is not required for a letter of direction. A signature from the authorized representative of the issuing entity is typically sufficient. Some escrow agents or lenders may request a certified corporate resolution alongside the letter to confirm the signatory's authority.

An incorrect account number or routing number can cause the wire to be returned to the sender, credited to a wrong account, or — in fraud scenarios — intercepted entirely. Always verify wire details by calling the receiving bank directly before including them in any payment instruction letter, and never rely solely on details received by email.

Yes. A letter of direction can list multiple payees with their respective amounts and banking details. For complex multi-party disbursements, a separate funds flow memorandum is often prepared alongside the letter to map every dollar of the acquisition price to its recipient and confirm all amounts sum to the total purchase price.

The letter should be signed by an officer or authorized representative of the issuing entity — typically the seller's CEO, CFO, or legal counsel acting under a power of attorney. The signatory's title and the full legal name of the entity should appear below the signature to confirm corporate authority.

A letter of direction is a short, direct instruction to one recipient to pay a specified amount to a specified payee. A funds flow memorandum is a comprehensive closing document that maps every disbursement — seller proceeds, lender payoffs, broker fees, transaction costs — across all parties. The two documents often work together at closing, with the funds flow serving as the master schedule and the letter of direction as the operative payment instruction.