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📝 '''Permitted leakage schedule''' is an annex to the [[Definition:Share purchase agreement (SPA) | share purchase agreement]] in a [[Definition:Locked box mechanism | locked box]]-structured insurance transaction that itemizes every category — and often every specific instance — of value extraction from the target business that the buyer has agreed to allow between the [[Definition:Locked box date | locked box date]] and deal completion. The schedule transforms the concept of [[Definition:Permitted leakage | permitted leakage]] from a negotiating principle into a binding, exhaustive list, serving as the definitive reference for determining whether any post-locked-box payment by the target is permissible or triggers an [[Definition:Indemnity | indemnity]] obligation.

📊 A typical permitted leakage schedule for an insurance target will enumerate items such as ordinary payroll and benefits costs, pre-budgeted [[Definition:Reinsurance premium | reinsurance premiums]], routine [[Definition:Commission | commission]] payments to [[Definition:Insurance broker | brokers]] or [[Definition:Coverholder | coverholders]], tax installments, lease payments, declared [[Definition:Dividend | dividends]] up to a specified cap, and any seller-related management fees that the parties agree should continue during the interim period. Each item is usually accompanied by a monetary cap or a reference to an approved budget, so the buyer retains visibility over the aggregate outflow. For insurance companies with complex group structures — common among European carriers operating across multiple [[Definition:Solvency II | Solvency II]] jurisdictions or [[Definition:Lloyd's of London | Lloyd's]] groups with both [[Definition:Managing agent | managing agent]] and [[Definition:Syndicate | syndicate]] entities — the schedule must carefully trace intercompany flows to ensure that what appears as ordinary-course at one level is not extractive at another.

🛡️ Precision in drafting the permitted leakage schedule can prevent some of the most contentious post-closing disputes in insurance [[Definition:Mergers and acquisitions (M&A) | M&A]]. Ambiguity around whether a large [[Definition:Insurance claim | claims]] payment, an unusual [[Definition:Facultative reinsurance | facultative placement]], or an accelerated [[Definition:Bordereaux | bordereaux]] settlement falls within the schedule's scope has, in past deals, led to protracted arbitration. Buyers' advisors therefore press for specificity — named payees, dollar thresholds, and defined categories rather than catch-all "ordinary course" language. Sellers, conversely, seek enough flexibility to manage the business through what may be a multi-month interim period without seeking consent for every routine transaction. The resulting schedule reflects the commercial balance of power and, in practical terms, functions as a mini-budget governing the target's cash outflows until the keys change hands.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Permitted leakage]]
* [[Definition:Locked box mechanism]]
* [[Definition:Share purchase agreement (SPA)]]
* [[Definition:Ordinary course covenant]]
* [[Definition:Completion accounts]]
* [[Definition:Indemnity]]
{{Div col end}}

Definition:Permitted leakage schedule - Revision history

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