Threshold | Practical Law

Threshold | Practical Law

Threshold

Threshold

Practical Law Glossary Item 1-383-2230 (Approx. 2 pages)

Glossary

Threshold

In the context of mergers and acquisitions, an indemnification concept limiting a party's obligation with respect to small claims. A threshold provides that an indemnifying party does not have an obligation to indemnify until the amount of the indemnified party's losses exceed a certain agreed amount. Once that amount is reached, the indemnifying party is liable for the total amount of losses (sometimes referred to as a "tipping" or "dollar one" basket). Compare this to a deductible which provides that the indemnifying party is only liable for the amount of losses in excess of the agreed amount once the agreed amount is reached.