Paying advisers and referrers at closing

By the time an onchain TLD is ready to change hands, more people have worked on the deal than the two who will sign it. A valuer may have priced the name. A lawyer drafted the agreement. Someone made the first introduction, months earlier, and was told they would be looked after if it went anywhere. Each of them expects to be paid when the deal closes, and each of them is owed by a different person, under a different promise, some of which were never written down.

The usual way to deal with this is to close first and sort out the fees afterward. The holder receives the full price and then pays invoices one by one. It works when everyone trusts everyone. It works badly when the holder is a private person who wants to stay private, when a recipient sits in another country, or when one promise was only ever a sentence in a message.

There is a second way: the single payment made at closing is divided among the recipients according to a split that all of them agreed beforehand. This article explains that mechanism, runs it through an example with fixed amounts, and then spends most of its length on the part that decides whether the arrangement is sound: who knows who is paid by whom, and whose judgment the payment might bend.

Who expects money when a TLD sale closes

Start with a list, because the list is usually longer than either principal thinks. In a sale of an onchain TLD the price is owed by the buyer to the holder. Everything else is a fee, and a fee is owed by whoever engaged the person, not by the deal.

An adviser engaged by the holder is paid by the holder, even if the money physically arrives from the buyer’s wallet. A referrer who introduced the buyer has a claim only against the person who promised the fee. If nobody promised it in terms that can be shown, the referrer has an expectation, not a claim.

Two rows deserve a comment. Lawyers and valuers are normally paid for work done, whether or not the deal closes, which is one reason their judgment is trusted. Advisers and referrers are normally paid on success, which is efficient for the client and is also the source of every conflict discussed further down. Knowing which kind of fee each person is on is the first piece of diligence on your own deal team.

In this article a referrer is someone who introduced one party to the other, or to an adviser, and does no further work on the file. A person who introduces and then negotiates is an adviser and should be engaged as one.

Three ways to settle fees out of a TLD sale

There are three routes, and they are not exclusive. A deal can use one for the adviser and another for the lawyers.

A closing agent, often a law firm, receives the money, pays each person per a signed statement and sends the balance to the seller. The cost is that someone now holds other people’s money, with the onboarding and checks that this implies.

The split at closing is the route the rest of this article examines. Its promise is narrow and worth stating exactly: the people who are owed money on success receive it at the moment of success, from the same payment, without any of them depending on another to forward it.

A split agreed and signed before funds move

A payment router is a piece of onchain software that directs one payment onward to several recipients in agreed portions. One example is shaka, which lets a payment link pay out to a name rather than a raw wallet address. The parties agree the division and sign it onchain before any money moves, and the router passes funds along without keeping them.

Three properties follow from that description, and each matters to a closing.

First, the order of events is reversed. In the invoice route, money moves and people then agree, or argue, about who gets what. Here the agreement comes first and is fixed. On closing day there is nothing left to negotiate about fees, which is exactly when you want nothing left to negotiate.

Second, no recipient is a creditor of another. Each is paid by the payment itself. This removes a familiar post-closing quarrel, the one that is not about the amount but about the delay.

Third, recipients can be designated by name. A wallet address is a long string that no one can check by eye. A name such as pay.yourbrand or name.yoursector can be read, compared with what the recipient told you, and confirmed out loud on a call. Mistyped destinations are a real operational risk in onchain payments, and a readable name reduces it. It does not remove the duty to verify: whoever sets up the split still confirms each destination with its owner through a channel other than the one the instruction arrived on. Name resolution is also uneven across wallets and tools, so check that the name resolves where you intend to use it; the page on payments to a name sets out what works.

One thing a split does not do is move the TLD. Routing money says nothing about whether the token changed wallets. The exchange of token against funds is the job of escrow, and a split sits beside it, never in its place. Whether fees travel in the same payment as the price or in a parallel one depends on the tools used for the closing, and that point is settled with whoever runs the escrow and transfer well before the closing date.

A worked example: USD 300,000 and three recipients

The following is an example with assumed figures, not a description of any real deal.

Assume a buyer and a holder have agreed that the buyer will make one payment of USD 300,000 for a TLD. Assume the holder engaged an adviser for a fixed fee of USD 15,000, payable on closing. Assume the holder also promised, in writing, a fixed fee of USD 5,000 to a referrer who made the introduction that led to the buyer. Assume both fees are borne by the holder and that no other fee is paid from this payment. The lawyers on each side bill their own clients separately and are outside the example.

The fees total USD 20,000. The holder therefore receives USD 280,000. The three amounts add back to the USD 300,000 the buyer pays, with nothing left over and nothing held by anyone in between.

HolderUSD 280,000

Adviser to the holderUSD 15,000

ReferrerUSD 5,000

Legal fees on each side, tax and network transaction costs are not included.

What the buyer sees in this example

The buyer pays USD 300,000 and receives the TLD. The buyer owes no fee to the adviser or the referrer, because the buyer engaged neither. Yet the buyer’s payment is what reaches them, and the buyer will see, or can find out, that the holder nets USD 280,000. That is information about the seller’s side of the table. The buyer must be told before agreeing to pay into a split, and the holder must accept that the buyer will know it.

If the fees were added on top instead

Change one assumption and the deal is a different deal. If the parties had agreed that the holder receives USD 300,000 clear and the buyer bears the same two fees, the single payment would be USD 320,000. The fees are identical; who carries them is not. This is why the phrase “the price is USD 300,000” is not enough in a term sheet. Write whether the figure is what the buyer pays or what the holder receives, and name every deduction between the two.

Why the amounts are fixed

The example uses fixed amounts on purpose. A fixed fee is known the day the mandate is signed, so the split can be drawn up and agreed long before closing and does not change if the price moves in the last round of negotiation. A fee calculated from the price has to be recomputed whenever the price changes, and it gives its recipient a stake in the number, which is the subject of the conflicts section below.

Telling each side who is paid, and by whom

A split makes payments visible to the people inside it. That is its discipline, and it should be embraced rather than engineered around. The working rule is simple: nobody should be surprised at closing by a name in the split.

What must be disclosed, and to whom, goes beyond the list itself.

The third row is where most problems live. Disclosure inside the split is automatic. A payment outside it is invisible unless someone declares it. An adviser who is paid a fixed fee in the split and a second sum by the other side, later and elsewhere, has shown the client half the picture. The client’s protection is contractual: the mandate should state that the fee in it is the only remuneration the adviser receives in connection with the deal, from anyone.

The fourth row matters more to organizations than to individuals. If the buyer is a company and the referrer turns out to be related to an employee who took part in the decision to buy, the company has a problem that the split did not create but has now recorded. Companies generally have rules on gifts, commissions and related-party payments, and laws on commercial bribery exist in many countries in varying forms. Ask the question before closing, in writing, and keep the answer.

Disclosure between the parties is not disclosure to the world. The agreement, the mandates and the fee letters stay private, and where a mutual NDA covers the exchange, they are covered by it. The onchain trace is another matter, addressed in the section on limits.

Conflicts of interest around a success fee

A conflict of interest is a situation in which a person who is supposed to serve your interest has a reason of their own to prefer a particular outcome. It is not an accusation. Most conflicts in a small deal are structural, known in advance and manageable once they are named.

The adviser who is paid only if the deal closes

A success fee aligns the adviser with closing, not with closing well. Near the end of a negotiation, an adviser on a success fee is better off with a signed deal on weaker terms than with no deal. Good advisers resist this pull, and good clients do not rely on resistance. Two measures help: a fixed fee that does not move with last-minute concessions, so that giving ground earns the adviser nothing extra, and a client who keeps the walk-away decision personally and says so at the start.

The fee that grows with the price

A fee calculated from the price looks aligned with a seller and opposed to a buyer. In practice it is weaker than it looks for the seller, since a small increase in price changes the fee very little compared with the risk of losing the deal, and it is plainly awkward on the buy side, where the adviser would earn more by negotiating less well. A fixed amount removes the question on both sides.

The referrer paid by both sides

A referrer who is promised a fee by the holder and another by the buyer is not necessarily doing anything wrong, since introducing two people serves both. It becomes wrong when either side does not know. Put both fees in the same split, or disclose both in writing, and the issue disappears.

The adviser who acts for both principals

One person advising the buyer and the seller on price cannot serve both. Some intermediary roles are honestly neutral, such as carrying messages or running the closing mechanics, and they should be described that way in the engagement. Advice on what to pay or accept comes from someone engaged by one side only.

Lawyers and referral fees

Professional rules in many countries restrict lawyers from sharing fees with non-lawyers, from paying for referrals, or from receiving a commission in a matter where they advise, and some require the client’s informed consent in writing. The rules differ from one country and one bar to the next. A lawyer who is asked to appear in a split as a referrer checks their own rules first, and a principal who is asked to pay one should expect that check to have been done.

The fee letter and the closing statement

Two documents turn the arrangement from an understanding into something that can be executed. The fee letter is the short agreement between a recipient and the person who owes the fee. The closing statement is a single page, agreed by both principals, that lists every amount moving at closing.

A fee letter for a split needs fewer clauses than people expect, and each one answers a question that will otherwise be asked on closing day:

• who owes the fee, and that nobody else does
• the amount, as a fixed figure in a named currency or asset
• the event that triggers it, described so that a third person could tell whether it happened
• that it is paid from the closing payment through the agreed split, and that payment through the split discharges it in full
• that the recipient receives nothing else in connection with the deal
• what happens if the deal does not close, or closes with a different buyer
• the destination for payment, and how a change of destination is confirmed

The clause on a different buyer deserves care for referrers. A referral fee is normally tied to a deal with the introduced party. If the introduced buyer walks away and another one appears through a different route, the letter should make plain that no fee is due, and for how long after the introduction the referrer’s entitlement lasts.

1. List every promiseEach principal writes down every person they have promised money to in connection with the sale, including informal promises. Anything not on a list is not paid at closing.
2. Paper each feeEvery recipient who is to appear in the split has a fee letter with the person who owes the fee. Fees that do not depend on closing are taken out and invoiced in the ordinary way.
3. Exchange the listsThe holder and the buyer each see the other's recipients and amounts, and each confirms in writing that they have no objection.
4. Draw up the closing statementOne page shows the payment, each deduction and the amount the holder receives. The figures must add up to the payment exactly.
5. Verify each destinationEach recipient confirms its wallet or name through a second channel, and whoever sets up the split checks that each name resolves to the intended wallet.
6. Agree the split, then closeThe parties sign the split before funds move. Closing then follows the escrow procedure, and each recipient confirms receipt.

Invoices, tax and records for each recipient

A split is a payment mechanism. It does not change who supplied a service to whom, and that is what accounting and tax follow. What follows is general information; the rules vary by country, and each party’s own accountant and counsel decide how they apply.

In the worked example, the adviser supplied a service to the holder, so the adviser’s invoice is addressed to the holder for USD 15,000, even though the funds arrived from the buyer’s payment. The referrer invoices, or otherwise documents, USD 5,000 to the holder. The buyer has one document: the purchase of a TLD for USD 300,000. The holder’s records show a sale for USD 300,000 and two costs, not a sale for USD 280,000. Booking the net figure as the price is a common shortcut and it misstates both the proceeds and the costs.

Several questions should be put to an adviser before closing, because they are hard to repair afterward:

• whether a sales or value-added tax applies to a fee, and if so whether the fixed amount includes it
• whether a cross-border payment for services is subject to withholding in the payer’s country
• how a fee received in a digital asset is valued in the recipient’s books, and at what moment
• whether a recipient who is an individual must declare the fee as income, and under what heading
• what identity and sanctions checks a party must run on a person it pays

Keep, for each recipient: the fee letter, the invoice, the closing statement, the confirmation of the destination, and the reference of the onchain transaction. The transaction reference is the equivalent of a bank statement line, and it does not disappear.

Where a split at closing is the wrong tool

The mechanism has limits, and some deals are better served by the older routes.

Fees that are not known at closing. A split needs figures. A fee that depends on something measured later, or that is still disputed on closing day, cannot be put in it. Pay what is agreed through the split and leave the open item to a separate agreement.

Recipients who cannot receive onchain. A lawyer whose firm accepts only bank transfers, or a referrer with no wallet and no wish to open one, is paid by invoice. Pressing someone to set up a wallet in the last week before closing creates exactly the operational risk the split was meant to remove.

Privacy. Onchain transactions are public. Anyone who knows where to look can see that a payment was divided, into what amounts, and to which wallets. A recipient designated by a readable name is easier to recognize than one behind a bare address. For a holder or an adviser who values discretion, this may outweigh every advantage above. The alternative is a closing agent, whose distribution is private, or invoices after closing.

Reversals. A bank transfer made in error can sometimes be recalled. An onchain payment sent to the wrong destination generally cannot. The verification step is the only safeguard, and the people performing it should not be rushed.

Before you set a closing date

Do the first step of the procedure before anything else, alone and on paper: write down every person you have told, in any form, that they would be paid if this TLD is sold or bought. Next to each name, write the amount, who owes it and where the promise is recorded. Where the last column is blank, write a short fee letter before you negotiate anything else, because it is far easier to agree a fee with someone before the price is known than after.

If you are an adviser or lawyer rather than a principal, the equivalent step is to tell your client, in writing, everything you stand to receive from the deal and from whom, and to read your own professional rules on referral fees before you accept one. The page for advisers describes how a file can be referred to the desk.

A holder can mandate Hush Partners to find a buyer through a sell-side mandate, and an organization can mandate it to find and approach a holder through a buy-side acquisition. Our fee is a fixed amount, charged only to the client who gave the mandate; a party that answers a note or buys a TLD pays the price of the TLD and nothing to us. The rules of engagement set out the rules we work by. To discuss a closing with several recipients, use the contact form.

Questions people ask

Can a referrer be paid if the promise was only verbal?

A verbal promise may or may not be enforceable, depending on the country and on what can be shown. For the purpose of a split, the practical answer is that it should be written down before closing, in a short letter both people accept. If the two cannot agree what was promised, that is a disagreement to settle directly, not through the closing payment.

Does the buyer have to accept paying the seller’s advisers through its payment?

No. A buyer may prefer to pay one amount to one counterparty and let the holder settle its own fees afterward. Some organizations have payment policies that require it. In that case the fees go by invoice or through a closing agent, and the disclosure of who is paid by whom still applies.

What if a recipient changes wallet just before closing?

Treat any late change of destination as a warning sign until proven otherwise. Confirm it with the recipient by voice or through a channel you already trust, have the fee letter amended, and have the split agreed again. If there is not enough time to do that properly, pay that one recipient by invoice after closing.