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How Commission Disbursement Works in Commodity Transactions

By Bahram Madaen, Esq. ·

In a typical commodity trade, the buyer and seller are connected through one or more intermediaries: mandates, facilitators and brokers. Each expects a commission, usually a small amount per unit or a percentage of the deal. The risk for intermediaries is simple. Once the buyer and seller are introduced, they can close without paying the people who brought them together.

The paymaster structure

  1. Commission agreement. All intermediaries sign an agreement that lists each beneficiary, the commission amount, and the bank details for payment. This is often called an IMFPA or a commission agreement.
  2. Paymaster engagement. The party paying commissions (usually the seller) signs a fee agreement with the paymaster and instructs that commissions be paid from the trust account.
  3. Identity checks. Every beneficiary provides identification and tax forms (W-9 for U.S. persons, W-8BEN for others). Banks will not release funds without them.
  4. Funds received. When the deal closes, the commission funds are wired into the attorney's trust account.
  5. Disbursement. The paymaster wires each beneficiary's share according to the signed agreement and keeps a record of every payment.

Why a written agreement matters most

A paymaster can only follow written, signed instructions. If a commission is not in the agreement, it will not be paid. Before the deal moves forward, check that every name, amount and account number in the agreement is correct.

Common reasons payments are delayed

  • A beneficiary has not returned identification or tax forms.
  • Bank details are incomplete or the name on the account does not match the beneficiary.
  • The paying bank holds a large incoming wire for its own compliance review.
  • The commission agreement and the main contract describe different quantities or prices.

Getting these items right before closing is the easiest way to make sure everyone is paid quickly. See our pages on oil and gold transactions, or contact us to set up a paymaster arrangement.

This article is general information, not legal advice for your situation. Reading it does not create an attorney client relationship.

Planning a transaction?

Fees quoted per transaction. Contact Bahram Madaen directly for a price.

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