1 Introduction
1.1 The professional who is charged with reviewing the tax covenant must spend a considerable time in reviewing the various definitions that are used in the document: the definitions are often complex and incorporate many of the technical issues which arise in the negotiation of tax covenants.
1.2 Each of the more common definitions are detailed below with some explanatory comments.
2 Buyer’s Relief
1.2.1
Buyer’s Relief : means
2.1 From a drafting viewpoint, it is very useful to gather together the various types of reliefs and allowances which the Buyer considers belong to him.
2.2 The definition of Buyers Relief is used in limiting the effect of the definitions of Overprovisions and Understatements. It is also used in defining a Seller’s Relief, by default. The main purpose of the collective term “Buyer’s Relief” is therefore in limiting seller protection clauses. In other parts of the tax covenant, such as due dates for payment and measurement of the Tax Liability, it is necessary to refer to the individual components of Buyer’s Relief, rather than using the collective noun. 2.3 The Buyer considers that these Reliefs belong to him on one of two grounds: either on the basis that the existence of the tax asset was assumed in the price paid for the shares, or they relate to reliefs of the Company created in the Buyer group. . The definition of Relief is given below, but part of its essence is covered in the following examples. The various Reliefs are explained in turn.
Deferred Tax Relief
(a) any Relief to the extent that it has been taken into account in computing and so reducing or eliminating any provision for deferred Tax which appears in the Completion Accounts, or which but for such Relief would have appeared in the Completion Accounts or to the extent that it was taken into account in computing any deferred Tax asset which appears in the Completion Accounts (“Deferred Tax Relief”).
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