in paying to the relevant Tax Authority any payment made hereunder by the Covenantors, or in keeping, preserving, maintaining or submitting any records, returns, or computations after Completion; 18.1 The first part of this exclusion is relatively self-explanatory: if the Covenantors make a payment under the tax covenant, then they should not be penalised by virtue of such payment not being passed promptly over to the tax authorities to cover the related liability. Because of the power of the covenant to pay, this exclusion is needed in order to protect the Sellers. 18.2 The second part of the exclusion is probably already covered by the exclusion in respect of voluntary acts after Completion but this specific exclusion provides the comfort of extra protection.
19 Stamp Duty Payable on Transaction
3.1.19 s uch Tax Liability is stamp duty payable on the purchase of the shares in the Company by the Buyer;
19.1 As previously noted, it is our view that this exclusion should not be required in a well drawn tax covenant. If the definition of Tax or Tax Liability are so widely drawn that they include the stamp duty payable by the Buyer, then it is our view that they need to be narrowed to refer to liabilities of the Company.
20 No Double Claim
3.1.20 such Tax Liability has already been successfully claimed under any other provisions of this Deed or the Agreement, including the Tax Warranties;
20.1 This is an important exclusion but one that can be easily overlooked. No difficulty in gaining agreement to such an exclusion should be expected.
20.2 It is possible that the Buyer may find that a claim under the warranties offers the scope for a larger claim than under the tax covenant.
20.3 Such a situation may arise if the Company is contractually committed to make certain payments after Completion and it is identified after Completion that these are not deductible for tax purposes. Another circumstance is where the assessment of future profits is affected: an example is the employers’ NIC costs in Stowmarket Warehousing Limited.
21 A Recovery Is Made From a Third Party
3.1.21 any member of the Buyer’s Group has already recovered from any third party any sum in respect of the Taxation Liability in question or that Taxation Liability has been otherwise settled;
142
Made with FlippingBook Learn more on our blog