CHAPTER THIRTEEN
CLAIMS
6.1 If the Buyer or the Company become aware of any Tax Claim of which the Covenantors are unaware the Buyer shall give written notice to the Covenantors as soon as reasonably practicable, setting out reasonable particulars of the potential liability, the due date for payment and the time limits for any appeal, provided that any failure in the giving of such notice shall not affect the liability of the Covenantors under this tax covenant.
Executive Summary
A The procedures to be followed in respect of claims are based on balancing two objectives which are considered to be at variance: it is assumed that the Buyer wishes to organise his tax affairs in an orderly fashion and does not wish to jeopardise relationships with the HM Revenue and Customs; it is assumed that the Seller is seeking to reduce the level of the claims under the tax covenant at all costs, and will wish to use all means to do so. B An underlying theme in these clauses is firstly, that prevarication may be one of the tactics that the Covenantors wish to adopt, and secondly, that this may disadvantage the Buyer. C There is a concern that the Covenantors should not be allowed to pursue a claim through to the Supreme Court when there is clearly no realistic prospect of success. In reality the Covenantors will almost certainly have no desire to incur costs in this way unless such action can be justified by the prospect of a successful outcome. D There are some tax covenants which place upon the Buyer a blanket obligation to notify the Sellers in respect of all Claims. There is then a complex clause to the effect that if the Seller notifies the Buyer of a claim, that act of notification is also deemed to be notification by the Buyer to the Sellers. The use of the phrase: “..of which the Covenantors are unaware” deals with this point rather more elegantly, in our opinion.
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