against the Covenantors as no provision was made in the Last Accounts or Completion Accounts. Therefore the above drafting deals with this situation as expected.
3.6 The final alternative is that neither the Tax Liability nor the related recovery were accounted for up to Completion. This is the situation that is most commonly assumed in respect of this clause. In this scenario the Covenantors are required to make payment for the Tax Liability; as and when the recoveries are received in respect of that Tax Liability they are then reimbursed.
4 Carry-Back and Carry Forward of Recovery
7.3 To the extent that the offset is not used under the provisions of clause 7.2 above, it shall be carried back and shall be set against any payments already made by the Covenantors under this Deed, in which case the lesser of the Recovery and the aggregate of the payments already made shall be repaid promptly by the Buyer to the Covenantors. 7.4 To the extent that such Recovery is not used under the provisions of clauses 7.2 and 7.3 above, it shall be carried forward and used to reduce or extinguish any future payments which become due from the Covenantors under this Deed.
4.1 This continues the theme of relating the payments and repayments very closely to the cash flows: if Recoveries are received by the Company and they exceed the amounts then due from the Covenantors, they are firstly carried back and are repaid to the Covenantors to the extent that they are equal to amounts already paid. If there is still a surplus, this does not belong to the Covenantors, but acts as a credit which can reduce future payments.
167
Made with FlippingBook Learn more on our blog