CHAPTER EIGHTEEN
1 Introduction
1.1 The clauses below deal with some miscellaneous matters in the tax covenant.
2 Treatment of Payments
11GENERAL
11.1 Any payment made by the Covenantors under this Deed shall (so far as possible) be by way of reduction in, and repayment of, the consideration for the Shares under the Agreement. Any payment made by the Buyer under this Deed shall (so far as possible) be by way of an increase in the consideration for the Shares under the Agreement.
2.1 This clause is not really needed as it repeats what has already been said, in respect of both payments to the Buyer and to the Covenantors.
2.2 As noted earlier, the tax effect of the payments made by Covenantors to the Buyer is to reduce the base cost of the shares. Provided that the Buyer is not receiving the payments on behalf of the Company, the payments should not be taxable on either the Buyer or the Company, providing that the payments do not exceed the Consideration. 2.3 As noted in the previous chapter, payments by the Buyer to the Covenantors, if treated as an increase in the Consideration for the shares, will be taxable on the Covenantors. There is then the need to identify the tax treatment of the payment made by the Covenantors which has triggered the payments by the Buyer.
2.4 If the payment has been made as a result of the counter-covenant, there is the need for the protection of a grossing up clause.
11.2 The provisions of the following clauses of the Agreement shall have effect as if incorporated into this Deed mutatis mutandis with references to this Agreement being replaced with references to this Deed and with any other necessary modifications:
195
Made with FlippingBook Learn more on our blog