M&A Foundations · glossary
The seller's promise to pay the buyer, pound for pound, for the target's pre-completion tax liabilities — in substance a standing indemnity for old tax, working alongside (and more powerfully than) the tax warranties. Clause 10.1 · Chapter 12
Explained in Chapter 12, Indemnities and the Tax Covenant, of M&A Foundations.
Also explained in Legal Due Diligence.
If indemnities are targeted strikes, the tax covenant is a standing army. It is an indemnity-style promise under which the seller covenants to pay the buyer an amount equal to the target's tax liabilities for the seller's period of ownership. Historically the covenant was a separate “tax deed”; now it is usually a clause or schedule. Practically every private share deal has one.Read Chapter 12, Indemnities and the Tax Covenant →
Every chapter of M&A Foundations is free to read, including the full training share purchase agreement.
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