Share Purchase Agreement Price Adjustment Clause
Another important issue on the tax side is the treatment of items that may have a subsequent impact on tax liabilities, as their treatment is different for accounting and tax purposes (deferred taxes), such as. B than depreciation/amortization, accrued interest or unrealized foreign exchange spreads. Often, so-called “tax assets,” such as tax losses. B, which are billed within a given source, or interest expenses that have not been offset in the distribution of profits, remain the central aspect. Whether such assets can be used by the purchaser in the future may also affect the tax appreciation of the business. The decision of the British Columbia Court of Appeal in Close v. Weigh West Marine Resort Incorporated, 2009 BCAA 216, shows that buyers and sellers need to think carefully about adjustments and the possibility of adjusting after preparing the financial statements after the accounts close. A completely different type of adjustment to the sale/sale price is an adjustment resulting from additional payments for the shares, based on compliance with certain conditions set out in the share purchase agreement. From the buyer`s perspective, there may be problems with how these payments can be recognized for the civil operations of corporate and corporate taxes. In both cases, the recognition of such a payment depends on the legal personality of the payment set out in the share purchase contract. The structure of the transaction will determine the nature of the price adjustments based on the objectives and expectations of the parties. Since these issues are generally decided at the negotiating table and ultimately in the sales contract, price adjustments can only be properly identified if accounting, tax and legal issues are properly verified.
Some flexibility in the design of these adaptations may have different effects on taxation for different types of adjustments. It is therefore essential to take into account the tax aspects of each transaction, not only in terms of compliance with the legislation, but also from a financial point of view, from the time of the trading process of stock exchange transactions and asset contracts. The issue of the correct tax treatment of the purchase price for the transactions of the M-A is one of the most complex issues and therefore requires cooperation between the parties to the transaction on a legal, financial and fiscal level.