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Review of SPA, tax warranties and indemnities

A Share Purchase Agreement (SPA) is a contract to buy/sell shares. It is a key document in an M&A transaction.
SPA defines terms of the transaction (shares, price, obligations of the parties etc). Buyer usually asks guarantees from the vendor that tax liabilities have been properly accounted and issues disclosed and that there are no hidden tax risks.
The interests of vendor and buyer in this respect are usually divergent, making this area an important part of the negotiation process.

Your situation as a buyer:

  • You need clear, precise and unambiguous provisions in the SPA;
  • You want to obtain warranties from the vendor that all tax liabilities and provisions for tax risks are recorded in the books;
  • You wish to ensure that issues identified in due diligence are properly addressed and covered;
  • You need protection against undisclosed tax risks;
  • You want coverage of the whole statute of limitation period;
  • You wish to introduce an efficient procedure for communication, management and settlement of third party claims;

 Your situation as a vendor:

  • You need clear, precise and unambiguous provisions in the SPA;
  • You wish to impose reasonable limits on scope, amounts and time;
  • You want to introduce an efficient procedure for communication, management and settlement of third party claims;
  • You want to provide lower pressure from the buyer for purchase price reduction and escrow account withholding to mitigate tax risks’

 Our services:

  • Clarifying and interpretation of wording of relevant clauses, and their compliance with relevant tax regulations;
  • Defining the scope of taxes and issues covered;
  • Determining limits and caps (individual and aggregate), de minimis amounts;
  • Addressing time limits;
  • Advising on mechanism of conduct of third party claims and settlement.

Contact us

Branka Rajicic

Partner, Tax and Legal services

Tel: +381 11 3302 100

Dragan Draca

Partner, Tax Services

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