On share acquisitions, purchasers customarily seek protection in the share purchase agreement (“SPA”) for historic exposures (including tax exposures) of the company/group being acquired (target). For historic tax exposures, protection generally takes one of two forms: warranties and/or covenants. The scope and drafting of that protection will often turn on the tax due diligence undertaken and the relative bargaining strengths of the parties.

However, in the heat of negotiations and the desire to ‘get the deal done’, sometimes the legal differences between, and effective protection provided by, warranties and covenants can be overlooked. Those differences were highlighted in the recent High Court decision in Oversea-Chinese Banking Corporation Ltd v ING Bank NV (“the OCBC decision”).

This article was originally published in Tax Adviser Magazine in August 2019.