Commentary

129 ‘Indemnity’ or ‘covenant to pay’?

COMPANIES vol 11 acquisitions, mergers, demergers
| Commentary

129 ‘Indemnity’ or ‘covenant to pay’?

| Commentary

129 ‘Indemnity’ or ‘covenant to pay’?

An indemnity must be expressed as being given in favour of the buyer and not the target company. Section 49(1)(c) of the Taxation of Chargeable Gains Act 1992 and the case of Zim Properties Ltd v Procter (Inspector of Taxes)1 may apply.

Section 49(1)(c) provides, inter alia, that payments made in respect of a ‘any contingent liability in respect of a warranty or representation’ will result in an adjustment being made to the purchase price. However, it makes no reference to indemnities. Zim Properties Ltd v Procter (Inspector of Taxes) cast considerable doubt on the

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