Template:M summ 2002 ISDA 5(b)(iv): Difference between revisions

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A “{{isdaprov|Burdened Party}}” is different from an “{{isdaprov|Affected Party}}” because taxes may fall on one’s ''own income'' (in which case one is both “''burdened''”, since you are the one who has to stump up to the taxman, and “''affected''” since your own income is correspondingly reduced by the payment) or on one’s ''payment obligations to someone else'' (in which case one is “''burdened''” by the tax, but not “''affected''” by it, since it is your poor counterparty who winds up a bit short in the proverbial ring).
{{isda Tax Event Upon Merger summ|isdaprov}}

Latest revision as of 21:54, 13 October 2023

This is you can imagine, a red letter day for ISDA’s crack drafting squad™ who quite outdid itself in the complicated permutations for how to terminate an ISDA Master Agreement should there be a Tax Event or a Tax Event Upon Merger. Things kick off in Section 6(b)(ii) and it really just gets better from there.

So, Tax Event Upon Merger considers the scenario where the coming together of two entites — we assume they hail from different jurisdictions or at least have different practical tax residences — has an unfortunate effect on the tax status of payments due by the merged entity under an existing Transaction.

It introduces a new and unique concept — the “Burdened Party”, being the one who gets slugged with the tax — and who may or may not be the “Affected Party” — in this case the one subject to the merger.