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 the tax obligation — well, ''burden — resulting from the merger of one counterparty may fall on the ''other'' one. If I were Russian and you Cypriot, and I was able to pay without withholding thanks to the Russia-Cyprus double tax treaty, and you went and merged into a Scottish company, meaning you became Scottish, then suddenly I can’t take advantage of that marvellous double tax treaty any more. In that case I am the “{{isdaprov|Burdened Party}}” — the one suffering the tax burden — but you are the “{{isdaprov|Affected Party}}” — since it was your merger which triggered the unhappy tax transformation.
{{isda Tax Event Upon Merger summ|isdaprov}}
 
In the case where my merger also caused me to suffer the tax burden, I would be both the Burdened Party ''and'' the Affected Party.
 
This is you can imagine, a red letter day for {{icds}} w2ho quite outdid itself in the complicated permutations for how to terminate an {{isdama}} should there be a {{isdaprov|Tax Event}} or a {{isdaprov|Tax Event Upon Merger}}. Things kick off in Section {{isdaprov|6(b)(ii)}} and it really just gets better from there on in.<ref>It doesn’t.</ref>

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.

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