Tax Event Upon Merger - 1992 ISDA Provision

1992 ISDA Master Agreement

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Crosscheck:
→’87 equivalent
→’92 equivalent
→’02 equivalent

Tax Event Upon Merger in a Nutshell™

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Original text

5(b)(iii) Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii);

See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.

The Varieties of ISDA Experience
Subject	2002 (wikitext)	1992 (wikitext)	1987 (wikitext)
Preamble	Pre	Pre	Pre
Interpretation	1	1	1
Obligns/Payment	2	2	2
Representations	3	3	3
Agreements	4	4	4
EODs & Term Events	5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE	5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE	5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE
Early Termination	6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off	6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off	6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET
Transfer	7	7	7
Contractual Currency	8	8	8
Miscellaneous	9	9	9
Offices; Multibranch Parties	10	10	10
Expenses	11	11	11
Notices	12	12	12
Governing Law	13	13	13
Definitions	14	14	14
Schedule	Schedule	Schedule	Schedule
Termination Provisions	Part 1	Part 1	Part 1
Tax Representations	Part 2	Part 2	Part 2
Documents for Delivery	Part 3	Part 3	Part 3
Miscellaneous	Part 4	Part 4	Part 4
Other Provisions	Part 5	Part 5	Part 5

Resources and Navigation

Index: Click ᐅ to expand: ISDA

Comparisons

Tax Event Upon Merger: Note the missing “indemnifiable” from the fifth line of the 2002 ISDA version and the expanded description of “merger events” towards the end of the clause. And the renumbering as a result of the Force Majeure Event clause in the 2002 ISDA.

Basics

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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JC’s “nutshell” summary of the clause
Background reading and long-form essays
- “Burdened” Party? Is that different from an Affected Party?

References