Risk of a charge to corporate income tax and trade tax for a German fiscal group.

A seller had been required to give an indemnity to a buyer to protect the target/buyer of real estate against an unexpected tax charge within the fiscal group. The target and buyer insisted on an indemnity from a private equity group for an indemnity limit of EUR 50m.

The private equity house worked with us to negotiate the indemnification required by the buyer but which they would back out with insurance. We worked with the seller’s advisors (a magic circle law firm in Germany) to ensure the conduct provisions and indemnification itself were backed out appropriately in the insurance policy. This enabled the private equity house to meet its commercial aims on the transaction to satisfy the buyer but also its own risk committee