Bifalgorithm post · Un actionnaire vend un immeuble à sa société · Nuvei v. Arrap - NSW Supreme Court finds that a post-closing voluntary disclosure by the target so as to deplete escrowed funds did not violate a duty to cooperate with the vendor

Escrow Funds

Escrow Funds (Un actionnaire vend un immeuble à sa société · Nuvei v. Arrap - NSW Supreme Court finds that a post-closing voluntary disclosure by the target so…

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  • Purchase-price escrow was agreed to address a potential Australian withholding-tax liability.
  • Before closing, Nuvei identified a potential withholding-tax issue involving the Company’s deemed dividend.
  • The deemed dividend may have attracted the 30% non-treaty reduced rate.
  • The 15% rate generally applied under the Australia-U.S. Treaty.
  • The investors were US LLC and LLP recipients of the deemed dividend.
  • The investors had not established that their ultimate owners were US residents.
  • Nuvei and Arrap agreed to place part of the purchase price into escrow.
  • The escrow would remain in place for 18 months.
  • The escrowed amount would cover the potential additional withholding-tax liability.
  • Was there an ATO determination within 18 months that additional withholding tax was payable?
  • If there was no determination, the escrowed funds would be released to Arrap.
  • If the ATO determined that additional tax was payable, the potential liability would be covered by the escrow.
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Escrow Funds

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Un actionnaire vend un immeuble à sa société

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USR292600b83e2a
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"Prior to the closing of the purchase of the shares of an Australian company (the “Company”), the Australian purchaser (“Nuvei”) identified that a deemed dividend paid by the Company may have been subject to withholding tax at the non-treaty reduced rate of 30%, rather than the 15% rate generally applicable under the Australia-U.S. Treaty, given that the various US LLC and LLP recipients of the deemed dividend (the “investors”) had not established that their ultimate owners were residents of the US. It agreed with the Australian sellers (“Arrap”) that a portion of the purchase price would be placed into escrow for 18 months to cover off this potential liability, and that if there was no “determination” by the Australian Taxation Office (“ATO”) within the 18-month period that the additional withholding tax was payable, the escrowed funds would be released to Arrap."

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