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Tax risks and W&I-backed transactions: a good combination?

A buyer should not automatically assume a W&I-backed tax deed is appropriate for its transaction, write Zita Dempsey and Lois Dale (Pinsent Masons).

Introduction to W&I transactions

Where an M&A transaction is covered by W&I insurance this typically means that the seller’s liability under all of the transaction documents including the tax deed is capped at a limited sum. Increasingly this liability cap is just £1 but the liability cap may also be set at the de minimis under the W&I policy.

W&I insurance is most commonly taken out by the buyer. The insurance provider essentially steps into the shoes of the seller meaning that generally the buyer’s only means of recovery if there is a claim under the transaction documents is to claim under the insurance policy. It is also possible for a seller to take out W&I insurance and to claim under...

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