Opinion Liability Insurance

This product aims to tackle potential impediments to the conclusion of a deal. These will usually be pre-identified hurdles, which have yet to crystallise, such as the divergence of opinion over the potential outcome of a specific issue.

These impediments range from intellectual property licences, patents or other rights, or to parental guarantees. In practice, however, the real sticking point is likely to be tax.

Tax Opinion Liability insurance can be utilised to facilitate a successful restructuring, which may also provide additional peace of mind to the parties should the company be involved in M&A activity at a later date.

The policy is designed to ring-fence liabilities that may arise despite a favourable opinion and are designed to support the tax opinion put forward by either the client's legal or accounting experts.

What does it cover?
The policy is designed to cover the direct tax that may become due as a result of the transaction or restructure including interest and penalties. It will also include gross-ups to cover the taxable benefits of any insurance proceeds. Defence costs will also be incorporated, ideally as a separate sub-limit.

The intention of the policy is to cover potential tax exposures arising out of a positive business aspiration or to assist where the main drivers are changes in tax laws, rates or pure valuation issues.

When may it be required?

• Acquisitions or disposals that may unwind earlier favourable tax treatment
• Concerns over the availability of net operating losses as a result of change of ownership
• Corporate restructures
• High net worth individuals personal financial restructures
• Concerns as to whether debt will be treated as equity for tax purposes