Section 116 Clearance Certificate Clause (Escrow Agreement)

This is a clause for an escrow agreement to be used in connection with a mergers and acquisitions (M&A) transaction allowing a purchaser to withhold funds pending the vendor obtaining a Section 116 Clearance Certificate. It can be used in connection with a private share or asset purchase transaction. It contains practical guidance, explanations, and drafting notes. This clause is for an escrow agreement relating to a mergers and acquisitions (M&A) transaction where a portion of the purchase price may be withheld by the purchaser and paid to the Canada Revenue Agency if the vendor is not able to obtain a Section 116 Clearance Certificate as required by the Income Tax Act (Canada) on closing. This clause can be used in connection with a private transaction involving shares or assets. This clause provides for an escrow of a portion of the purchase price in an M&A transaction in favour of a purchaser to satisfy the vendor's obligations to obtain a section 116 Clearance Certificate on ...