Tax Representation Letter from Acquiror for Tax-Free Section 368(a)(1)(A) Reorganization

Summary

This template is a Tax Representation Letter from Acquiror for Tax-Free Section 368(a)(1)(A) Reorganization that an acquiring corporation should provide to tax counsel in order for tax counsel to issue a tax opinion that a direct merger qualifies as a tax-free reorganization. If, however, neither acquiror's nor target's tax counsel is providing a tax opinion, the representations contained in this template may still be helpful to include in the representations provided by acquiror in the merger agreement. This template includes practical guidance and drafting notes. This template should only be used for a merger of a target into an acquiror. For a reverse subsidiary merger that qualifies as a tax-free reorganization under Section 368(a)(2)(E) of the Internal Revenue Code, please refer to Tax Representation Letter from Acquiror and Merger Sub for Tax-Free Section 368(a)(2)(E) Reorganization. For a forward subsidiary merger that qualifies as a tax-free reorganization under Section 368(a)(2)(D) of the Internal Revenue Code, please refer to Tax Representation Letter from Acquiror and Merger Sub for Tax-Free Section 368(a)(2)(D) Reorganization. For a reverse merger (i.e., a merger in which acquiror merges with and into target), acquiror should provide the target representations and target should provide the acquiror representations. In order for a direct merger to qualify as a tax-free reorganization under Section 368(a)(1)(A), several requirements must be met, including: (a) The reorganized company must continue a substantial portion of the target's historic business; (b) The continuity of proprietary interest requirement must be satisfied; (c) The companies must formally adopt a "plan of reorganization"; and (d) The parties must have a valid business purpose for engaging in the merger. For a discussion of different types of tax-free reorganizations under Section 368(a), see Tax-Free Acquisitions. The template provides a starting point for drafting representations applicable to a tax-free Section 368(a)(1)(A) reorganization and should be tailored for the specific facts and circumstances. This template does not address representations that may be applicable to special kinds of corporations, such as real estate investment trusts. This template also does not address acquisitions that occur with non-U.S. corporations. Capitalized terms in this template are generally included in the standard tax-free reorganization merger agreement; however, you should cross-reference the acquisition agreement to ensure that the applicable definitions are the same. If both target and acquiror's tax counsel are providing tax opinions, the representation letter should be addressed to both target and acquiror's tax counsel, as each must rely on the representations provided therein. See also Tax Representation Letter from Target for Tax-Free Section 368(a)(1)(A) Reorganization.