The passage of tax reform last December gave investors greater security when it comes to corporate tax rates in the near future. One consequence is the increased interest of some investors in acquiring payment rights under existing tax receivable agreements (TRAs). In short, ACCORDS are agreements made by a company (a «pubco») as part of an IPO to monetize Pubco`s tax attributes after the IPO for the benefit of owners prior to the IPO and investors who acquire payment rights under TRAs to such pre-IPO owners. Our previous article on ARTs focused on some ways in which tax reform could affect the value of TRA payment rights. Since the introduction of tax reform, we have seen a marked increase in investor interest in the acquisition of TRA payment rights, including through hedge funds, family offices and private trust funds. This article describes some of the functions of an AED that an investor should analyze before acquiring rights under an AER. Posted by simsjg on Wednesday, April 18, 2018 in Essays, Volume 71, Volume 71, Number 3, Volumes. Each individual tra investment should be considered taking into account the specific provisions of the TRA and the facts applicable to the pubco concerned. These concrete facts may raise specific questions of diligence. However, there are a number of issues to consider for most PURCHASEs of TRA payment rights, including: . For more information on investments in ARTs, please contact one of the following members of the Ropes-Gray team: Gladriel Shobe Associate Professor, Brigham Young University Law School Before 2005, TRAs were almost never used in IPOs. Today, they have become commonplace and are changing the IPO market landscape in a way that should become even more evident in the future. This article traces the history of different ITerations of TRAs and shows that a new generation of more aggressive TRAs has recently developed.

Although TRAs have only been used in the past for a small set of companies with a specific tax profile, the new generation of innovative and aggressive TRAs can be used by virtually any COMPANY that makes an IPO, greatly expanding the potential use of TRAs. . In short, TRAs are trying to obtain before the IPO the owner of a Pubco a large part of the real tax-saving benefits resulting from the use of pubco of certain tax attributes. This advantage is generally measured «with or without», the main thing being that the pubco initially uses tax attributes that are not covered by the TRA (for example. (B) interest payments and capital expenditures) to protect its revenues from tax. The two most common forms of TRAs are «NOL TRAs» and «Step-Up TRAs.» CEPs have been described as «bizarre» and «sneaky» by some critics, but the economic and fiscal consequences of different types of TRAs have remained largely unexplored in the literature. This article examines whether reviewers` comments on ARTs have value or whether ARTs are simply an effective contract between owners prior to the IPO and state-owned enterprises. It examines TRANSACTIONS in the broader context of financial transactions and shows that the way TPAs are used in the public market departs from similar private transactions in a way that could have negative effects on public shareholders. This article also shows how up-C, a kind of IPO operation in which TRAs are most used, allows owners to take money before the IPO, which should be provided for public shareholders in an undisclosed manner, and proposes corrective measures to this problem.