- use of the so-called “vehicle company” when acquiring equity interest;
- alleged absence of corporate purpose in the manner in which the transactions that gave rise to goodwill were structured;
- absence of merger between the assets of the invested company and the entity that acquired equity interest with goodwill when it did not originally spend the funds used in the acquisition (“real investor”); and
- inadequacy of the future profitability report proving the economic basis of the goodwill.
Indeed, cases discussing related party transactions (the infamous “internal goodwill”) also have been well accepted.
This is because, as a rule, the courts have scrutinized the issue from the point of view of legality and free enterprise, weighing these principles in the face of the case at hand and rejecting the right to goodwill only in those cases in which willful misconduct with the intention of defraud tax authorities are verified.
It is not only substantive issues that can influence the success or failure of a lawsuit on the matter. The procedural strategy to be adopted has also proved to be extremely relevant. The type of lawsuit, the time in which it is filed (whether before or after receiving tax assessment notices) and, especially, the jurisdiction in which the claim will be filed must be carefully studied before going to court.
However, even in this macrocosm of increasing litigiousness and improving receptivity, there has yet to be any judgment rendered by the high courts which make the subject – quite a thorny one at that – continue to be far from a final outcome.
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