Annex 3 to the Subsidiary Convention may be amended only by written agreement between the Parties. Like any contract on the merits, a subsidiary letter presupposes in particular a legitimate object and a non-fraudulent intention of the parties. Therefore, a side letter should not intend to deceive third parties or circumvent binding legal provisions. Fraudulent accessory letters can lead tax authorities to convict companies. In 2003, the Dutch authorities conducted an investigation of Ahold, including examining some of its secondary letters allowing joint ventures to be illegally consolidated in order to improve their accounts. Initially, a settlement was concluded with the Dutch authorities and the company was fined €8 million. Ahold was later convicted of fraud by the SEC. In share purchase contracts, ancillary letters are sometimes added to insurance and guarantees to deal with issues such as tax liabilities or social issues that the parties do not want the authorities to know about. For a secondary letter to become mandatory, it must meet the same criteria as all contracts: (i) the offer; (ii) adoption; (iii) recital (iv) certainty; and (v) the intention to create legal relationships. The 50/50 distribution of the surplus is not essential for our result, but our results are important on the idea that C covers at least part of the surplus during negotiations with J.
Example 1: The good side of the ancillary agreements Good State Party (p = .5)Bad State (1-p = .5) actiongbGBS120200120200J200200C700100S+J140200140200S+J+C2100150200 Add a little intuition, We start with Example 1, which aims to show the potential usefulness of ancillary agreements. When changing the terms of a primary contract, it may be necessary to forward ancillary letters to third parties. For example, in lease agreements, concessions, such as a shorter lease term or consent to subletting, are often granted by the landlord to the tenant by means of a secondary letter. In our example, the potential buyer must be informed of the various concessions granted. Your distribution and R&I teams are no doubt willing to go and do the “extra mile” to close a sale with a customer, but if that “extra mile” involves an “ancillary deal” to lend money to the customer to close the deal, it`s time to re-evaluate the deal. The preamble to the subsidiary letter will both determine the intention of the parties and justify itself when it is made public. Due to the confidentiality of the subsidiary letters, the confidentiality clause will also be a key element in determining what degree of (non)disclosure is desired. . . .