Unilever 2008 Annual Report Download - page 130

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Notes to the consolidated accounts Unilever Group
Unilever Annual Report and Accounts 2008 127
Financial statements
25 Commitments and contingent liabilities (continued)
Tax cases Brazil
During 2004 the Federal Supreme Court in Brazil (local acronym STF) announced a review of certain cases that it had previously decided in
favour of taxpayers. Because of this action, we established a provision in 2004 for the potential repayment of sales tax credits in the event that
the cases establishing precedents in our favour are reversed. Since that time we continue to monitor the situation and have made changes as
appropriate to the amount provided.
In June 2007, the Supreme Court ruled against the taxpayers in one of these cases. Industry associations (of which Unilever is a member)
attempted to negotiate a settlement with the Federal Revenue Service to reduce or avoid the payment of interest and/or penalties on such
amounts. On 3 December 2008 the negotiations resulted in the publication of a settlement by the Brazilian government, open to all taxpayers
including Unilever. The amount payable based on this offer does not result in additional liabilities beyond those already accounted for.
Also during 2004 in Brazil, and in common with many other businesses operating in that country, one of our Brazilian subsidiaries received a
notice of infringement from the Federal Revenue Service. The notice alleges that a 2001 reorganisation of our local corporate structure was
undertaken without valid business purpose. The dispute is in court and if upheld, will result in a tax payment relating to years from 2001 to the
present day. The 2001 reorganisation was comparable with restructurings done by many companies in Brazil. We believe that the likelihood of a
successful challenge by the tax authorities is remote. While this view is supported by the opinion of outside counsel there can be no guarantee
of success in court.
Cumulative preference shares
In November 2006 NV announced that it had agreed a settlement with the main parties in a legal dispute over the conversion of the cumulative
preference shares that were issued in 1999 as an alternative to a cash dividend. These cumulative preference shares were converted into
ordinary shares in 2005 and subsequently cancelled following approval from the Annual General Meeting in 2005. Former cumulative
preference shareholders who held these shares at the opening of trading on 24 March 2004 were entitled to participate in the settlement.
A group of former cumulative preference shareholders who had bought their preference shares after 24 March 2004 and who are not entitled
to the settlement, instituted claims with the Rotterdam District Court for nullification of the NV Board’s decision to convert the preference
shares and NV’s Annual General Meeting decision to cancel the preference shares. The Rotterdam District Court has not yet decided on the
merits of these claims. The claims are contested vigorously by Unilever NV.