Tax treatment in the hands of the creditor
The tax treatment of the forgiveness of debt within a group of companies depends on whether or not such forgiveness is of a “normal nature”. In order to be considered as being of a normal nature, the ‘advantage’ granted by a parent/creditor to its subsidiary/debtor must involve valid business reasons.
Summary
This briefing sets out the key French corporate income tax issues in respect of debt restructurings. In summary, debtors and creditors may be faced with material tax consequences in case of a debt waiver, debt transfer, conversion of debt into equity or debt buy-back, so that such operations may require an appropriate structuring in order to mitigate potential tax issues.
Introduction
This briefing summarises key French tax points relating to restructuring of indebtedness.
The recent restructuring of Autodis, a French car parts company, is a perfect illustration of the positive consequences of the reform of the French bankruptcy code in effect since February 15, 2009. The combined use of the French conciliation procedure for the operating company and the French safeguard procedures for the holding companies were agreed upon between the debtor and its creditors pursuant to the first pre-pack agreement executed in France.
Background
Article L 611-4 to L 611-15 of the French Commerce Code.
Act n° 2005-845 of 26 July 2005, as completed and amended, has created a new out-of-court settlement process known under French law as “Conciliation,” replacing the former amicable settlement or “règlement amiable.”
Everyday, most of us in the United States encounter evidence of relentless economic globalization. Gone are the days when American-brand automobiles dominated our roads. As a result of NAFTA, fresh Mexican produce fills the shelves of our local supermarkets. You are perhaps just as likely to fly overseas on Japan Air Lines, Aer Lingus or Lufthansa as on Northwest-Delta, American or United.
February 2017 N° 19 Fondo Atlante and the future for the financial institutions Tommaso dalla Massara Some news on insolvency procedures Fabio Marelli EU Commission first draft of ePrivacy Regulation Rocco Panetta Insurance Distribution Directive Guido Foglia ACROSS THE EUNIVERSE 2 In this Issue Editorial Giovanni Moschetta, Bernard O'Connor 3 What's App in Europe 4 Bernard O'Connor The next big thing for European data protection: EU Commission publishes first draft of ePrivacy Regulation to be discussed during GDPR transition period 6 Rocco Panetta, Francesco Armaroli Critical features of
Despite numerous obstacles and challenges faced along the way following Brexit (and its inevitable impact on tracing and recovering assets of UK based debtors overseas), we last left our brave cross-border recovery specialists triumphantly holding the hard-won exequatur judgment which expressly recognised the bankruptcy order and Trustee in Bankruptcy (TIB) and confirmed that all rights and powers were enforceable in France. Vive La France!
In Short
The Situation: For the first time ever, a court in France has examined the compatibility of the statutory netting safe harbor with the French Constitution. The French High Court of Justice (Cour de cassation) addressed the preliminary question of constitutionality in the context of an insolvency proceeding and handed down its decision on March 6, 2024.
On 7 December 2022, the European Commission unveiled a draft directive (2022/0408 (COD)) (the “Directive”) proposing to harmonise certain aspects of insolvency laws across the European Union[1].
Global FDSI Briefing
Welcome to our latest quarterly briefing on legal developments across our global network. I hope you find the articles insightful and thought provoking. Highlights this quarter include recent developments in Italian derivatives case law, an overview of the amendments made to Spain’s insolvency regulation and the UK’s FCA issuing first warning notices against individuals.
If you have any questions or would like further information please do not hesitate to contact me, or one of our global key contacts.
[Matthew Allen]
Matthew Allen