All too often the task of procuring and renewing D&O insurance at a portfolio company is assigned to the portfolio company’s CFO or Controller, who employs an insurance broker to find the best price for the amount of coverage deemed appropriate by the broker. When such insurance is procured and thereafter renewed, the CFO/Controller simply reports to the board the fact of the procurement/renewal and few questions about the terms of coverage are discussed at the board level. This can be a big mistake.

With its judgment of November 28, 2016, the German Supreme Tax Court (Bundesfinanzhof; “BFH”) dismissed the application of the tax administration’s so-called restructuring decree (Sanierungserlass). The restructuring decree allowed, subject to certain conditions, a suspension and abatement of taxes on so-called cancellation-of-debt income (“COD-Income”) otherwise resulting from certain recapitalization measures such as the waiver of debt and “debt-to-equity swaps”.

With its judgment of 28 November 2016, the German Supreme Tax Court (Bundesfinanzhof; BFH) dismissed the application of the tax administration's so-called restructuring decree (Sanierungserlass). The restructuring decree allowed, subject to certain conditions, a suspension and abatement of taxes on so-called cancellation of debt income (COD Income) otherwise resulting from certain recapitalization measures such as the waiver of debt and debt-to-equity swaps.