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.
In King v PFL Finance Limited & Anor [2015] NZCA 517, the Kings, a husband and wife team of farmers, arranged finance from PFL Finance Limited but the loan went into default. PFL served PLA notices but failed to serve the Kings as guarantors. A receiver was appointed to the farming operation, who determined to cease trading the day after his appointment.
The mere existence of a secured remedy against another party is not a substantial ground for refusing to allow a creditor to pursue a remedy against a guarantor.
On 10 August 2012, the Supreme Commercial Court of the Russian Federation (the “SCC”) published a decree clarifying disputes relating to suretyships (the “Decree”). The Decree has not been significantly amended since the draft was published in February 2012 and analysed in the March edition of the Legal Digest.
We would like to note several important positions included in the SCC’s Decree:
Recent amendments to the Enforcement Procedure and the Interim Protection Act facilitate repayment in enforcement proceedings.
Introduction
Bills of exchange are mostly regulated by the sector specific act of 1946 (based on provisions of three 1930’s Geneva conventions). Provisions of other acts (eg, Obligation Code; Obligacijski zakonik) are used secondarily if the Bill of Exchange Act (Zakon o menici) does not contain applicable provisions.
Prescription is one word which every creditor (and attorney) dread. Prescription extinguishes a debt and there is very little a creditor can do once that proverbial ship has sailed.
The Prescription Act, No 68 of 1969 (Prescription Act), on a good day, has its challenges, but the situation is even more uncertain when an insolvent estate is concerned.
Rogers J, with Nuku J concurring, in the recent judgment of Van Deventer and Another v Nedbank Ltd 2016 (3) SA 622 (WCC) shed some very needed light on this issue.
The restructuring of financially distressed companies is on the increase globally. In line with this international trend is Chapter 6 of the Companies Act, No 71 of 2008 (Act) which introduced business rescue into the South African corporate landscape.
Although business rescue has brought a much needed and long overdue alternative to liquidation for businesses in distress, it is also responsible for many points of contention. The most pertinent of these is currently the general moratorium found in s133 of the Act.
It is common practice to find directors of a company standing surety for the company in order to secure its debts. The consequence could be severe for the sureties, because if the company is unable to pay its debt, the creditor can take legal action against the directors or other third parties in their capacity as sureties, unless the company pays its debts and the sureties are released from liability.
Ever since the new business rescue regime, contained in Chapter 6 of the Companies Act, No 71 of 2008 came into force in May 2011 there has been much anticipation as to how courts would treat sureties who had stood and provided security for the debts of a company (principal debtor) that subsequently went into business rescue and had a business rescue plan adopted: would such suretyships remain unaffected and enforceable?
- In our business rescue training workshops prior to the implementation of the Companies Act, No. 71 of 2008, clients were advised that where the debt of a debtor is compromised in terms of a business rescue plan, the debt of the surety and co-principal debtor may be extinguished because of the accessory nature of the suretyship debt to the principal debt.