Tax in Debt Restructuring

Transcript

1. Tax in debt t t i restructuring Presenters: > Emma Riddle CMS Cameron McKenna LLP > Dipesh Santilale CMS Cameron McKenna LLP > Sam Dames CMS Cameron McKenna LLP
2. Overview 1. Releases and deemed releases 2 W i d l f l di t ib ti 2. Waivers and unlawful distributions 3. Debt for equity swaps 4. Holding equity medium/long term: Commercial issues 5. HMRC Consultation: Potential impact
3. 1 Releases and deemed releases 1 ► Introduction to Loan Relationships ► Tax charge on release ► Group exception ► Group exception ► Other exceptions ► Deemed releases
4. D d l C t d 1 Releases and deemed releases Deemed release: Case study BANK 1 BANK 2 BANK 3 DEBTOR PURCHASER Debt £60m Business £50m PURCHASER • Debtor company has already been in financial difficulties ; is now owned by a consortium of Banks, none of which control it Debtor’s b siness is orth £50m Banks ha e fo nd a potential P rchaser at • Debtor’s business is worth £50m ; Banks have found a potential Purchaser at this value • Banks are owed £60m by Debtor • Option 1 - Banks waive £10m of debt. Purchaser buys Debtor for £1 and procures repayment of outstanding £50m of Bank debt. • Option 2 – Purchaser buys shares and debt owed to the Banks for £50m
5. 1 Waivers and unlawful distributions ► Rules on maintenance of capital 1 ► Valuation of intercompany loans: Distressed vs. non-distressed situations ► Group relief on intercompany waivers of loans
6. 1 C St d Waivers and unlawful distributions 1  Insolvent group with no documented intercompany loans and only net balances known for each company: Case Study and only net balances known for each company: individual loan relationships cannot be identified  Not all group companies insolvent  Sale of half of group and requirement to clean up intercompany loan positions through waiver to facilitate sale Is it possible lawfully to waive the intercompany debts? debts?
7. 1 Debt for Equity Swaps 1 ► Exemption from bringing a credit into account ► What is an ordinary share? ► One or two shares? ► One or two shares? ► Entitlement to shares ► Subsequent disposal
8. 1 Debt for Equity Swaps Di i t i 1 Discussion topic What economic rights should attach to the share(s)? ( )
9. 1 Holding equity medium/long term: Commercial issues for lenders ► Strategy and how much debt to convert? Commercial issues for lenders ► Accounting/Regulatory impact of holding equity C titi /P i i ► Competition/Pensions issues ► Board representation and conflicts for lenders ► General approach on usual shareholder and equity terms y
10. 2 HMRC Consultation and potential impact Fi l Di i potential impact Final Discussion –
11. Questions ?
12. Summary
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