"NEWS of September 21, 2016-shareholder loans LBO operations foreign"

Posted by on Sep 21, 2016

Have aroused some concerns and raised some criticism in certain operators doctrine and guidelines in circular No. 6/E/2016 of the revenue relating to leveraged buy out: this is what is being argued in par. 3.3 where practices document draws attention to the possibility – mind you, "on the use of particular and exceptional circumstances" – "to redevelop financing operations in capital injections".

The Administration invokes in that regard the General Canon of mismatch between the legal form of the transaction and its economic substance, so that they could use the circumstances in which the shareholder loans granted to the special purpose vehicle will be in effect for a capital contribution tax equalized. The clues that might trigger this retraining are listed in the document as a policy, and would be circumstances which could give the impression that the debt is not in fact conform to the economic substance of the transaction, all – always according to administration – based on "factual and objective indexes".

The criticisms raised by the operators and by the doctrine in this recommendation have been taken up also by Assonime in circular No. 17/2016.

First, it should be noted that there would be no reason to doubt the authenticity of the shareholders ' loan, which is usually characterized by a riskier than loans from financial institutions, hence its higher interest rate and a deferment, precisely because it is related to a higher risk: even so, it would not be any sums disbursed by way of capital , would you even for the substantial difference between the respective mode of remuneration: interest, in the case of financing; dividends, in case of capital.

Technically, it is noted that the recall regulations made by the Administration to par. 1.67 1.64 – of the OECD guidelines is now overtaken by par. 8-10 of 1,119 and subsequent Actions of the BEPS Project. In this most recent paper, in fact, the ability to redevelop certain transactions is limited to very exceptional cases. The reference to the test of economic substance should therefore take into account the information referred to in para. BEPS 1,123 of that Action which replaces the concept of economic substance with that, more limited rationality: the opportunity to redevelop the contract would therefore be limited to cases where there is no economic logic and transaction business observed, and the examples in the following sections of the document is no longer the case of "shareholder loan" as it appears in para. 1.65 of the OECD guidelines, precisely in via upgrade.

It is observed then that the LBO operations involving international players quite frequently employ a variety of funding sources which, by way of physiological, also influences the structure of contractual agreements confluent on the cd. "financial package" which is a document usually prepared to use their funders. As a rule, then, it is precisely these to demand the inclusion of clauses that are intended to preserve and protect the position of the senior financing granted by them, by making the position of shareholder loans.

In conclusion, then, it appears that the use of the financial package to show the not rationality of the transaction and the disconnect between the economic substance and legal form of shareholder loans, such as to lead to the redevelopment of the latter to capital, whether in the opinion of the operators an exercise a bit forced.

Fabio Lad