Jul 18, 2016
Richard Nugent comments on recent IRS guidance creating safe harbors for corporations that want to engage in tax-free spinoffs but have trouble satisfying the control requirement, providing that a recapitalization into control by way of a dual voting structure can be unwound two years after the spinoff without threatening the tax-free nature of the spin.
An excerpt from "Guidelines Placed on Control Workarounds for Spinoffs," Tax Notes Today (July 18, 2016):
Richard M. Nugent of Cadwalader, Wickersham & Taft LLP said the safe harbor "will effectively preclude recaps where [SpinCo] at the time of the spin may already be considering whether to unwind the structure afterward. It will be imperative that [SpinCo's] structure be frozen in place at the time of the spin."
The IRS also won't claim that control wasn't satisfied if SpinCo engages in an unanticipated transaction with a third party that effects an unwind as long as both the transaction or a similar transaction wasn't the subject of an "agreement, understanding, arrangement, or substantial negotiations" or discussions during the 24 months following the spin, and at any time, including after 24 months have passed, one person (where a corporation or investment fund can be a person) doesn't own more than 20 percent (by vote or value) of both SpinCo and the third party.
Nugent explained that if a company satisfies either of the safe harbors, "the IRS will respect the pre-spin recap into control for purposes of the related spinoff."
The Bank of England has initiated a review of its own exposure to LIBOR,
Scott Cammarn, Jonathan Watkins, Mark Chorazak, Aaron Lang
On 7 June 2019, Regulation (EU) 2019/876 (CRR II) was published in the Official Journal of the EU.