The following Tax guidance note Produced in partnership with Jenny Doak of Vinson & Elkins RLLP provides comprehensive and up to date legal information covering:
This Practice Note outlines the tax issues that are relevant where creditors seek to enforce their security over the assets of a company, or corporate group, in distress.
Other Practice Notes in this series cover the tax issues relating more specifically to:
acquisitions of distressed debt, and
In addition, a Checklist summarises the key points to consider when dealing with distressed debt.
This Practice Note discusses the types of enforcement actions available to creditors of distressed companies.
For a closer look at the technical provisions dealing with debt releases in the loan relationships legislation, see Practice Notes: Impairment losses and debt releases and Impairment and debt releases—connected companies.
As discussed in Practice Note: Debt restructurings—acquisitions of distressed debt, lenders will often participate in a restructuring of a distressed group’s debt in order that the underlying business may survive. Enforcement by the lenders of their security is usually only pursued as a last resort.
Where security is to be enforced however, there are a number of options available depending on the rights available to the lender:
exercising a power of sale
appointing a receiver
appointing an administrator, and
Other, less commonly used, methods of enforcement (not considered further in this Practice Note) include:
taking possession of the secured assets—note that this option is only available at the discretion of the
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