Taxation (International and Other Provisions) Act 2010 section 259NEF

Corporate rescue: debt released shortly after connection arises

Section 259NEF sets out the circumstances under which a debt release qualifies as a corporate rescue, where the debt is released shortly after the parties become connected.

• The debt must be released within 60 days of the payer and payee becoming connected with each other
• The connection between the parties must have arisen from an arm's length transaction
• Before the connection arose, there must have been a material risk that the payee would have been unable to pay its debts within the next 12 months
• Inability to pay debts means either being unable to meet debts as they fall due or having liabilities (including contingent and prospective liabilities) exceeding the value of assets

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