Taxation (International and Other Provisions) Act 2010 section 469

Debt restructuring

Section 469 provides that where a debtor and creditor become related parties solely as a consequence of a debt restructuring involving distressed debt, their loan relationship (and any other financial liabilities or transactions between them) will continue to be treated as if they were not related parties.

• Where a debtor (D) and creditor (C) are not related parties, but a debt restructuring causes them to become related parties, the related party rules are disapplied for that particular loan relationship going forward from the date of the debt release.
• A "relevant release of debt" occurs when a liability under a debtor relationship is released, and immediately before the release it is reasonable to conclude that without it (and any associated arrangements) there would be a material risk that D or a related party of D would be unable to pay its debts within the next 12 months.
• The rule applies not only to loan relationships but also, with any necessary modifications, to any other financial liability owed to C or any transaction with C.
• The disapplication of the related party rules only applies where none of the parties to the loan relationship were related parties of each other before D became a related party of C as a consequence of the debt release.