True sale: Difference between revisions
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The true sale analysis requires that a purchaser receiving an asset has no contractual restrictions on right to deal with their own property as any legal and beneficial owner would. In particular the selling party should not be able to control the asset, and should have no right to require its redelivery or future repurchase. | The true sale analysis requires that a purchaser receiving an asset has no contractual restrictions on right to deal with their own property as any legal and beneficial owner would. In particular the selling party should not be able to control the asset, and should have no right to require its redelivery or future repurchase. | ||
The motivation for this request is simply to support the true sale analysis and avoid recharacterisation risk. | The motivation for this request is simply to support the true sale analysis and avoid [[recharacterisation]] risk. | ||
This is to ensure that in the selling party's [[insolvency]] there is no chance of the selling party's [[liquidator]] challenging the transfer of the asset to the purchasing party on the grounds that it was not a true sale for accounting purposes, and recharacterising it as a loan or an unperfected pledge or other form of security. | This is to ensure that in the selling party's [[insolvency]] there is no chance of the selling party's [[liquidator]] challenging the transfer of the asset to the purchasing party on the grounds that it was not a true sale for accounting purposes, and [[recharacterising]] it as a loan or an unperfected pledge or other form of security which may be treated less favourably in the distribution of insolvency proceeds. | ||
A "True sale opinion" is an opinion from a law firm confirming that a disposal or the transfer of collateral amounts to a true sale. | A "True sale opinion" is an opinion from a law firm confirming that a disposal or the transfer of collateral amounts to a true sale. | ||
Revision as of 11:09, 8 November 2012
"True sale" is an accounting concept relating to the disposal of assets under a sale and purchase or other form of title transfer.
The true sale analysis requires that a purchaser receiving an asset has no contractual restrictions on right to deal with their own property as any legal and beneficial owner would. In particular the selling party should not be able to control the asset, and should have no right to require its redelivery or future repurchase.
The motivation for this request is simply to support the true sale analysis and avoid recharacterisation risk.
This is to ensure that in the selling party's insolvency there is no chance of the selling party's liquidator challenging the transfer of the asset to the purchasing party on the grounds that it was not a true sale for accounting purposes, and recharacterising it as a loan or an unperfected pledge or other form of security which may be treated less favourably in the distribution of insolvency proceeds.
A "True sale opinion" is an opinion from a law firm confirming that a disposal or the transfer of collateral amounts to a true sale.
See Also
Replace with {{anat|csa}}