True sale: Difference between revisions
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“[[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 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. | ||
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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 | This is to ensure that in the vendor’s [[insolvency]] there is no chance of the vendor’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 | A [[True sale opinion]] is a [[legal opinion]] from a [[law firm]] (ideally a [[magic circle]] one) confirming that a disposal or the transfer of collateral amounts to a true sale. | ||
====See Also==== | ====See Also==== | ||
*{{1994csa}} | *{{1994csa}} | ||
Revision as of 10:03, 27 September 2017
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CSA Anatomy™
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“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 vendor’s insolvency there is no chance of the vendor’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 a legal opinion from a law firm (ideally a magic circle one) confirming that a disposal or the transfer of collateral amounts to a true sale.