Till Spillmann Luca Jagmetti The Swiss Federal Supreme Court has recently ruled that up-stream and cross-stream loans must be entered into at arm's length terms. If not at arm's length, the decision seems to suggest that the loans constitute de facto distributions and may only be granted for an amount that does not exceed the lender's freely distributable reserves. The court also imposed stringent requirements on satisfying the arm's length test. In addition, the court held that an up-stream or cross-stream loan not entered into at market terms reduces the lender's ability to pay future dividends by the amount corresponding to the loan. Further, the court raised the question of whether Swiss companies are allowed to participate in zero balancing cash pools at all.
December 09 2014