Section 361 — Corporation Tax Act 2009: Acquisition of creditor rights by connected company at undervalue

Acquisition of creditor rights by connected company at undervalue 361 1 This section applies if—

a a company (“D”) is a party to a loan relationship as debtor, b another company (“C”) becomes a party to it as creditor, c immediately after it does so C and D are connected, d in a case where the person from whom C acquires its rights under the loan relationship is a company, in the period of account in which C acquires them there is no connection between C and that company, e the amount or value of any consideration given by C for the acquisition is less than the pre-acquisition carrying value (see subsection (5)),

and f the equity-for-debt exception (see section 361C) does not apply. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 C is treated as releasing its rights under the loan relationship when it acquires them.

4 The amount treated as released is the amount of the difference referred to in subsection (1)(e).

5 In subsection (1)(e) “ the pre-acquisition carrying value ” means the amount which would be the carrying value of the liability under the loan relationship in D's accounts if a period of account had ended immediately before C became a party to it.

6 For the purposes of subsection (5) the carrying value is determined taking no account of—

a accrued amounts, or b amounts paid or received in advance.

7 Subsections (3) and (4) are subject to section 361D (corporate rescue: debt released shortly after acquisition).