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True sale or not true sale


Lawyer Neill May
Area Corporate Finance and Securities


Article originally published in the Canadian Lawyer Magazine, September 2015

Excerpt from "True sale or not true sale":

That there is uncertainty as to what constitutes a “true sale” should come as no surprise.  In my personal life, there are stereotypical debates about the benefits of retail bargains that are “on sale.”  Having studied economics, I expect that every decision each of us makes in our lives is a “true sale,” made with full information and without coercion; otherwise, we would not do it - the kind of Economics 101 conclusion that seems pretty obvious and leaves one no further ahead.  So, the fact the law has not neatly settled the question is foreseeable.

In fairness, the simplicity of the “true sale” label belies the complexity of the transactions where the question arises.  At its core, the issue generally boils down to whether the transaction in question was a “true sale” of an asset or some form of financing transaction, and tends to arise either in the context of commercial disputes about competing interests in the asset or as part of sophisticated tax structuring.  The recent British Columbia Supreme Court decision in Coutinho & Ferrostaal GmbH v. Tracomex (Canada) Ltd. is an interesting example of the former.

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