Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Recharacterization: The Hidden Risks
This is the second of a two-part article.
As described last month, the lease is the second element of the tripartite lease transaction. (The tripartite transaction in question consists of two elements and three parties: the first element involves the transfer of equipment from a supplier to a finance lessor, and the second element consists of the lease of such equipment from the finance lessor to the lessee with a supplier support guarantee.) The hidden recharacterization risk is embedded in the first element, that is the transfer of title of the equipment from the supplier to the finance lessor. Depending upon the nature and extent of a supplier guarantee that may be required to support the lease in these tripartite transactions, this transfer may be considered by a reviewing court as a loan instead of a sale.
The following example of a common commercial leasing transaction illustrates the hidden risk. Assume that a supplier finds an end-user to lease a piece of equipment. The supplier then transfers title of the equipment to a finance lessor in a transaction that is documented as a sale, at a purchase price that is: 1) stated to be the full retail price of the equipment; and 2) used to compute the lease payments to the end-user. The finance lessor then enters into an operating lease with the end-user. In an effort to provide economic support or credit enhancement, the supplier executes a written guaranty of the lessee's lease obligations under the operating lease to the finance lessor. The supplier also agrees to repurchase the equipment at the end of the lease term at the scheduled residual price fixed at the inception of the lease, which residual is computed as the retail price paid by the lessor to the supplier at the inception of the transaction, plus accrued interest, less the amount of the lease payments made by the lessee under the operating lease.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?