Intercompany Loan Agreement South Africa

Once the underlying loan agreement is approved, the interest payable and repayments of the main loan are freely transferred abroad. The application to FSD usually sets the duration of the loan, the interest rate and its calculation, as well as the date on which interest or capital is due under the loan. Normally, loans between a South African company and its foreign subsidiaries of the group would be subject to transfer pricing rules, which require that the terms of the loan be comparable. However, there is an exclusion from the rules relating to certain business-to-business debts. However, multinational enterprises relying on this transfer pricing exclusion should review the terms of the loans in the light of a recent Supreme Court decision. The Court agreed that the effect of Clause 7 was that, as a result of the relevant events, the loans were immediately due and payable and that, therefore, the requirements of Article 31(7) were not met. In the South African credit market, there are regular syndicated and cross-border credit transactions. It is common for these transactions to involve a number of legal orders and for the documents used in these transactions to be subject to a different legal system than South African law. It is then necessary to reconcile the requirements and practices of different legal systems in order to ensure that these transactions are economically viable, bankable and reliable.

The Tribunal also held that the subsecation agreement merely changed CBL`s order of priority among MML`s creditors and would not distract from the above conclusion. . . .