Sham Transactions Research Articles

К вопросу об оспаривании цепочки сделок в делах о банкротстве по мотиву притворности

The authors of the article refer to the concept and signs of a sham deal, paying special attention to the sign of the coincidence of the parties in the covering and disguised deals. Based on the analysis of judicial practice in bankruptcy cases, the conditions for qualifying as sham several consecutive transactions covering a single transaction for the withdrawal of the debtor’s assets are identified. The problem of the presence of a sign of coincidence of the initial and final parties of transactions in a chain of sham transactions is considered separately. A conclusion is formulated about the coincidence of the initial and final parties of transactions and in the case of a sequence of interrelated transactions.

임대차보증금반환채권 담보 목적 전세권의 법률관계

This paper reviews the Supreme Court's Decision 2018 Da 268538 sentenced on December 30, 2021, which determined the legal relationship when chonsegwon is established to secure a lease deposit return bond. The main issues in this ruling are whether chonsegwon is valid for the purpose of securing such bonds and whether the settler of a leasehold can claim a deduction for overdue payments under an internal lease agreement from the mortgagee of the leasehold if a mortgage is set on chonsegwon. First, the validity of chonsegwon to secure a leasehold security deposit return bond needs to be examined from the perspective of the nature of chonsegwon, statutory real property right principle, and sham transaction jurisprudence. In principle, this type of chonsegwon is valid unless the possibility of use and profit by the leaseholder is completely excluded. However, any part of the leasehold transfer agreement that is incompatible with the internal lease agreement constitutes a sham transaction and is invalid. A valid cause of action exists in a leasehold transfer registration if the partial invalidity doctrine of Article 137 of the Civil Code is applied. The next issue is whether the settler of a lease can claim a deduction for overdue payments under a lease agreement for internal reasons in response to the exercise of its surrogation right of the security deposit return bond of the mortgagee of the leasehold. The judgment reconciles the interests of the parties by applying the law of general debt enforcement or the law of false representation. The settler of the leasehold cannot claim a deduction for overdue payments under a lease agreement against a mortgagee who is unaware that the mortgagee has a lease agreement with the settler. However, the settler may claim a deduction for overdue payments under a lease agreement from a mortgagee who is aware that the settler has entered into such a lease agreement. The relevant judgment was reasonable in light of balancing the parties' conflicting interests.

Legal Qualification of the “Concealed Transaction” and the Legal Facts Arising from It

The basis for the conclusion of civil law transactions is the equality of participants in civil transactions and the principle of freedom of contract, which correspond to the requirements for conscientious behavior of participants in public relations and the prohibition of abuse of law. The legal consequences of concluding transactions are closely related to the issue of stability of the emerging civil turnover and the level of legal culture. The purpose of the study is to analyze the features of the “concealed transaction” and the legal assessment of the consequences of its conclusion. Objectives of the study: determination of the elements of a “disguised transaction”; an overview of the possible legal qualification of the covert transaction, the conclusion of which was ultimately directed by the will of its parties; analysis of judicial practice approaches on the current issues; characterization of the legal consequences of concluding the transactions in question. Research methods: general scientific methods (analysis and synthesis, system analysis method) and methods of legal science (including the interpretation of legal norms). Results of the study. Judicial practice has developed an approach in which it follows that a sham transaction actually includes two transactions: a sham transaction made for the sake of appearance (fictitious transaction) and a transaction actually made by the parties (concealed transaction). The legal consequence of sham (fictitious) transactions is their nullity from the moment of conclusion, which the court can only ascertain. In turn, the legal consequences of a covert transaction depend on its content and compliance with the rules established by the Civil Code of the Russian Federation on a particular type of transaction. So, the legal consequences of a concealed transaction can be: general, special and specific.

Запрет на притворность в административном праве: проблемы обоснованности

Introduction: in 2016, administrative liability was introduced for violating the ban on the registration of sham accounting objects in the accounting registers, including sham transactions (hereinafter, referred to as the “ban on sham”). For more than five years, these elements have not found any targeted analytical understanding in the professional scientific and legal books, nor reflected in the practice of administrative offenses. Meanwhile, the “ban on sham” creates problems, preventing bona fide organizations from implementing the principle of freedom of contract, forcing them to distort their will in the form of refusing to conclude unnamed contracts, simplifying business relations, incurring the costs of auditing sham, etc. These circumstances have predetermined the purpose of the study – to identify the reasons for the lack of reaction of legal science and practice to the “ban on sham”, to assess its validity. Methods: dialectics, conceptual analysis, and the comparative legal method. Results: the common reasons for inattention to the “ban on sham” are the mega-branch, and therefore, unclear for most legal scholars, nature of the basic concept of “sham accounting objects”; the complexity of proving violations of the “ban on sham”. Special reasons for such inattention are the contradiction between the absence of a ban on sham transactions and the punishability of actions to include transactions in the accounting registers; the identification of sham transactions and sham accounting objects in the legislative documentation; the possibility of qualifying violations of the “ban on sham” by related sets of facts. The legal groundlessness of the introduction of the “ban on sham” is shown. An approach to the correction of the legislation is proposed. The scope of application of the results is administrative, financial, civil, constitutional law, legal research, law enforcement, and lawmaking. Conclusions: the amendments to the legislation on accounting and the abolition of the “ban on sham” are required.

Counteracting the practices of sham transactions: market manipulations and using insider trading

Objective: to consider approaches to countering the use of unfair transaction practices, in particular, market manipulations and insider trading within the functions and powers of the Bank of Russia.Methods: the work used a combination of methods of dialectical, empirical, comparative and logical research.Results: approaches to the definition of market manipulation are established, the main methods of market manipulation are considered. The activity of the Bank of Russia to identify unfair practices in the Russian financial market was studied; the amount of market manipulation cases was identified and analyzed. The approaches were shown, which exist within the framework of the financial market development strategy to counteract the use of unfair transactions practices, including the practices of market manipulation and the use of insider trading; promising areas of development in the specified areas were identified.Scientific novelty: the article consolidates the dynamics of the activities of the Bank of Russia, the probable problem areas and the potential in the field of countering the unfair transactions practices, including market manipulation and insider trading; the amount of identified cases of market manipulation is analyzed.Practical significance: the main provisions and conclusions of the article can be used in the further analysis of countering the use of unfair behavior practices in the financial market and in forming a glossary.

Interpreting Tax Legislation: The Role of Purpose

This paper was delivered in abbreviated form at the January 1995 meeting of the American Association of Law Schools, Tax Section.Copyright © 1995 by Deborah A. Geier"Sex Illegal in Missouri? Perhaps." (I knew that would get your attention.) That was the headline of an article in the Cleveland Plain Dealer in November 1994. The article described a Missouri statute enacted the preceding August that, if read literally, outlaws all sex in Missouri. One of the legislators is quoted in the article as saying that "[n]o one is going to be prosecuted for having normal sex," a statement I don't dare touch.The connection that this newspaper article has with the topic I discuss here is that tax law has a rich history of nonliteral interpretation in order to avoid results that one person or another has considered to be inconsistent with the purpose of the statute as a whole. This tradition is illustrated by the common law doctrines variously named substance over form, sham transaction, step transaction, business purpose, and assignment of income. In other instances, however, we have an extremely form-conscious approach, such as the approach to bootstrap acquisitions in the Zenz v. Quinlivan context. How do we make sense of it all?Interest in statutory interpretation has been renewed over the last decade, probably prompted-at least in part-by the confluence of two events that have nothing to do with tax law: the elevation to the Supreme Court of Antonin Scalia (whose literal textualist approach to statutory language is now embedded in the Court's opinions) and the attention paid to literature theorists, the so-called deconstructionists, who seized upon the notion that language is indeterminate. All of a sudden language and its interpretation were once again center stage after a long hiatus during which the theory behind the language dominated academic discourse.

Fake transactions in Russian law: history and modernity

This article examines the phenomenon of a fake transaction. The author shows the origin of this institution in the decisions of the civil cassation Department of the Governing Senate in the Russian Empire. In particular, it is shown that initially such decisions were about circumventing the law, then the idea of fictitious (imaginary) transactions was formulated, and only then were the imaginary and fake transactions differentiated. The Soviet approach was initially based on the division of the imaginary and feigned transaction with the indication reactions a fake transactions: nullity, but with the ability to save to cover its legal. The author analyzes the current legislation, judicial practice. The aim of the study is the determination of aggravating circumstances sham transactions, based on the legislative model of sham transactions, including the value at which regulatory provisions it is understood in the legal positions of the Constitutional Court of the Russian Federation, of the Supreme Court of the Russian Federation, courts of arbitration and courts of general jurisdiction, given the domestic doctrine and the experience of legal regulation. Based on the results of the study, the author formulated the main elements that form the model of a fake transaction in the law of the Russian Federation, including the qualifying features of a fake transaction.

Притворное правовое явление: понятие и юридический состав

Introduction: in recent decades, there has been an increase in the number of legal phenomena in which nominal properties do not correspond to the real ones. So, even such terms as, for example, the nominal value of an asset and the like began to be included in the laws. The discrepancy between nominal and real properties has long been typical for sham transactions. Therefore, the researchers considered it appropriate to extend the rules on such transactions to the legal phenomena of various branches. So, in tax law, it is proposed to talk about a sham counterparty and apply the legal consequences to the real one. It is also important that in recent years the concept of “sham object” has appeared in the acts of financial and administrative law. The accumulation of relevant circumstances predetermined the purpose of the study – based on the generalization of the construction of a sham transaction to reveal the composition of the concept of “sham legal phenomenon”. Results: the prerequisites for the formulation of the concept of “sham legal phenomenon” are revealed. The expediency of introducing this concept into the legal circulation is characterized. The relevance of extrapolating the construction of a sham transaction to sham legal phenomena is justified. It is shown that the elements of the composition of a sham legal phenomenon are the covering phenomenon claimed by the participants as real; the covered (real) legal phenomenon; the legal consequences of the covered phenomenon; the participants of the legal phenomenon seeking to achieve the legal consequences characteristic of the covered phenomenon. The rule on the legal meaning of the consequences of the covered legal phenomenon is formulated. The scope of application of the results is the theory of law, the branch legal sciences, scientific legal research, law enforcement, law-making. Conclusions: it is necessary to study the scale, causes and consequences of the prevalence of sham legal phenomena in various branches of law.

The Conflict between the Legal Form and the Economic Content of the Contract and Methods of its Resolution on the Example of a Buyout Lease Agreement

The paper substantiates that the reason for the collision between the legal form and the economic content of the contract is the discrepancy between the real economic goals of the parties to a particular contract and the goals that the legislator had in mind when constructing the legal structure of the corresponding contract, for example, a lease payment in a buyout lease agreement includes not only payment for the use of the property, as it should be for the lease, but also the redemption value of the property. The author identifies and analyzes three ways to resolve this conflict: re-qualification of the contract as a whole or its individual conditions according to the rules on sham transactions, direct application of the general legal principle of justice and the priority of revealing the actual common will of the parties over the literal interpretation of the contract. It is substantiated that the parties to the contract have the right to use certain contractual structures to achieve uncharacteristic economic goals, if such goals are not illegal.

허위표시의 외관과 간접적으로 이해관계를 맺은 제3자의 보호 - 대법원 2020. 1. 30. 선고 2019다280375 판결 -

허위표시의 외관과 간접적으로 이해관계를 맺은 제3자의 보호 - 대법원 2020. 1. 30. 선고 2019다280375 판결 -

The Use of Paragraphs 1.119 to 1.128 of the 2017 OECD Transfer Pricing Guidelines for the Application of Transfer Pricing Rules

This article aims to analyse the paragraphs 1.119 to 1.128 of the 2017 OECD Transfer Pricing Guidelines and their relation to the comparability analysis, sham transactions and domestic anti-avoidance rules. For this purpose, the authors discuss the nature of the transfer pricing rules, the limits of the OECD transfer pricing guidelines to the application of transfer pricing rules and the main features of the comparability analysis, sham transactions and the anti-avoidance rules. It is concluded that part of these paragraphs contains recommendations that exceed the purpose of the transfer pricing rules when they are structured over the arm’s length principle. OECD Transfer Pricing Guidelines, arm’s length principle, transfer pricing rules, comparability analysis, sham transactions, anti-avoidance rules.

Мнимые сделки как средство вывода активов: проблемы теории и практики

Мнимые сделки как средство вывода активов: проблемы теории и практики

Sham and remedial doctrines

This article articulates a general theory of sham, understanding it as a species of fraud uniquely characterized by the deceptive misuse of an otherwise valid legal form to defeat a substantive rule of law or policy. It then considers two theoretical questions underlying the design and structure of civil remedial doctrines that protect potential victims and claimants against fraudulent sham transfers. First, should a sham avoidance doctrine require evidence of the challenged wrongdoer’s subjective fraudulent intent, or should the doctrine alternatively allow for more objective proof, such as circumstantial evidence of surrounding facts indicative of a sham transfer? Secondly, is a bright-line rule prohibition or a holistic standard for ex post evaluation more likely to be effective as a remedy for sham transactions, and how do concerns about efficiency of judicial review weigh in this rendition of the rules-versus-standards debate? The article identifies the Fraudulent Transfer Doctrine as the dominant approach for addressing sham transactions in the United States, which imposes a standard rather than a rule, and allows for proof of either subjective fraudulent intent or objective circumstantial evidence of badges of fraud in connection with the challenged transaction. The article then surveys other specialized sham avoidance doctrines, developed to address abusive tax trusts and spousal disinheritance, which illustrate experimentation with both subjective state-of-mind criteria and rule-based prohibitions, with mixed reception and success.

Phantom Journalism

A key parameter of determining the changing nature of journalism is to address the question of who owns the media and why. Recent revelations of sham transactions, fraudulent trade practices and black money being used to fund the news media in India, suggest a lack of transparency in how news business are run and financed. Five cases involving leading news organizations in India are analysed to illustrate the argument. In conjunction with this, the corporate take-over of news space by non-media entities signals the rise of a press that can no longer serve as a watchdog of democracy. The paper outlines a decline in quality journalism as a consequence of a disconcerting nexus between influential politicians, powerful corporates and profit-maximizing news organizations. Corrupt funding procedures and concealed ownership patterns have orchestrated a crisis of credibility for journalism while posing fresh challenges for media governance and the nature of democracy.

Understanding Sale and Leaseback

Sale and leaseback transactions in India have quite a history. They have been aggressively used by leasing players and have been called as sham transactions in the past. It would not be an overstatement that leasing industry saw its end in the early 90s in India and it was largely attributable to sale and leaseback transaction. As the leasing industry in India revives, the author makes an interesting case of understanding sale and lease back in India from tax, accounting and legal aspects on the subject.

Defining the contract rights of third parties on sham transactions: Any limits to the protection of their rights?

Defining the contract rights of third parties on sham transactions: Any limits to the protection of their rights?

Fortuitous Victims: Some Tax Law Consequences of Ponzi Schemes

In this paper the authors examine the tax consequences of Ponzi schemes for innocent investor-victims. They use the decisions of the Tax Court of Canada and The Federal Court of Appeal in Johnson v. The Queen as a focus of discussion. Their discussion as to the taxability and deductibility of gains and losses for victims of Ponzi schemes draws on the source doctrine of Income, contract law principles, and the sham and ineffective transactions doctrines. The paper concludes that a Ponzi scheme is a source of income for victims, and that winners ought to recognize net gains on account of income and net losses on account of capital. The paper’s discussion of the investigative obligations of taxpayers is grounded in considerations of reassessments beyond the normal reassessment period and liability for penalties in the Ponzi context. The paper concludes that a contextual approach to these two issues is required considering the fraudulent nature and inherent information imbalance of Ponzi schemes.

Penalties: Unintended Consequences of the Economic Substance Penalty

In 2010, Congress codified the economic substance doctrine and created a strict liability penalty for understatements attributable to transactions that did not have economic substance. Recent court decisions have refused to invalidate transactions based on economic substance and have focused instead on other doctrines such as sham transaction and substance over form. This may have implications for the strict liability penalty incorporated into the economic substance doctrine.

Establishing the Legal Concept of ‘Sham Transaction’ in Tax Law

Establishing the Legal Concept of ‘Sham Transaction’ in Tax Law

Clarifying State Action Immunity under the Antitrust Laws: FTC v. Phoebe Putney Health System, Inc.

The tension between federalism and national competition policy has come to a head. The state action doctrine finds its basis in principles of federalism, permitting states to replace free competition with alternative regulatory regimes they believe better serve the public interest. Public restraints have a unique ability to undermine the regime of free competition that provides the basis of U.S.- and state-commerce policies. Nevertheless, preservation of federalism remains an important rationale for protecting such restraints. The doctrine has elusive contours, however, which have given rise to circuit splits and overbroad application that threatens to subvert the state action doctrine’s dual goals of federalism and competition. The recent Eleventh Circuit decision in FTC v. Phoebe Putney Health System, Inc. epitomizes the concerns associated with misapplication of state action immunity. The U.S. Supreme Court recently granted the FTC’s petition for certiorari and now has the opportunity to more clearly define the contours of the doctrine. In Phoebe Putney, the FTC has challenged a merger it claims is the product of a sham transaction, an allegation certain to test the boundaries of the state action doctrine and implicate the interpretation of a two-pronged test designed to determine whether consumer welfare-reducing conduct taken pursuant to purported state authorization is immune from antitrust challenge. The FTC’s petition for writ of certiorari raises two issues for review. First, it presents the question concerning the appropriate interpretation of foreseeability of anticompetitive conduct. Second, the FTC presents the question whether a passive supervisory role on the state’s part can be construed as state action or whether its approval of the merger was a sham. In this paper, I seek to explicate the areas in which the state action doctrine needs clarification and to predict how the Court will decide the case in light of precedent and the principles underlying the doctrine.