Cash Pooling Agreement Example

In addition to credit tax rates and borrowing rates, account should also be taken of remuneration during borrowing for guarantees provided by the parties to the external bank, as well as any remuneration for the management of the head of treasury in the situation of a fictitious pool of cash. [1] As a general rule, a cash balancing contract provides for the obligation to return the same amount of money, but the obligation to transfer a certain amount of money to the unit indicated in the contract is lacking. A participant with a surplus cannot determine in advance whether it is used to fund another participant, at what level, when and by which of the other participants. On the day of the conclusion of the contract, it is not certain that the participant has financial surpluses or bottlenecks. In addition, a loan agreement within the meaning of the Civil Code assumes two parties (lenders and borrowers), while in the case of treasury agreements, the number of participants is at least three and there must be a pool manager responsible for managing liquidity within the group, if applicable. Fictitious cash pool A fictitious cash pool allows the multinational group to debit balances from different bank accounts in different jurisdictions. Cash is not physically transferred to the bank account of a cash guide. On the other hand, the Polish tax authorities do not recognise cash pooling as a loan subject to the taxation provided for in the Civil Transaction Tax Act[4]. In this case, when granting individual tax interpretations, the administrators of the tax chambers consider that the cash pooling agreements remain unassigned agreements under Polish law and therefore do not fulfil the criteria of one of the contracts listed in Article 1(1)(1) of the CLT Act, including loan agreements. [5] It would appear that the first reference to a term “cash pooling” in government acts appears in the Ordinance of the Federal Statistical Service of the Land of 24.07.2019 N 421 “On the approval of statistical monitoring forms of the Confederation for the organization of statistical monitoring of prices and federal finances”, in which cash pooling is considered an intra-group credit agreement between companies. At the same time, recent amendments to the Russian Civil Code have allowed banks to execute a direct debit order, even if there is no money in an account, provided that the account is included in a set of accounts (including those held by different companies) and the total amount of these accounts is sufficient to execute the direct debit order.

This solution, enshrined in the Russian Civil Code, can have a positive influence on the development of cash pooling in Russia and bring it closer to the concept used in other jurisdictions. However, in the absence of clarifications from the Central Bank of the Russian Federation, it is not yet clear how the above-mentioned mechanism can be implemented in practice. There are two main types of cash pooling agreements: fictitious cash pooling and physical cash pooling. In summary, both in Poland and in Russia, participants operate in cash pooling within a non-binding legal framework that does not directly address this institution. . . .

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