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13.6: Company’s Legal, Business, Financial, Ownership, and Tax Practices

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    22687

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    Company’s Legal, Business, Financial, Ownership, and Tax Practices

    • Major changes in ownership, managerial, legal, regulatory, and operating structure
    • Overfocus of management time and resources on creating complex corporate legal entity, operating, finance, and tax structures (particularly if this is accompanied by intercompany asset sales, transfers, or fee payments)
    • Existence of seemingly excessive number of corporate legal entity vehicles (particularly those with limited or no clear operational mandates)
    • Heavy reliance on tax shelters or similar devices to maintain or maximize profitability
    • Management inability or unwillingness to explain reasons behind corporate-, finance-, tax-, or ownership-structure complexities

    • Aggressiveness or complexity in financial leverage and structure, including

      • high degree of leverage versus peers;
      • stability of capital structure susceptible to refinancing risk;
      • over-reliance on short-term debt;
      • management inability to explain rationale for capitalization structure and financing sources and uses;
      • complexity or untoward number of financing subsidiaries or other financing vehicles within the corporate structure;
      • Overly structured financing arrangements.