5 grudzień 2020

Cash Pooling Agreement Meaning

Autor: Anna Pilsniak. Kategorie: Bez kategorii .

There are some cash-pooling models. The first is fictitious pooling, which means that there are no actual account sweeps, and what is generated is easy for taking into account net corporate positions. This type of pooling does not consist of interest charges from the transfer of the balance. As part of hybrid cash pooling, participating players combine an efficient and virtual cash pool. This method is mainly used when different currencies are used in the cash pool. For example, the clearing of the bank assets in question is only in euros and physically, while the original accounts in other currencies are managed only within the framework of the virtual pool. The effects of Russian monetary control legislation in the case of international remittances are also important in examining cash-pooling agreements with Russian companies. In accordance with the aforementioned provisions, cash-pooling between a Russian unit and non-residents is subject to monetary control. This means that the Russian company is required to register the contract with the bank if the value of the contract is about 50,000 usd for import contracts or about $100,000 for export contracts. In addition, the transfer of funds to a Russian bank account includes an initial transfer period to a special transit account and it is only after supporting documents have been made available to the service bank that the service bank can authorize the transfer to the current account. In addition, the implementation of cross-border cash-pooling agreements may be accompanied by a risk of breaching the rules on repatriation of funds according to which, when a Russian company lends a loan to a non-resident, the repayment of funds borrowed from its bank accounts for the duration of the loan agreement.

In this context, monetary control laws provide for the obligation to indicate the expected duration of the loan as part of an agreement. As a general rule, agreements without a certain loan term are not accepted. As the foregoing shows, monetary control laws create not only uncertainties, but also obvious obstacles for international groups that are willing to include their Russian affiliate in cross-border cash-pooling agreements. The following graph shows a possible structure of fictitious cash pooling, in which the parent company and other entities of the group have independent individual accounts (hellorange) and are responsible for the debts incurred, while the fictitious account (light blue) is only the internal account of the group and has no legal status in this case.

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