The benefits trap: the UK Government’s plans for the tax treatment of foreign …

Announcements were made in the 2015 Summer Budget regarding proposed changes to the UK tax rules regarding individuals who are domiciled outside the UK. These included the introduction of new provisions which would deem certain foreign domiciliaries, who are or have previously been UK resident, to be domiciled in the UK for all tax purposes. On 30 September 2015 the Government published a consultation paper regarding these proposals.

The paper is called rather illiterately Reforms to the Taxation of Non-Domiciles. It is fairly short, and where the proposed deemed domicile rules are concerned, does not contain much information that was not in the technical briefing document which was released in the summer.

However, the new paper is of interest insofar as it addresses the tax treatment of offshore trusts. As discussed below, the Government is proposing quite major changes here, which appear not to have been considered very thoroughly and will need, at the very least, refinement before they can be implemented. This is somewhat concerning, given the Governments ambition to bring the new rules into effect on 6 April 2017. It is possible that we will not have clarity about the post-April 2017 treatment of offshore trusts until well into next tax year, and if so, this will provide a rather short planning window for individuals affected by the changes.

Where the proposed deemed domicile rules are concerned, the Governments intention is to include the rules in the Finance Act 2016, but on the basis that they will not come into effect until 6 April 2017. The Government has given no indication that it intends to include new legislation regarding offshore trusts in the Finance Act 2016. The assumption therefore must be that this new legislation will form part of the Finance Act 2017.


As announced in the Summer Budget, from the tax year 2017/18, foreign domiciliaries who have been resident in the UK in at least 15 of the preceding 20 tax years will be deemed UK domiciled for all UK tax purposes. In a typical case, a non-UK domiciled individual will become deemed domiciled under this proposed new rule at the beginning of the 16th tax year of UK residence.

This is a major change. Under the current legislation, the concept of deemed domicile only applies for inheritance tax (IHT) purposes; it has no relevance for the taxation of income and gains. But from 2017/18, if a UK resident individual is deemed domiciled under the proposed new rule, he will be precluded from using the remittance basis, so he will be taxable on foreign income and gains as they accrue. This change will mean that from 2017/18, there will be no foreign domiciliaries paying the pound;90,000 remittance basis charge, as all individuals required to pay that charge to use the remittance basis will be deemed domiciled.

Aside from the fact that it will apply to income tax and CGT, as well as IHT, the proposed new rule will work somewhat differently from the current IHT deemed domicile rule for long-term UK residents. The current rule typically causes the acquisition of a deemed domicile in the UK at the beginning of the 17th tax year of UK residence, not the 16th; so the change will accelerate the onset of deemed domiciled status by one year.

Rather more significantly, the proposed new rule will greatly extend the period of non-UK residence that will be needed to break a deemed UK domicile. Under the current IHT deemed domicile rule for long-term UK residents, four tax years of non-UK residence are required for deemed domiciled status to be shaken off. However, under the proposed new rule, no fewer than six tax years of non-UK residence will be needed to break a deemed UK domicile, once 15 tax years of UK residence have been clocked up.


Also as announced in the Summer Budget, there will be a separate rule that will cause a UK resident individual to be deemed domiciled in the UK, if the individual has a domicile of origin in the UK (meaning, broadly, that the individuals father was domiciled in the UK when the individual was born). Again, the deemed domicile will apply for the purposes of income tax, CGT and IHT, and again the change will have effect from 2017/18.

This proposed new rule is intended to prevent an individual from enjoying the tax benefits of non-UK domiciled status whilst UK resident, if the individual originally had a domicile in the UK, and was born in the UK, but at some point in his adult life he acquired a domicile of choice outside the UK, and still has the foreign domicile notwithstanding his return to live in the UK. Relatively few individuals fall into this category, and therefore the impact of this rule will be small. The rule seems politically motivated and cannot be expected to generate significant revenue.

The proposal is for deemed domicile under this rule to persist only for as long as the individual remains UK resident. A cessation of UK residence will typically cause the deemed domicile to fall away. The only exception to this will be where the individual has been UK resident for 15 or more out of the 20 preceding tax years. In that unusual case the individual will be caught by the deemed domicile rule for long-term UK residents, as discussed at para 2 above, which will delay the loss of deemed domiciled status until there have been 6 tax years of non-UK residence.

If a taxpayer is caught by the proposed new rule for individuals with a UK domicile of origin, not only will he be precluded from using the remittance basis for as long as he is UK resident, but in addition his non-UK assets will be within the scope of IHT. So too will non-UK assets held by any trust which the individual may have established whilst domiciled outside the UK and before the acquisition of the deemed UK domicile. If he is capable of benefiting from the trust, its assets will in effect be included in his taxable estate for IHT purposes, in the event of his death whilst deemed domiciled in the UK.

The IHT aspect of this could operate harshly, and has the potential to create a degree of complexity where trust assets are concerned. The Government is consulting on this, and seems open to the possibility of introducing an exemption for individuals whose UK residence is only for a short period.


Generally, the deemed domicile proposals in the consultation paper seem fairly well thought-out. However, the Government seems to be at a rather earlier stage in its thought processes where the treatment of non-UK resident trusts is concerned. This is a topic of importance, given the encouragement which the existing tax legislation gives to the creation of trusts by foreign domiciliaries, and the number of such trusts that are in existence.

It was clear from the technical briefing document released in the summer that the Government was proposing rather significant changes to the tax rules regarding offshore trusts, at least insofar as those rules apply to individuals who have become deemed domiciled in the UK. As with the developments discussed above, these changes are intended to take effect from 2017/18.

In the technical briefing document, it was stated that an individual with a deemed UK domicile who had established an offshore trust would not be taxed on the income and gains of the trust on an arising basis (as might be expected, if the concept was that such an individual should be treated in exactly the same way as a UK domiciliary). Instead, fiscal impositions for the settlor in respect of the trust would be limited to tax on any UK source income of the trust, and tax on any benefits received from the trust.

It is worth adding that, consistently with the current law, non-UK assets of a trust established by a foreign domiciliary will generally remain outside the scope of IHT, notwithstanding the settlors acquisition of a deemed domicile in the UK. The exception will be where the settlor has a domicile of origin in the UK, and was born in the UK, and so is caught by the rule discussed at para 3 above.

Assuming that this approach is indeed taken in the legislation, it will allow offshore trusts to be used as roll-up vehicles for the benefit of foreign domiciled families, with tax being charged on benefits received (insofar as the beneficiaries are UK resident, and subject to the remittance basis in the case of beneficiaries who are not yet deemed domiciled), but without the imposition of dry tax charges on deemed domiciled settlors. This approach seems fair, and strikes a reasonable balance between the policy of taxing deemed UK domiciled individuals as if they were actually domiciled in the UK, and the recognition that such individuals are mobile and will only remain UK resident if the tax costs are not too punitive.

The consultation document has shed a little extra light on the direction which the Government is heading in, where the tax treatment of offshore trusts is concerned. The document suggests that a deemed domiciled individual receiving a benefit from an offshore trust should be taxed on the value of the benefit received, whether he receives the benefit in the UK or not (which is to be expected), and without any reference to the income and gains of the trust. It is the proposed absence of any linkage between the tax charge and the income and gains of the trust which is new here.

In our view, it would be a mistake to disconnect the tax treatment of benefits from the economic performance of the assets in the trust. If the legislation does take this approach, it will have the advantage of simplicity, but at the cost of great potential unfairness. There would be a heavy tax cost to benefits received from trust structures that have not realised any income or gains, or indeed where the assets held by the trust may be standing at a loss.

To take one example, one can imagine an individual funding an offshore trust shortly before the acquisition of a deemed domicile in the UK, to protect non-UK assets from IHT, and then receiving a substantial distribution from the trust, or indeed revoking the trust, shortly after he has become deemed domiciled, and before any income or gains have accrued. It would be entirely reasonable to assume that this would have no income tax or CGT consequences, but if the Government implements the proposal to tax trust benefits at a flat rate, without regard to the trusts income and gains, that would be a very expensive mistake. Our view is that while greater simplicity in the tax system is a laudable goal, such simplicity cannot be achieved through crude legislation which sets bear traps for unsuspecting taxpayers.

We are making representations to the Government on this point. We would be prepared to accept that taxing trust benefits at a flat rate is potentially an acceptable approach, and indeed could be attractive to both taxpayers and HMRC, but only if beneficiaries are given the ability to elect to be taxed in a more sophisticated manner which takes account of the trusts income and gains.


Foreign domiciled individuals who will become deemed domiciled in the UK on 6 April 2017, and who currently use the remittance basis, should be starting to consider their options, and should open a dialogue with their advisers, so that they are ready to move ahead once there is sufficient clarity about the tax regime that will apply from 2017/18 onwards.

Given the scope to use offshore trusts as roll-up vehicles, it seems likely that many remittance basis users will continue to be able to live in the UK quite tax-efficiently once they have become deemed domiciled, provided that they take appropriate planning steps in advance of the change of tax status. The increased tax cost of being taxed on non-UK income and gains, and on any benefits received from offshore trusts, will be set against the fact that they will no longer have to pay the pound;90,000 remittance basis charge.

In some cases, there may be merit in dividing wealth between trusts and offshore insurance bonds, which may permit the tax-free extraction of capital. This strategy may be particularly attractive if the Government persists with its proposal to tax benefits from offshore trusts at a flat rate, without any linkage to the income and gains of the trust.

Many factors will need to be taken into account when planning not only the precise nature of the post-5 April 2017 regime, when that is known, but also (in particular) the extent to which the individuals assets represent foreign income and gains, as such income/gains are very likely to be taxable if remitted to the UK, even after the individual has become deemed domiciled. As ever where UK resident foreign domiciliaries are concerned, the most expert advice is needed.

Food Security Act of 1985: determining where farm products are produced

Lenders providing financing secured by farm products must be acquainted with the strictures of the Food Security Act of 1985 (FSA).See7 USC. sect;1631. Failure to do say may result in a buyer taking free of the lenders security interest in farm products.

The FSA protects lenders with a security interest in farm products when their debtors sell the farm products to buyers in ordinary course, by allowing the secured lender to preserve its security interest, notwithstanding the farm products sale, in one of two ways. Which of these two methods applies depends on the state in which the farm products are produced.

States may adopt either a direct notice or central filing system to allow secured lenders to provide notice to potential buyers of farm productsproduced in the stateregarding their security interest in the farm products. A direct notice system requiresthe secured partyto provide notice to potential buyers of its security interest in the farm products for sale. Failure to do so allows the buyer to take free of the security interest. A central filing system, on the other hand, requiressecured parties and buyersto register with the secretary of state, who then compiles a listing of farm products for sale and the respective security interests attached. So long as the seller has filed an Effective Financing Statement (EFS) with the secretary of state, providing notice of its interest in the farm products, asubsequent buyer takes subject to the security interest.

The import of a farm products location becomes paramount where some states are direct notice states, ie Washington, and others are central filing states, ie Idaho and Oregon. A secured party and buyer have different obligations in each. Further, although the FSA does not supplant the perfection process of security interests under Article 9 of the UCC, some states, like Idaho, have a special UCC-1 form for farm products, called a UCC-1F. In Idaho a UCC-1F doubles as the requisite filing under Article 9andIdahos central filing system implementing the FSA. Problems may arise however where a UCC-1F is filed based on the location of the debtor (as required under Article 9), but not where the farm products are produced in another jurisdiction. In such a circumstance the FSA may operate to allow a buyer of the farm products to take free of the security interest. Therefore, it is essential to understand where farm products are produced to ensure all measures are taken to fully protect ones security interest therein.

Published opinions interpreting the FSA are rare. However, the Colorado Court of Appeals has provided insight on how to determine where a farm product is produced for purposes of the FSA.See Great Plains National Bank v. Mount, 280 P.3d 670 (Colo. Ct. App. 2012). There, a Colorado Buyer agreed to purchase 206 cows from an Oklahoma Debtor. The Debtors Bank had previously filed a UCC-1 and EFS in Oklahoma, a central filing state. However, the cattle were essentially raised in Missouri, a direct notice state, spending only 24 hours inOklahoma before being shipped to the Buyer in Colorado. The Bank sought to enforce its security interest in the cows purchased by the Buyer. If the cows were produced in Oklahoma, the Bank had properly complied with the FSA and preserved its security interest. However, if thecows wereproduced in Missouri, the Bank had not properly complied with the FSA, because it did not send notice of its security interest to the Buyer.

The Colorado Court concluded that produced as used in the FSA was intended by Congress to mean the location where farm products are furnished or made available for commerce, in other words, the state in which a sale of farm products takes place. Because the cows were furnished for sale in Oklahoma, that is where they were produced, and the Bank prevailed. The Court based its reasoning on the premise that to hold otherwise would put a huge burden on buyers of farm products to investigate the state in which farm products originated instead of simply relying on the state in which the farm products were being sold. Such a burden would be inconsistent with the policy of the FSA.

While a Colorado state courts interpretation of a federal statute is not binding on other jurisdictions, theMountCourts opinion is one of few interpreting the FSA, and provides helpful guidance to a secured party trying to best protect its interest in farm products. It stands for the proposition that a secured party should comply with the FSA pursuant to the states system in which the farm products are being offered for sale. However, until the statute is clarified, a secured party might consider complying with the FSA in all of the states the farm products have been located.

Amtek Auto Ltd appoints Morgan Stanley as advisors to reduce debt

Amtek Auto Ltd has appointed Morgan Stanley as advisors to assist in the groups debt reduction plan. The various options include a minority stake-sale of upto 25-40% in our overseas business. During the process the Company have received a large number of enquires for the outright purchase of a couple of the Companys Overseas businesses which include for instance Tekfor group. The interest for this has come from trade players and financial players around the globe. These businesses are located in a much coveted market attracting premium valuations in the global markets. As mentioned there are several options and it is a matter of right value-opportunity that will determine the eventual decision.

Shares of AMTEK AUTO LTD. was last trading in BSE at Rs.44.25 as compared to the previous close of Rs. 38.7. The total number of shares traded during the day was 5980677 in over 35640 trades.

The stock hit an intraday high of Rs. 45.4 and intraday low of 40. The net turnover during the day was Rs. 259753656.

Silver Fern Farms reduce debt

Silver Fern Farms have made a net profit of $27.2m up from the previous financial year and an improvement achieved ahead of next years planned investment by Chinese company Shanghai Maling.

For the financial year ended September 2015, the company achieved earnings of $86.9m, a figure which represents a 28 per cent improvement on the $68.1m achieved in 2014. Net profit before tax for the year was $27.2m, up from $1.8m in 2014.

Silver Fern Farms chief executive Dean Hamilton (left) and chairman Rob Hewett say the companys financial performance is pleasing. Photo: Supplied.

On October 16, Silver Fern Farms shareholders voted to approve an investment in the company planned for 2016 of $261m by Shanghai Maling, which is outside the financial year covered by the results the company is currently reporting on.

Chairman Rob Hewett says Silver Fern Farms shareholders will be pleased by the audited result, which confirmed a positive 2015 financial result with further inroads made on debt reduction.

This is a positive result, delivered in an environment where there were a number of constraints, explains Rob.

What was particularly pleasing was that all species made a significant contribution to the overall improvement.

However, whilst a significant improvement on 2014, we still have progress to make to achieve a return that reflects the amount of capital we have invested in the business over the course of a season.

A key aim for 2015 was to put the company on a sustainable financial footing.

To achieve that we needed to both reduce debt under our own steam, and to introduce new equity, he says.

Chief Executive Dean Hamilton says: We achieved our goal of a material and sustainable improvement in profitability. Pleasingly, we were profitable across all three species – beef, sheep meat and venison.

Beef and venison both had good results, and our big focus on turning around the performance of our sheep meat business is starting to achieve results with a meaningful profit, the first one in four years.

More importantly, we see significant scope for continued improvement across all three species.

The Annual report will be available in late November ahead of the companys Annual Meeting, which will be held in Dunedin on December 16.

Fight continues to keep Aldershot boy, 7, walking after drug funding rejected

The parents of a seven-year-old boy suffering from a muscle wasting condition are continuing their campaign for government backing of a drug that could keep him walking for two more years.

On Friday (October 23), the National Institute for Health and Care Excellence (NICE) announced it will not recommend funding on the NHS for the breakthrough drug Translarna, which could keep up to 50 boys in the UK with life-limiting Duchenne muscular dystrophy walking for longer.

In June, Harry Barnley, seven, of Aldershot, hand-delivered a letter to 10 Downing Street begging David Cameron to back the drug, and now his mother, Sue Barnley, has said the family will continue to campaign to ensure he can get it.

“We’re pretty devastated, obviously the drug can keep you mobile for another two to three years and can only be taken whilst they can still walk,” she said.

“It’s all about time and we don’t have that on our side. While they have these meetings boys are literally losing the ability to walk.

“It’s super frustrating, it’s the first drug that’s come on the market for Duchenne, so it’s there but unfortunately down to cost we can’t get it.”

Translarna was approved by the European Union in August last year and has been available in several European countries since. It was also approved for one boy in Scotland following an individual funding request.

Mrs Barnley said the situation is ‘massively frustrating’ and thinks the case put forward by parents to NICE couldn’t be stronger.

Chief executive of Muscular Dystrophy UK, Robert Meadowcroft, said NICE’s decision is ‘extremely disappointing’ and a ‘bitter blow’.

“Having spoken to some of the families affected, it really is impossible to describe their heartbreak,” he said.

“Many parents across the UK are watching their child weaken and lose mobility day by day, as this really is a race against time.

“If we are not careful, it will be too late for many of these boys to even be eligible to take Translarna.

“Duchenne is a life-limiting condition, and we must take every opportunity to protect children and their quality of life.

“The chance to be able to walk for longer can be immeasurably precious. We may not yet be able to halt the difficult physical and emotional challenges these children face, but with this drug, we have the chance to delay them.”

Mrs Barnley said there is a NICE meeting in November, where more decisions on the future of the drug in the UK could potentially be made.

Meanwhile, Help 4 Harry, the fund the family set up after Harry’s diagnosis in 2013, has received a cash boost of pound;22,500 after TV presenter and fitness guru Mr Motivator won ITV’s All Star Mr and Mrs with his wife Palmer earlier this month.

“When I heard about little Harry I decided I wanted to do everything in my power to raise money to fund research to help find a cure for this cruel condition,” he said.

ArcelorMittal South Africa Seeks $324 Million in Share Sale

ArcelorMittal South Africa Ltd. plans to raise as much as 4.5 billion rand ($324 million) in a rights offer to reduce debt and invest in plants as the continent’s biggest steelmaker said its 2015 loss will be 11 times bigger than last year’s.

ArcelorMittal, which holds 46.8 percent of the company, will fully underwrite the offer, the local unit said in an statement Friday.It owes the parent 3.2 billion rand in loans and the fundraising exceeds the company’s current market value of 3.47 billion rand. TheVanderbijlpark, South Africa-based steelmaker sees its headline loss for the year to Dec. 31 widening by more than 6 rand a share from 0.57 rand 12 months earlier.

Proceeds from the share sale “will first be used to settle loans from companies within the ArcelorMittal Group, with any balance being retained for operational and capital expenditure purposes,”said AMSA, as the local unit is known. Apart from the loan, “there is no other material long-term debt outstanding,” it said.

SandRidge Energy: More Negative News Than Positive News

(click to enlarge)

(Image: SandRidge Energy)

Important Note: This article is not an investment recommendation and should not to be relied upon when making investment decisions – investors should conduct their own comprehensive research. Please read the disclaimer at the end of this article.

Oil Volumes In Steep Decline

SandRidge Energy (NYSE:SD) reported a headline production decline of 10% in third quarter 2015.

The headline figure masks a much steeper oil production decline in the companys core Mid-Continent operation.

SandRidges Mid-Continent assets produced 70.6 MBoepd during the third quarter (30% oil, 19% NGLs, 51% natural gas).

These results show that the companys Mid-Continent oil production declined 18% sequentially, whereas natural gas and NGL volumes declined less steeply, 7% and 9% respectively.

(click to enlarge)

While the decline is a consequence of the operating activity slowdown, it also reflects, in my opinion, very steep oil declines typical for Miss Lime wells. SandRidge averaged six horizontal rigs operating in the play and drilled 31 laterals. In Q2, SandRidge drilled 43 laterals.

The company also made comments during the call that is has made some changes to its artificial lift methods in the Mid-Continent in order to optimize production costs. In my understanding, the company reduced the use of ESPs, which tend to be expensive to operate, in some cases in favor of gas lift and in some cases by making an earlier transition to the rod pump.

Given the significant reduction in the number of wells turned to sales per quarter beginning approximately in Q2 2015 and reduced use of ESPs, I expect the companys oil production in the Mid-Continent to decline further in Q4 2015. While the rate of decline is difficult to anticipate, I expect it to be comparable to Q3.

Earlier, I estimated that SandRidge is likely to exit 2015 with oil production in the Mid-Continent in the ~20,000 barrels per day range. In fact, the companys oil production decline is running ahead of that estimate.

Cash Flows Contracted, Driven By Weaker Volumes and Lower Realizations

Adjusted EBITDA, net of noncontrolling interest, was $118 million for third quarter 2015, compared to $161 million for prior quarter, a 27% decline.

Adjusted operating cash flow was $45 million for third quarter 2015, of which contribution from hedge settlements was $67 million. The result shows that in the absence of hedges, SandRidges adjusted operating cash flow for the quarter would have been a negative $22 million.

By comparison, operating cash flow for prior quarter was $111 million, of which contribution from hedge settlements was $74 million.

Sequential decline in adjusted operating cash flow in Q3 was 59%. On a pre-hedge basis, cash flow flipped from positive to negative.

The negative pre-hedge cash flow reflects narrow operating margins driven by the continued weakness in oil, natural gas and NGL price realizations as well as the companys enormous interest expense burden.

Pressure on cash flow will continue in Q4, as production continues to contract and oil volumes under attractively-priced swaps decline. Q4 natural gas price realizations are likely to be lower sequentially as well, using futures prices.

The Colorado Acqusition: More Negatives Than Positives

SandRidges decision to diversify away from its Mid-Continent plays – which obviously have not worked particularly well – is understandable and under normal circumstances would be a right decision.

However, given SandRidges leverage situation, the decision to enter a new, unfamiliar play by spending $190 million of its last-resort cash and committing to a significant capital program is more than questionable.

SandRidge provided little detail with regard to well performance on the acquired properties. Based on the scarce data points discussed in the press release and on the conference call, there is no confidence with regard to the plays economic viability in the current price environment. Even assuming the assets future success, it appears that SandRidge is facing significant execution and geology risks in this new play. Given SandRidges prior spending decisions, there is no confidence that the company will be able to manage these risks prudently.

The acquired properties apparently went through a marketed sales process in 2014 but did not find a buyer. SandRidge acquired the assets in a privately negotiated transaction. By assigning $40 million to PDP reserves, SandRidge is effectively paying ~$1,100 per acre for undeveloped acreage.

It is important to mention that SandRidges secured lenders may not allow the company to channel its entire cash balance towards incremental bond buybacks. That said, the cash position was an important source of protection for the company, buying it survival time and providing potential options in the event oil prices recovered. Moreover, the balance sheet cash could have been used as effective leverage in negotiating amendments with senior lenders to allow additional debt repurchases.

Reducing the cash balance by $190 million appears to be a dangerous step given the circumstances. It appears to signal that the companys management and board do not believe in their ability to successfully restructure the balance sheet and therefore are not attempting to concentrate all of the companys available financial resources on unsecured buy backs and exchanges.

In Conclusionhellip;

Based on SandRidges current stock price, the market value of the companys common equity is ~$220 million, which is dwarfed by the companys debt burden.

The following table shows the companys pro forma capitalization as of September 30, 2015. Adding the acquisition, the companys pro forma cash balance will be further reduced to ~$500 million.

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(Source: SandRidge Energy, November 2015)

The market obviously has little confidence in the possibility of a turnaround at SandRidge.

Disclaimer: Opinions expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment, tax, legal or any other advisory capacity. This is not an investment research report. The authors opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the authors best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

Chapter 11 Bankruptcy Petition Filed by Kamron Evergreen LLC

According to documents filed with the US Bankruptcy Court, privately-held Kamron Evergreen LLC (KE) and affiliate Cyrus Carrol LLC (CC) filed for Chapter 11 protection in the Southern District of California. Based in Vista, CA, KE is a real-estate company, while its affiliate CC provides real-estate management services.

KE’s Chapter 11 petition indicates total assets of $1.85 million all in one real property and approximately $1.95 million in liabilities. The creditor holding the largest unsecured claim is Jalali Family Trust with a disputed claim of $601,000. The Company’s secured lenders include JP Morgan Chase: $741,064 and Small Business Administration: $605,099.

CC’s petition indicates total assets of $1.9 million all in one real property and above $1.6 million in liabilities in the form of secured claims. The Company’s secured lenders are JP Morgan Chase: $707,833, the Small Business Administration: $615,944 and Jalali Family Trust: $300,000.

Court-filed documents identify Nasser Palizban as sole owner of both KE and CC. The companies are represented by Andrew H. Griffin, III of Law Office of Andrew H. Griffin, III.

Read more business bankruptcy updates.