Forward Pharma A/S: Receipt of Tax Audit Report – Form 6-K


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

FOREIGN PRIVATE ISSUER REPORT

In accordance with article 13a-16 or 15d-16 of the

Stock Exchange Act of 1934

July 1, 2022

Board file number: 001-36686

Forward Pharma A/S

Østergade 24A, 1st floor

1100 Copenhagen K, Denmark

Indicate with a check mark whether the registrant files or will file annual returns under form 20-F or form 40-F.

Form 20-F ☒

Form 40-F ☐

Indicate with a check mark if the filer is submitting the Form 6-K on paper, as permitted by ST Rule 101(b)(1): ☐

Indicate with a check mark if the filer is submitting the Form 6-K on paper, as permitted by ST Rule 101(b)(7): ☐

Point 1. Receipt of the tax audit report

On July 1, 2022, Forward Pharma GmbH (“FP GmbH”), a subsidiary of Forward Pharma A/S (the “Company” and, collectively with FP GmbH, the “Group”), received a tax audit report from the part of the tax authorities in connection with the German FP 2017 tax return (the “report”) after the conclusion of the tax audit covering the years 2013 to 2017. The report replaces the preliminary audit assessment received on 21 May 2021 and claims taxable income in 2017 was €271.6 million ($283.1 million based on July 1, 2022 exchange rate), an increase in taxable income of €252.9 million euros ($263.6 million based on July 1, 2022 exchange rate) to FP GmbH’s income Tax position 2017. FP GmbH’s effective tax rate in Germany is approximately 32% .

The Group remains in disagreement with the positions taken by the German tax authorities. The additional taxes will only become payable one month after receipt of the tax levy (based on the report). Management anticipates that the tax levy will be issued by the German tax authorities shortly. Based on the report, it is estimated that the ultimate net impact of any tax levies by the German tax authorities on the Group’s cash could reach €21.3 million ($22.2 million based on the rate of July 1, 2022) before applicable interest and/or penalties. This estimate is subject to several assumptions, including the Group’s ability to obtain relief from double taxation.

Based on recent discussions with the Group’s tax advisors, the management of the Company continues to believe that it is likely (i.e. more likely than not) that FP GmbH will not be required to pay additional taxes to the German tax authorities when entering into a Mutual Agreement Procedure (“MAP”) and/or litigation against the German tax authorities. Even in the event that FP GmbH should pay additional taxes in Germany, the Company expects that the overall net tax impact for the Group will be fully or partially mitigated by a tax reduction in Denmark after the conclusion of the transaction. a MAP between Denmark and Germany. Such a determination is inherently subjective and, if incorrect, FP GmbH may be subject to significant additional tax levies which could have a material adverse effect on the consolidated financial position, results of operations and cash flow of the Group. FP GmbH does not have sufficient cash or other assets to pay a significant tax levy upon issuance by the German tax authorities.

In order to put the Group in the best position to defend the disputed tax position and in anticipation of the receipt of the tax levy by the German tax authorities, FP GmbH has brought a request to ask the German courts to authorize FP GmbH to conclude proceedings of debtor-in-possession (“DIP”) on April 28, 2022. A DIP proceeding has been opened before a German insolvency court (the “Court”) and is at a preliminary stage (“DIP Preliminary Proceeding”) until which the Court approves Application by FP GmbH to initiate DIP proceedings. During the preliminary DIP procedure, the management of FP GmbH continues to oversee the day-to-day operations of FP GmbH and retains the ability to initiate and manage a PAA and/or litigation against the German tax authorities, while a supervisor appointed by the court monitors the activities of FP GmbH.

Management is unable to predict when or if the court will approve FP GmbH’s request to initiate DIP proceedings. If FP GmbH is not able to stay in the preliminary DIP procedure and starts a DIP (ordinary) procedure, the management of FP GmbH – under the supervision of a court-appointed administrator – continues to oversee the day-to-day operations of FP GmbH; if the DIP is dismissed, FP GmbH will likely enter ordinary insolvency proceedings, at which time a court-appointed insolvency administrator will take over the day-to-day operations of FP GmbH and management will no longer control FP GmbH. The loss of control of FP GmbH could negatively impact management’s ability to defend FP GmbH’s tax position in 2017 and challenge the allegations made by the German tax authorities in the Report. Subject to the court’s decision regarding the initiation of DIP proceedings, the management of FP GmbH intends to take all available measures to avoid entering into ordinary insolvency proceedings.

In the event that FP GmbH is required to pay a significant tax levy at the conclusion of the tax dispute in Germany, FP GmbH would likely be deemed insolvent under German insolvency law, which would force FP GmbH to initiate proceedings of insolvency. An insolvency proceeding would have a material adverse effect on the consolidated financial position, results of operations and liquidity of FP GmbH and the Company. The timeframe for finally resolving the tax dispute with the German tax authorities, including the completion of a mutual agreement procedure and/or litigation against the German tax authorities, is currently unknown; however, management does not believe the dispute will end within the next twelve months and reaching a conclusion could take three years or more.

For further information regarding Germany’s tax audit, DIP and MAP procedures, please see the Company’s Annual Report on Form 20-F for the year ended December 31, 2021 and the consolidated financial statements included therein.

Certain statements contained in this report on Form 6-K may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements containing terms such as that “believe”, “expect”, “anticipate”, “estimate”, “would”, “could”, “plan” and “potential”. Forward-looking statements are only predictions, which involve known risks and unknowns, uncertainties and other factors that could cause actual results to differ materially from those expressed in such statements. Many of these risks, uncertainties and other factors are considered within the Company’s underlying assumptions. underlying these forward-looking statements and include, among other things, risks related to the following: the Group’s ability to defend its tax filings; the timing of receipt on of the final tax levy; the timing of the final settlement of the tax dispute; the impact of bankruptcy proceedings on the Company and FP GmbH; the ability of FP GmbH to avoid insolvency; the result of the DIP procedure; the adequacy of the Company’s cash resources; the estimated impact of the final taxation on the liquidity of the Company; the availability of relief to avoid double taxation; and the likelihood that FP GmbH will be required to pay additional taxes. Some of these and other risk factors are identified and described in detail in certain of the Company’s filings with the United States Securities and Exchange Commission, including its Annual Report on Form 20-F for the fiscal year closed on December 31, 2021.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized thereto.

FORWARD PHARMA A/S

Date: July 7, 2022

By:

/s/ Claus Bo Svendsen

Name: Claus Bo Svendsen

Title: Chairman and CEO

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