As more fully discussed in Practice Note: Loan relationships—the main tax rules, the general rule is that credits and debits (very broadly, profits and losses) arising to a company from its loan relationships are brought into account for corporation tax purposes under the loan relationships regime on the basis of the company’s accounting measure of profit and loss, as disclosed in the company's relevant accounts prepared in accordance with generally accepted accounting practice (GAAP). In other words, a company’s accounts prepared in compliance with GAAP provide the means by which the existence, measure and the timing of taxable amounts in relation to its loan relationships are identified for corporation tax purposes. This approach is often described as ‘tax following the accounts’. The rules for the taxation of loan relationships are mainly contained in Part 5 of the Corporation Tax Act 2009 (CTA 2009) (CTA 2009, ss 292–476) (with some provisions also found in Part 6 (CTA 2009, ss 477–569)). There are, however, a number of circumstances where the rules for the taxation of loan relationships depart

The loan relationships regime provides the rules for the taxation and relief of a company’s profits and losses from its ‘loan relationships’. The rules are found in Part 5 of the Corporation Tax Act 2009 (CTA 2009), with some further provisions contained in Part 6. This Practice Note looks at the types of transactions and other arrangements that fall within the scope of the loan relationships regime. For the computational rules which govern how profits and losses on loan relationships are calculated and brought into account for corporation tax purposes, see Practice Note: Loan relationships—the main tax rules. Who is taxed under the loan relationships regime? The loan relationships rules apply to companies within the charge to corporation tax. Entities within the regime therefore include: • UK resident body corporates (and certain unincorporated associations) • non-UK resident companies carrying on a trade in the UK through a permanent establishment to which profits and losses from a relevant loan relationship are attributable • companies within the charge to corporation tax who are members of partnerships, and • trustees of

Another name for a bond normally used in connection with those issued by non-government bodies such as companies.

[name] Trust TRUSTEE RESOLUTION 1 We [trustee] of [address] and [trustee] of [address] are the present trustees

The practice of acquiring debt with a view to converting it into equity (ie shares) in the target company.

This Practice Note looks at: • the key features of loan to value (LTV) covenants in secured lending transactions • possible issues with calling an event of default based on a LTV covenant breach • potential challenges to an event of default based on a LTV covenant breach • remedying a LTV covenant breach, and • the impact of the economy on LTV covenant breaches LTV covenants are a critical component of risk management in secured lending. An LTV covenant is a common form of financial covenant which requires the principal sum of an outstanding loan, when expressed as a percentage of the value of the security charged to a lender, to remain below a stipulated level during the term of that loan. This provides a mechanism for lenders to monitor and maintain the security of their loan over time. For borrowers, understanding and negotiating these covenants is essential to securing favourable loan terms and avoiding the pitfalls created by a covenant

Points to consider Comments What is the most appropriate method of transfer? Consider: Whether only rights are being transferred (eg drawn commitments) or obligations (eg undrawn commitments) as well? Assignment only transfers rights, while novation transfers rights and obligations. Novation is generally preferred as a method of loan transfer as it transfers both rights and obligations.If assignment is used, obligations can be novated. For more information, see Practice Note: Transferring a loan by assignment. Whether consent can be obtained from the borrower? Assignment does not need the counterparty’s consent by law. However, borrower consent will often be required for assignment, as well as for novation, under the terms of the facility agreement. Sub-participation is sometimes used as a way to transfer loans on syndicated transactions where borrower consent can’t be obtained. However, some deals may also require borrower consent for sub-participation. Whether the intention is for the transfer to be kept confidential from the borrower This can be potentially be achieved by an equitable assignment or sub-participation (depending on the terms of the documentation)

An agreement entered into where a company wishes to engage the services of a producer to produce a film or an artist, whose services are controlled by a loan-out company. Such an agreement is often used in conjunction with an inducement letter.

Occupational pension scheme resources may not at any time be invested in an employer-related loan. In accordance with section 40 of the Pensions Act 1995, employer-related loans are: loans to the employer or any such person; shares or other securities issued by the employer or by any person who is connected with, or an associate of, the employer; or employer-related investments eg a guarantee or security for obligations of the employer. This does not apply in respect of small self-administered schemes (SSASs) and self-invested pension plans (SIPPs).

Once the limitation period under a contract or deed has expired, a chargee may no longer enforce their debt through the courts. Special provision is made in the Limitation Act 1980 (LA 1980) for debts due under certain loans. This applies where the loan does not state that the debt must be repaid on or before a certain date. As such that provision would not apply in the present case (see LA

The Companies Act 2006 (CA 2006) contains provisions that require loans from a company to its directors or persons connected with its directors and related arrangements to be approved by the members of the company. Approval is required for such transactions as they involve directors (or their connected persons) and are considered to be particularly open to abuse. The relationship between the statutory provisions requiring approval of such a transaction and the general duties of a director that are set out in statute is discussed in Practice Note: Directors' duties—scope, nature, interpretation and application. One of the general duties of a director set out in statute is the duty of a director to declare if they are in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company of which they are a director and the nature and extent of that interest to the other directors. In relation to: • a director’s obligation to declare an interest in a transaction or arrangement with

This Practice Note summarises the provisions of the Companies Act 2006 (CA 2006) in relation to consequences of a failure to obtain the members’ approval of loans to directors, persons connected with directors, and related arrangements. For further information about the requirement for members' approval, including details on key transitional provisions, see Practice Note: Loans to directors, connected persons and related arrangements—requirement to obtain members’ approval and Commentary: Common matters regarding member approval: Gore-Browne on Companies. The term 'director', for the purposes of these statutory provisions, includes any persons occupying the position of director, by whatever name called, and a shadow director. If the company making the loan is a company with a listing of shares in the equity shares (commercial company) category the UK Listing Rules (UKLR), particularly UKLR 8 on related party transactions, may apply (see Practice Note: Equity shares (commercial companies) listing category—key continuing obligations). Consequences of a failure to obtain members' approval of a loan to a director or connected person and related arrangements The