Section 162 | Meaning of “normal commercial loan”

(1)For the purposes of sections 158(1)(b) and 159(4)(b) “normal commercial loan” means a loan—

(a)which is of or includes new consideration, and

(b)in relation to which each of conditions A to D is met.

(1B)For those purposes, “normal commercial loan” also includes a hybrid capital instrument (within the meaning of section 475C of CTA 2009).^F1

(1A)Repealed^F2

(2)Condition A is that the loan does not carry any right to conversion into shares or securities other than a right to conversion into—

(a)shares to which section 164(1) applies,

(b)securities to which section 164(2) applies, or

(c)shares or securities in a quoted unconnected company (see section 164(2A)) or in the relevant company's quoted parent company (see section 164(3) to (7)).^F3

(3)Condition B is that the loan does not carry any right to the acquisition of shares or securities.

(4)Condition C is that the loan does not entitle the loan creditor to any amount by way of interest which—

(a)depends to any extent on the results of the relevant company's business or on the results of any part of that business,

(b)depends to any extent on the value of any of the relevant company's assets, or

(c)exceeds a reasonable commercial return on the new consideration lent.

This subsection needs to be read with section 163.

(5)Condition D is that the loan is a loan in relation to which the loan creditor is entitled, on repayment, to an amount which—

(a)does not exceed the new consideration lent, or

(b)is reasonably comparable with the amount generally repayable (in relation to an equal amount of new consideration) under the terms of issue of securities listed on a recognised stock exchange.