Section 226 — Corporation Tax Act 2010: Conditions to be met in relation to loans

Conditions to be met in relation to loans 226 1 Condition A of this section is that either—

a the CDFI receives from the investor, on the investment date, the full amount of the loan, or b if the loan agreement authorises the CDFI to draw down amounts of the loan over a period of time, the end of that period is not later than 18 months after the investment date.

2 Condition B is that the loan must not carry any present or future right to be converted into or exchanged for a loan which is, or securities, shares or other rights which are, redeemable within the 5 year period.

3 Condition C is that the loan must not have been made on terms that allow any person to require—

a the repayment during the first two years of the 5 year period of any of the loan capital advanced in those two years, b the repayment during the third year of that period of more than 25% of the loan capital outstanding at the end of those two years, c the repayment before the end of the fourth year of that period of more than 50% of that loan capital, or d the repayment before the end of that period of more than 75% of that loan capital.

4 Subsection (3) does not apply if the CDFI is required to make the repayment as a result of its failure to meet any obligation of the loan agreement which—

a is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and b is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.

5 The Treasury may by order substitute any other percentage for any percentage for the time being specified in subsection (3).

6 Any such substitution is to have effect in relation to loans made by a company on or after the date specified in the order.