Loan Notes Definition

GLOSSARY

/ləʊn/ /nəʊts/

Published by a ��˾��ҹ�� Corporate expert

What does Loan Notes mean?

The financial instruments which evidence the existence of a debt between a borrower (issuer) and one or more lenders (noteholder(s)) and the promise by the issuer to repay the amounts outstanding under the loan notes to the noteholder(s).

Also commonly known as loan stock, loan notes constitute a type of debt security which entitles the holder to payment of principal and interest in accordance with the terms of the loan note instrument. In the context of a share purchase transaction, loan notes may be issued to the seller by the buyer in whole or part payment of the purchase price by way of deferred consideration as an alternative to cash.

View the related checklists about Loan Notes

GAAR guidance: examples of non-abusive transactions—checklist

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Structuring a takeover: offers and schemes of arrangement—comparative timetables

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Development capital investment

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Best Practice Guide for Term Sheet Completeness—Explainer

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Joint venture shareholders’ agreement—deadlock (50:50)

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Legal due diligence questionnaire—private M&A—share purchase

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Dive into our 70 Precedents related to Loan Notes

Can personal representatives sell loan notes in an estate during the administration period?

Can personal representatives sell loan notes in an estate during the administration period? Loan notes are often subject to specific transfer restrictions so the Personal Representatives (PRs) would first need to review the relevant terms and conditions of the loan note instrument under which the loan notes were issued and then ensure compliance with such provisions. Subject to any restrictions on transfer in the loan note instrument and assuming the loan notes are not the subject of a specific gift under any Will, the PRs would be free to sell them during the administration period and may need to sell them, for example, if they need to raise cash to pay inheritance tax, settle estate liabilities or pay cash legacies. It is also worth remembering that, while the decision as to which estate assets to sell is ultimately a decision for the PRs, it is generally prudent for the PRs to consult with the

Where there are loan notes that are convertible to equity on a company entering administration, would the administration moratorium prevent the conversion? Does it make a difference whether the loan note provides for automatic conversion to equity or at the option of the holder?

Where there are loan notes that are convertible to equity on a company entering administration, would the administration moratorium prevent the conversion? Does it make a difference whether the loan note provides for automatic conversion to equity or at the option of the holder? The procedure to convert convertible loan notes is usually set out in the convertible loan note instrument under which the notes are issued. Conversion is usually triggered (i) automatically on the occurrence of specified trigger event, or (ii) at the option of the noteholder following the occurrence of specified events. Typically, in the latter case, the noteholder will be required to serve notice on the issuer (a conversion notice) that requires the loan notes to be converted. A form of conversion notice will typically be included as a schedule to the convertible loan note instrument. The exact procedure should be checked in the loan note documentation. For more information, see Practice Note: Loan notes—fundamentals—How do you convert convertible loan notes? When a company is put into...

See the 21 Q&As about Loan Notes

Tax weekly highlights—31 October 2024

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