188体育

The note-issuing company: regulation 5

The note-issuing company is the key entity in the securitisation arrangement. It must meet four conditions.

• It must be within CTA10/S623. That is, it has issued securities to investors in the form of a 鈥榗apital market investment鈥� that is part of a 鈥榗apital market arrangement鈥� (CFM72300).
• The securities must be issued 鈥榳holly or mainly鈥� to 鈥榠ndependent persons鈥�.
• The total value of the securities issued must exceed 拢10m.
• The company鈥檚 only business, apart from being a debtor to a capital market arrangement and apart from any incidental activities, must be either:
  • acquiring, holding and managing financial assets (CFM72350) forming the whole or part of the security for the capital market arrangement, or
  • acting as guarantor in respect of loan relationships, derivative contracts, finance leases, or other liabilities of other companies, where the guarantor鈥檚 rights in respect of the guarantee (including any rights of subrogation) form the whole or part of the security for the CMA.

The 拢5m test

The value of the securities must be at least 拢5m at issue. The test is to be applied at the date of issue, even if the value has fluctuated in the run up to the issue. The value will normally be the carrying value of the liability that is represented by the securities in the issuer鈥檚 accounts, measured in accordance with generally accepted accounting practice as defined in CTA10/S1127.

Prior to 17 May 2022 the total value of the securities at the date of issue needed to be at least 拢10m. The threshold was reduced to 拢5m to facilitate access to the securitisation regime for charities and other social impact organisations, and for other sectors such as small to medium sized enterprises. The 拢10m threshold continues to apply where securities are issued as part of a capital market arrangement entered into by the issuing company before 17 May 2022.

CFM72390 and CFM72400 have guidance on the interpretation of 鈥榠ndependent persons鈥� and 鈥榠ncidental activities鈥�.

Non-resident note-issuing companies

A note issuing company can include a company that is outside the charge to corporation tax but which satisfies all the conditions in Regulation 5. (In addition, a note-issuer which is outside the charge to corporation tax does not need to satisfy the 鈥榬etained profit鈥� condition (CFM72480) or the 鈥榩ayments condition鈥� (CFM72510) in order to satisfy the conditions in Regulation 5.) It follows, therefore, that other companies in the structure may be intermediate borrowing companies or asset-holding companies and within the regulations.