Loan meaning

ARCHIVED: This Practice Note is archived and is no longer maintained. A bank loan is treated as a non-performing loan (NPL) if more than 90 days pass without the borrower making the agreed instalments or interest payments. Banks experienced an accumulation of NPLs in their books when borrowers' inability to repay was intensified by the financial crisis and subsequent recessions. When NPLs are proportionately high, banks' capacity to manage the riskiness of their lending is diminished. NPLs are a supervisory priority for the European Central Bank (ECB), which monitors the overall level of NPLs across euro area banks. Under the supervisory review and evaluation process (SREP), the ECB assesses whether individual banks adequately manage loan risk and whether they have suitable strategies, governance arrangements and processes in place. The ECB also regularly undertakes co-ordinated exercises to review the asset quality of the banks it directly supervises—it works with national supervisors to establish a consistent and effective approach to tackling and reducing bad loans, drawing on best practices as set...

STOP PRESS The Loan Market Association (LMA) has released refreshed editions of the standard terms and conditions for Par and Distressed Trade Transactions, the complete set of Funded Participation and Risk Participation Agreements, and the Secondary Debt Trading Documentation User Guide, with effect from 17 March 2026. The changes remove LIBOR references, update IBOR rate definitions and the Target2 definition, and revise ERISA representations to incorporate additional exemptions to the prohibited transaction rules under ERISA and the US Internal Revenue Code. The revised documentation is available exclusively to LMA members, accessible via the LMA’s Documentation Hub. These publications are updated versions issued by the LMA. Summary A core principle of trading under the LMA protocol is that ‘Trade is a Trade’; i.e. once a trade is struck—including an oral contract agreed by telephone—it is binding, and subsequent developments, even if adverse to one or both parties, do not entitle either party to cancel or ‘break’ the trade. By way of example, a failure to secure consent for...

Checklist This Checklist sets out the principal direct and indirect tax considerations that a corporate borrower within the scope of UK corporation tax (a UK corporate borrower) ought to assess both prior to entering into a loan and over the life of that loan... It is designed to be used as a Checklist by the tax adviser to a UK corporate borrower, offering a concise outline of the relevant tax matters and providing space for the adviser to record notes... This Checklist proceeds on the basis that: the borrower is a company within the charge to UK corporation tax in relation to the loan, that is, either a UK tax resident company or a non‑UK tax resident company for which the loan is attributable to its UK permanent establishment (a UK PE), or attributable to the non‑UK resident company’s trade of dealing in or developing UK land; and the borrower and the lender are unconnected parties dealing at arm’s length ...

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The government supported £77bn in total of loans across three relief programmes during 2020 and 2021. Around £47bn went out through the bounce-back loans scheme, with £1.79bn thought to be fraudulent, according to the department’s most recent figures. Lenders marked £5m of the £25.8bn issued under the coronavirus business interruption loan scheme as suspected fraud. No loans made via the third programme—the coronavirus large business interruption loan scheme—have been flagged as potentially fraudulent, the DBT stated. The DBT did not provide an immediate response to a request for additional comment...

Manolete Partners Plc v Howarth [2025] EWHC 2294 (Ch) What are the practical implications of this case? This judgment marks a significant victory for company directors and a sharp reminder to office‑holders and those pursuing claims on their behalf: contemporaneous records are paramount. The court condemned the failure to retain and produce meeting notes, emails and working papers, noting that gaps in the paper trail can justify adverse inferences. Insolvency practitioners should, therefore, keep meticulous files of the advice provided and the decisions taken. The court also affirmed that directors are entitled to place reliance on insolvency specialists’ guidance. Where a director behaves openly and follows the directions of a CVA supervisor, later accusations of preference or undervalue are harder to sustain. The evidential onus accordingly returns to the applicant, who must prove misconduct with cogent evidence. Further, the ruling indicates that salary‑for‑loan‑swap arrangements can be valid and commercially rational where structured to minimise PAYE/NIC and where they substitute, rather than add to, salary. Finally, the decision sounds a...

This Practice Note sets out the principal tax considerations where creditors move to enforce security over the assets of a distressed company or corporate group. Related Practice Notes in this series address tax issues concerning: acquisitions of distressed debt, and debt restructurings (ie waivers, debt/equity swaps or renegotiations) In addition, Tax and distressed debt—checklist of points to consider distils the main tax points to bear in mind when dealing with distressed debt in general. This Practice Note reviews the enforcement routes open to creditors of troubled businesses and the consequences that may follow. For a detailed look at the loan relationships provisions on debt releases, see: Loan relationships—impairment and debt releases Loan relationships—impairment and debt releases: connected companies Types of enforcement As explained in Practice Note: Tax and distressed debt—debt restructurings, lenders will frequently engage in a restructuring of a distressed group’s debt to help the underlying business continue. Enforcing security over a borrower’s assets...

Firms sometimes extend low-interest (or interest-free) borrowing to directors or staff as part of a remuneration package, or on particular occasions, to assist the individual with major financial outlays. As with any other form of employment reward, where a loan is made by a third party rather than by the employer, the disguised remuneration rules in Part 7A of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) must be considered first, since those provisions take precedence over most mechanisms for charging employment income to tax (including the benefits code). For further information, see: Disguised remuneration and EBTs—overview and, also, regarding the loan charge within the disguised remuneration rules, refer to Practice Note: Disguised remuneration—history of the loan charge. If no third party is involved (eg where the employer itself advances the loan), or an exemption from the disguised remuneration regime applies, the provisions in the benefits code for employment-related loans outlined below may instead govern the position for the particular loan in question...

The most common reasons for entering into derivatives are for the purposes of: Speculation — when a party seeks exposure to a given variable, for example taking a view on a commodity’s future price on the assumption it will rise or fall over a chosen period Hedging — aiming to offset exposure to the risk of an unfavourable shift in a variable, or to stabilise expected outcomes over time Arbitrage — seeking to take advantage of price discrepancies (between markets, or within the same market over time) to earn profit or cut costs, or where one participant can reach a price or market unavailable to another, including where prices differ over time Exposure to asset classes — obtaining access to a target market (eg commodities, shares, property) without incurring the expense, complexity and formalities associated with those markets, avoiding the same costs and complications Derivatives are commonly used alongside lending arrangements for hedging purposes in practice. In this context, the primary...

This Agreement, dated [ • ] 20[ • ], is entered into between the following parties: Parties [ insert name of Borrower ], a company incorporated in England and Wales with registered number [ insert company number ], whose registered office is at [ insert address ] (the Borrower); and [ insert name of Lender ] of [ insert address ] (the Lender). Background (A) [ insert description of background to transaction ]. (B) The Lender has agreed to provide the Facility (as defined below) to the Borrower on the terms and conditions contained in this Agreement...

TO BE PRINTED ON THE BORROWER’S SOLICITORS’ HEADED PAPER To: [ insert details of the lender’s solicitors ] (the Lender’s Solicitors) and [ insert details of the lender ] (the Lender) Dear [ insert organisation name ] Completion undertaking This undertaking concerns the acquisition of [ insert property description ] (the Property) by [ insert borrower’s name ] (the Borrower) under a sale contract dated [ insert date ] between [ insert seller’s name ] (the Seller) and the Borrower (the Sale Contract), together with the grant of a first legal charge over the Property in favour of the Lender pursuant to a facility agreement dated [ insert date ] between [ insert details ] (the Facility Agreement). For the purposes of this letter, ‘completion’ means completion of the Transfer of the Property to the Borrower (the Transfer), and does not include registration of the Transfer at HM Land Registry. We are instructed by the Borrower. We enclose: ...

£ [ insert number ] [ insert rate ]% convertible [ subordinated ] redeemable loan notes 20[ insert year ] [ insert name of issuer ] Dated [ insert day and month ] 20[ insert year ] Parties [ Insert name of issuing company ], incorporated in England and Wales under number [ insert company number ], whose registered office is at [ insert address ] (the Issuer) Background The Issuer has determined to create up to a maximum nominal amount of £[ insert number ] [ insert rate ]% convertible [ subordinated ] redeemable loan notes, to be constituted as set out in this document...

When one company advances funds to another, the contractual provisions govern any restriction on repaying the loan before the ten-year period first contemplated. Should the lending company enter liquidation or administration, that circumstance, by itself, does not alter the contract’s terms. The office-holding insolvency practitioner should nevertheless review the agreement to determine whether it permits earlier repayment, or repayment on alternative terms, if the lending company goes into liquidation or administration. Although that may appear improbable, it remains possible, and the officeholder ought to explore every avenue to secure accelerated repayment of the borrowing. Absent an express clause to the contrary, the insolvency of the lender does not, of itself, accelerate the debt, and timing remains governed by the bargain. It would seem that the office-holding insolvency practitioner holds an appointment that must remain open for at least ten years before the loan can be discharged and a dividend distributed to creditors...

There are a number of points to weigh up when determining if a consumer credit agreement is regulated by the Consumer Credit Act 1974 (CCA 1974). Under the CCA 1974, s 8(1), a consumer credit agreement is described as an agreement between an individual (“the debtor”) and any other person (“the creditor”) whereby the creditor extends credit of any amount...

The provisions relating to notices of sums in arrear (NOSIAs) Sections 86B–86D of the Consumer Credit Act 1974 (CCA 1974) set out the rules on notices of sums in arrear (NOSIAs). CCA 1974, s 86B deals with NOSIAs for fixed-sum credit agreements, etc, and CCA 1974, s 86C deals with NOSIAs for running-account credit agreements...