Loan relationships: meaning of money debt
Money debt: CTA09/S303
A money debt is a debt that may be settled by
- the payment of money, or
- transferring the rights to settlement of another money debt, or
- the issue or transfer of any share in any company.
CFM31030 has more on what we mean by ‘debt’.
Example: payment of money
Brint Finance Ltd lent Hasteen Ltd £10,000. On the repayment date, Hasteen negotiates with Brint to pay the debt in kind with £10,000 worth of fuel oil. This is still a money debt, even though it was finally settled in oil, rather than cash.
Example: transfer of a right
Brint Finance Ltd lent Hasteen Ltd £10,000. On the repayment date, Hasteen Ltd can’t find the cash. However a third company, Jiddaw Ltd, owes Hasteen Ltd £10,000, the balance of a cash loan of £20,000. Hasteen Ltd transfers its right to collect the £10,000 owed by Jiddaw Ltd to Brint Finance Ltd. So, even though the debt isn’t settled directly by the payment of cash, it is still a money debt because it was settled by the transfer of rights to a money debt.
As long as it is possible for the debt to be settled in money, then it is a money debt. This is true even if
- that possibility only existed for a short time
- the lender will accept money or another form of repayment.
For example, the terms of the debt may include an option
- for the borrower to repay the debt in shares of equivalent value, instead of cash, or
- for the lender to require the borrower to satisfy the debt by the transfer of property.
Both debts may be settled in cash, even if they end up being settled in some other way, and are therefore money debts.