Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
, see all updates

Old rules: convertibles pre 2005: nature of the security: meaning of predetermined value

Predetermined value for the shares

This guidance applies to periods of account beginning before 1 January 2005

To have satisfied the conditions, the terms of the security could not have fixed the value of the shares to be received on conversion or exchange. If the value of the shares to be received was fixed then the holder of the convertible debt would have been able to predict exactly the return for lending money. Holding the debt would not have left the creditor open to fluctuations in the value of the shares. Holding a debt of this kind would not have been comparable to owning the shares.

The terms of the security could have specified the cash value of the shares that would be received, or could have given a formula by which a cash value would be calculated. Both situations would have led to the exclusion of the security from FA96/S92.