NEWS FLASH – Is A Loan Agreement A Debenture?

The City of London Law Society (CLLS) recently sent a letter to HM Treasury regarding the Court of Appeal decision in Fons Hf v Corporal Ltd and another as the decision may, in the view of the CLLS, have "serious implications for regulated and unregulated lenders, borrowers and loan intermediaries".¹

The central issue of the decision is whether a loan agreement, regardless of whether loans made by reference to the agreement are drawn or undrawn, creates and acknowledges debt and is therefore a debenture. Although the Court of Appeal decision was not given in the context of the UK's financial regulation framework, the CLLS argues that loan agreements may now be viewed to constitute regulated investments for the purposes of UK financial regulation and lists the legal implications of such a qualification, including the requirement for any person carrying out 'regulated activities' (which term would include, among others, dealing as principal, i.e.