Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p1
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 1/30)
Character Range: 7783887–7786528

4                 An interest issued by the company that:
                  (a) gives its holder (or a *connected entity of the holder) a right to be issued with an *equity interest in the company or a *connected entity of the company; or
                  (b) is an *interest that will, or may, convert into an equity interest in the company or a connected entity of the company.

  This subsection has effect subject to subsection (2) (requirement for financing arrangement).
Note: Section 974‑90 allows regulations to be made clarifying when a right or return is taken to be at discretion of a company or connected entity.

Financing arrangement
 (2) A *scheme that would otherwise give rise to an *equity interest in a company because of an item in the table in subsection (1) (other than item 1) does not give rise to an equity interest in the company unless the scheme is a *financing arrangement for the company.

Form interest may take
 (3) The interest referred to in item 2, 3 or 4 in the table in subsection (1) may take the form of a proprietary right, a chose in action or any other form.

Exception for certain at call loans—until 30 June 2005
 (4) If:
 (a) a *financing arrangement takes the form of a loan to a company by a *connected entity; and
 (b) the loan does not have a fixed term; and
 (c) either:
 (i) the loan is repayable on demand made by the connected entity, and repayment is required immediately on the making of the demand, or is required at the end of a particular period after the demand is made (being a period that is not longer than is reasonably necessary to arrange repayment); or
 (ii) the loan is repayable on the death of the connected entity (if the connected entity is an individual); and
 (d) the arrangement was entered into on or before 30 June 2005;
the arrangement does not give rise to an equity interest in the company. Instead, the arrangement is taken, despite anything in Subdivision 974‑B, to give rise to a debt interest in the company. This subsection ceases to have effect on 1 July 2005.
Note: If this subsection ceases to have effect in relation to an interest that is, according to the other provisions of this Division, an equity interest immediately after the cessation, an adjustment to the company's non‑share capital account will occur at that time (see subsection 164‑15(2)).
 (5) If, while subsection (4) applies to a *financing arrangement, a circumstance occurs that would otherwise have attracted the operation of subsection 974‑110(1) or (2) in relation to the arrangement:
 (a) that subsection of section 974‑110 does not apply to change the result that subsection (4)