Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p4
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 4/30)
Character Range: 7790916–7793480

lends the money to Company B3 which lends the money to Company A.
 Under the arrangements under which the interest is issued and the loans made, payments of interest by Company A on the loan that Company B3 makes to Company A are intended to pass back through Company B2 and Company B1 to fund the return on H's interest in Trust Fund C.
 Under subsection (2), Company B3 will have an equity interest in Company A. If the return to Company B3 were itself contingent on Company A's performance, Company B3's interest would be an equity interest in Company A under item 2 of the table in subsection 974‑75(1) (and not under subsection (2) of this section).
 Company B2 has an equity interest in Company B3 and Company B1 has an equity interest in Company B2. This is because the returns they get are intended to fund the return on H's interest in Trust Fund C and that return is contingent on aspects of the economic performance of Company A (which is related to both Company B3 and Company B2).
 (3) The interest referred to in paragraph (1)(a) or (2)(c) may take the form of a proprietary right, a chose in action or any other form.

974‑85  Right or return contingent on aspects of economic performance
 (1) A right, or the amount of a return, is contingent on aspects of the economic performance of an entity, or a part of the entity's activities, if the right or return is contingent on the economic performance of that entity, or that part of those activities, but not solely because of one of the following:
 (a) the ability or willingness of an entity to meet the obligation to satisfy the right to the return;
 (b) the receipts or turnover of the entity or the turnover generated by those activities.
 (2) The regulations may specify circumstances in which a right or return is to be taken to be contingent, or not contingent, on aspects of the economic performance of an entity or a part of an entity's activities.
 (3) The regulations may provide that paragraph (1)(b) does not apply in the circumstances specified in the regulations.
 (4) The regulations may provide that an interest that:
 (a) is covered by item 2 in the table in subsection 974‑75(1) or paragraph 974‑80(2)(a); and
 (b) arises in the circumstances specified in the regulations;
is not an equity interest because of:
 (c) the limited extent to which the right or return that the interest carries is *contingent on aspects of the economic performance of an entity or a part of the entity's activities; or
 (d) the practical insignificance of the right or return that the interest carries