28 SEPTEMBER 2006

NEW ZEALAND GAZETTE, No. 112

3305

(a) the parties to the optional convertible note at the date of issue are members of the same wholly owned group of companies; or

(b) the parties to the optional convertible note at the date of issue are beneficially owned or ultimately controlled by the same person; or

(c) under the arrangement, however structured at the date of issue, there would be no change to either of the voting interests or the market value interests in the issuer if the share warrant were exercised at that time.

4. Subclause (3) does not apply if the subscriber intends to sell the optional convertible notes to an independent third party within 93 days of acquiring the notes and does so sell them.

5. If subclause (3) does not apply, the effect of this determination is that a party to an optional convertible note is taxed as if the optional convertible note were a bond that:

(a) is issued at a price excluding an amount paid or received for the share warrant; and

(b) is redeemable for the cash redemption amount or its present value if converted early; and

(c) otherwise has the same terms as the optional convertible note.

6. If subclause (3) does not apply, this determination attributes to the value of the share warrant any difference between the consideration actually provided under the optional convertible note and the consideration that is deemed to be provided for the bond described in subclause (5).

7. Interpretation

8. In this determination, a reference to the Act is a reference to the Income Tax Act 2004.

9. In this determination:

cash redemption amount, for an optional convertible note, means the amount that the holder receives in repayment under the optional convertible note if the person elects not to exercise the share warrant which is part of the optional convertible note, being its agreed future value or face value

contingent fees is the amount of the fees payable by the person that are contingent on the optional convertible note being issued

convertible note—

(a) means an instrument issued by a company that:

(i) is evidence of, acknowledges, creates, or relates to, a loan or other advance to the company, or any other secured or unsecured liability of the company; and

(ii) provides that there is an option to require all or part of the liability referred to in subparagraph (i) to be redeemed or paid by the issue or delivery of new shares in the company:

(b) includes any subsidiary or collateral agreement that fixes the amount of a coupon interest payment to be made under the instrument described in paragraph (a)

coupon interest, for an optional convertible note, means an amount that:

(a) is payable or receivable under the optional convertible note by the company; and

(b) is not a contingent fee or part of the cash redemption amount for the optional convertible note

debt component, for an optional convertible note, means that portion of the optional convertible note that is subject to the financial arrangements rules and treated under this determination as if it were a bond but does not include the equity component

Determination G22 means Determination G22: Optional Conversion Convertible Notes Denominated in New Zealand Dollars Convertible at the Option of the Holder issued by the Commissioner on 24 October 1990

equity component, for an optional convertible note, means the share warrant

holder, for an optional convertible note, means the subscriber or a person other than the subscriber that has acquired the optional convertible note

issuer, for an optional convertible note, means the company issuing the optional convertible note and, in respect of any obligation to issue new shares on redemption, includes any company that is required to issue those shares

market value interests means market value interests as defined in paragraph (a) of the definition in section OB 1 of the Act

maturity date, for an optional convertible note, means the last date on which the company is required to settle the optional convertible note (whether for the cash redemption amount or for new shares in the company)

optional convertible note means a convertible note that satisfies the following requirements:

(a) all amounts payable under the convertible note are denominated in New Zealand dollars; and

(b) the person either issues, subscribes for or acquires the convertible note on or after the date of this determination or the person issued, subscribed for or acquired the convertible note before the date of this determination, has applied Determination G22 to the convertible note and the convertible note has not matured within four years of the date of this determination; and

(c) the person has the following information by the person’s first balance date that follows the day on which the person issues or acquires the convertible note:

(i) the cash redemption amount; and

(ii) the maturity date; and

(iii) the amounts and dates of payments to be made under the note by the holder; and

(iv) the amounts, or the fixed relationship between the amount of each such payment and a market or indicator interest rate, and dates of payments (other than in repayment) to be made under the note by the issuer; and

(d) the holder can elect to settle the convertible note’s face value for new shares in the issuer, rather than the cash redemption amount; and