Introduction Overview Overview Section 758: Type 1 finance arrangement defined
2290.This section defines a form of arrangement, labelled a “type 1 finance arrangement”, which falls within this legislation. It is based on section 774A of ICTA.
2291.Subsection (1) provides that two conditions must be met if an arrangement is to be a type 1 finance arrangement.
2292.The word “arrangement” appears in subsection (1) for the first time in this Chapter. See section 775.
2293.Subsection (2) specifies condition A, which concerns the terms of the arrangement. There are three tests in condition A, all of which must be passed if the condition is to be met. To summarise:
	A borrower must “receive” an advance from a lender;
	the borrower (or a person “connected” with the borrower) must “dispose” of an asset (the security) to, or for the benefit of, a lender (or a person “connected” with the lender); and
	the lender (or a person “connected” with the lender) must be entitled to “payments in respect of” the security.
2294.An ordinary secured loan would not be a type 1 finance arrangement, because it would not satisfy subsection (2)(b) or, if it did, it would not satisfy subsection (2)(c).
2295.The first reference in this Chapter to a person receiving an asset is in subsection (2)(a). See section 776(2).
2296.Subsection (2)(b) is the first of a number of provisions in this Chapter which refer to persons being “connected”. The meaning of “connected” in those provisionsis given by section 1176(1). Section 774G(4) of ICTA is therefore not rewritten as a separate proposition.
2297.The first reference in this Chapter to a disposal of an asset is in subsection(2)(b). See section 776(3).
2298.The first reference in this Chapter to payments in respect of an asset is in subsection (2)(c). See section 776(4).
2299.Subsection (3) specifies condition B, which is about accounting. To summarise, the payments mentioned in subsection (2)(c) must be, for accounting purposes, payments of principal rather than interest.
2300.The first reference in this Chapter to a person’s accounts is in subsection(3)(a). See section 774(2) and (4).
2301.The first reference in this Chapter to an amount being recorded in accounts as a financial liability is in subsection (3)(a). See section 774(3).