Part II Credit Agreements, Hire Agreements and Linked Transactions

19 Linked transactions.

1

A transaction entered into by the debtor or hirer, or a relative of his, with any other person ( “the other party ”), except one for the provision of security, is a linked transaction in relation to an actual or prospective regulated agreement (the “principal agreement ”) of which it does not form part if—

a

the transaction is entered into in compliance with a term of the principal agreement; or

b

the principal agreement is a debtor-creditor-supplier agreement and the transaction is financed, or to be financed, by the principal agreement; or

c

the other party is a person mentioned in subsection (2), and a person so mentioned initiated the transaction by suggesting it to the debtor or hirer, or his relative, who enters into it—

i

to induce the creditor or owner to enter into the principal agreement, or

ii

for another purpose related to the principal agreement, or

iii

where the principal agreement is a restricted-use credit agreement, for a purpose related to a transaction financed, or to be financed, by the principal agreement.

2

The persons referred to in subsection (1)(c) are—

a

the creditor or owner, or his associate;

b

a person who, in the negotiation of the transaction, is represented by a credit-broker who is also a negotiator in antecedent negotiations for the principal agreement;

c

a person who, at the time the transaction is initiated, knows that the principal agreement has been made or contemplates that it might be made.

3

A linked transaction entered into before the making of the principal agreement has no effect until such time (if any) as that agreement is made.

4

Regulations may exclude linked transactions of the prescribed description from the operation of subsection (3).