PIK notes and Parliamentary supremacy: Difference between pages

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PIK notes are debt instruments based on non-cash payment of interest coupons.
''UK law''.


Interest is usually recognised by an increase in the amount of principal owed by the borrower.
The historical principle in UK law that the UK Parliament was 'supreme' in its law-making powers.


This principle was fundamentally affected when the UK joined the EU in 1973.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.
Parliamentary supremacy meant that:


This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.  
#The UK Parliament was able to make UK law as it saw fit either by repealing earlier statutes, over-ruling case law or by making new law.
#No UK Parliament could bind its successor.  Parliament could not make laws that a subsequent Parliament was prevented from altering or repealing.
#The UK courts had to apply the relevant statute law enacted by the UK Parliament.
By joining the EU, UK Parliamentary supremacy was fundamentally affected and it is no longer true to say that only the UK Parliament has the power to make new law for the UK.


In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.
The effect of becoming a member of the EU was to cede the UK Parliament's supremacy on certain matters of European Union law which have direct effect on member states. 
 
The position now is that: 
 
#The EU may pass legislation directly for the UK.
#The UK cannot, generally, make laws that conflict with EU law.
#Overall, EU law enjoys supremacy over domestic national law and is applied in priority to domestic law.




== See also ==
== See also ==
* [[Coupon]]
* [[European Union ]]
* [[Equity]]
* [[Sovereignty]]
* [[Interest]]
 
* [[Notes]]
[[Category:Compliance_and_audit]]
* [[Payment in kind]]
* [[Principal]]
* [[Secured debt]]
* [[Subordinated debt]]
* [[Unsecured debt]]

Revision as of 10:40, 8 October 2013

UK law.

The historical principle in UK law that the UK Parliament was 'supreme' in its law-making powers.

This principle was fundamentally affected when the UK joined the EU in 1973.

Parliamentary supremacy meant that:

  1. The UK Parliament was able to make UK law as it saw fit either by repealing earlier statutes, over-ruling case law or by making new law.
  2. No UK Parliament could bind its successor. Parliament could not make laws that a subsequent Parliament was prevented from altering or repealing.
  3. The UK courts had to apply the relevant statute law enacted by the UK Parliament.

By joining the EU, UK Parliamentary supremacy was fundamentally affected and it is no longer true to say that only the UK Parliament has the power to make new law for the UK.

The effect of becoming a member of the EU was to cede the UK Parliament's supremacy on certain matters of European Union law which have direct effect on member states.

The position now is that:

  1. The EU may pass legislation directly for the UK.
  2. The UK cannot, generally, make laws that conflict with EU law.
  3. Overall, EU law enjoys supremacy over domestic national law and is applied in priority to domestic law.


See also