Local Government and Housing Act 1989

69 Companies subject to local authority influence

(1) For the purposes of this Part, unless the Secretary of State otherwise directs, a company which is not at the time under the control of a local authority is for the time being subject to the influence of a local authority if it is not a banking or insurance company or a member of a banking or insurance group and at that time there is such a business relationship between the company and the authority as is referred to in subsection (3) below and either—

(a) at least 20 per cent. of the total voting rights of all the members having the right to vote at a general meeting of the company are held by persons who are associated with the authority as mentioned in subsection (5) below; or

(b) at least 20 per cent. of the directors of the company are persons who are so associated; or

(c) at least 20 per cent. of the total voting rights at a meeting of the directors of the company are held by persons who are so associated.

(2) A direction under subsection (1) above—

(a) may be limited in time and may be made conditional upon such matters as appear to the Secretary of State to be appropriate; and

(b) may be made with respect to a particular company or a description of companies specified in the direction.

(3) For the purposes of this section there is a business relationship between a company and a local authority at any time if the condition in any one or more of the following paragraphs is fulfilled—

(a) within a period of twelve months which includes that time the aggregate of the payments to the company by the authority or by another company which is under the control of the authority represents more than one-half of the company’s turnover, as shown in its profit and loss account for the most recent financial year for which the company’s auditors have made a report on the accounts or, if there is no such account, as estimated by the authority for the period of twelve months preceding the date of the estimate or for such part of that period as follows the formation of the company;

(b) more than one-half of the company’s turnover referred to in paragraph (a) above is derived from the exploitation of assets of any description in which the local authority or a company under the control of the authority has an interest (disregarding an interest in land which is in reversion on a lease granted for more than 7 years);

(c) the aggregate of—

(i) grants made either by the authority and being expenditure for capital purposes or by a company under the control of the authority, and

(ii) the nominal value of shares or stock in the company which is owned by the authority or by a company under the control of the authority,

exceeds one-half of the net assets of the company;

(d) the aggregate of—

(i) grants falling within paragraph (c)(i) above,

(ii) loans or other advances made or guaranteed by the authority or by a company under the control of the authority, and

(iii) the nominal value referred to in paragraph (c)(ii) above,

exceeds one-half of the fixed and current assets of the company;

(e) the company at that time occupies land by virtue of an interest which it obtained from the local authority or a company under the control of the authority and which it so obtained at less than the best consideration reasonably obtainable; and

(f) the company intends at that time to enter into (or complete) a transaction and, when that is done, there will then be a business relationship between the company and the authority by virtue of any of paragraphs (a) to (e) above.

(4) In subsection (3) above—

(a) the reference in paragraph (c) to the net assets of the company shall be construed in accordance with section 152(2) of the [1985 c. 6.] Companies Act 1985; and

(b) the reference in paragraph (d) to the fixed and current assets of the company shall be construed in accordance with paragraph 77 of Schedule 4 to that Act;

and in either case, the reference is a reference to those assets as shown in the most recent balance sheet of the company on which, at the time in question, the auditors have made a report or, if there is no such balance sheet, as estimated by the local authority for the time in question.

(5) For the purposes of this section, a person is at any time associated with a local authority if—

(a) he is at that time a member of the authority;

(b) he is at that time an officer of the authority;

(c) he is at that time both an employee and either a director, manager, secretary or other similar officer of a company which is under the control of the authority; or

(d) at any time within the preceding four years he has been associated with the authority by virtue of paragraph (a) above.

(6) If and to the extent that the Secretary of State by order so provides, a person is at any time associated with a local authority if—

(a) at that time he is, or is employed by or by a subsidiary of, a person who for the time being has a contractual relationship with the authority to provide—

(i) advice with regard to the authority’s interest in any company (whether existing or proposed to be formed), or

(ii) advice with regard to the management of an undertaking or the development of land by a company (whether existing or proposed to be formed) with which it is proposed that the authority should enter into any lease, licence or other contract or to which it is proposed that the authority should make any grant or loan, or

(iii) services which facilitate the exercise of the authority’s rights in any company (whether by acting as the authority’s representative at a meeting of the company or as a director appointed by the authority or otherwise);

(b) at any time within the preceding four years, he has been associated with the authority by virtue of paragraph (b) or paragraph (c) of subsection (5) above;

(c) he is at that time the spouse of, or carries on business in partnership with, a person who is associated with the authority by virtue of subsection (5)(a) above; or

(d) he holds a relevant office in a political association or other body which, in the nomination paper of a person who is an elected member of the authority, formed part of that person’s description.

(7) For the purposes of subsection (6)(d) above, an office in a political association or body is relevant to a local authority in the following circumstances—

(a) if the association or body is active only in the area of the local authority, any office in it is relevant; and

(b) in any other case, an office is relevant only if it is in a branch or other part of the association or body which is active in the area of the local authority.

(8) In relation to a company which is an industrial and provident society, any reference in this section to the directors of the company is a reference to the members of the committee of management.

(9) Subject to subsections (4) and (8) and section 67 above, expressions used in this section have the same meaning as in the [1985 c. 6.] Companies Act 1985.