(1)In Chapter I of Part I of the Companies Act [1985 c. 6.] 1985 (company formation), for section 23 (membership of holding company) substitute—
(1)Except as mentioned in this section, a body corporate cannot be a member of a company which is its holding company and any allotment or transfer of shares in a company to its subsidiary is void.
(2)The prohibition does not apply where the subsidiary is concerned only as personal representative or trustee unless, in the latter case, the holding company or a subsidiary of it is beneficially interested under the trust.
For the purpose of ascertaining whether the holding company or a subsidiary is so interested, there shall be disregarded—
(a)any interest held only by way of security for the purposes of a transaction entered into by the holding company or subsidiary in the ordinary course of a business which includes the lending of money;
(b)any such interest as is mentioned in Part I of Schedule 2.
(3)The prohibition does not apply where the subsidiary is concerned only as a market maker.
For this purpose a person is a market maker if—
(a)he holds himself out at all normal times in compliance with the rules of a recognised investment exchange other than an overseas investment exchange (within the meaning of the Financial Services Act 1986) as willing to buy and sell securities at prices specified by him, and
(b)he is recognised as so doing by that investment exchange.
(4)Where a body corporate became a holder of shares in a company—
(a)before 1st July 1948, or
(b)on or after that date and before the commencement of section 129 of the Companies Act 1989, in circumstances in which this section as it then had effect did not apply,
but at any time after the commencement of that section falls within the prohibition in subsection (1) above in respect of those shares, it may continue to be a member of that company; but for so long as that prohibition would apply, apart from this subsection, it has no right to vote in respect of those shares at meetings of the company or of any class of its members.
(5)Where a body corporate becomes a holder of shares in a company after the commencement of that section in circumstances in which the prohibition in subsection (1) does not apply, but subsequently falls within that prohibition in respect of those shares, it may continue to be a member of that company; but for so long as that prohibition would apply, apart from this subsection, it has no right to vote in respect of those shares at meetings of the company or of any class of its members.
(6)Where a body corporate is permitted to continue as a member of a company by virtue of subsection (4) or (5), an allotment to it of fully paid shares in the company may be validly made by way of capitalisation of reserves of the company; but for so long as the prohibition in subsection (1) would apply, apart from subsection (4) or (5), it has no right to vote in respect of those shares at meetings of the company or of any class of its members.
(7)The provisions of this section apply to a nominee acting on behalf of a subsidiary as to the subsidiary itself.
(8)In relation to a company other than a company limited by shares, the references in this section to shares shall be construed as references to the interest of its members as such, whatever the form of that interest.”.
(2)In Schedule 2 to the [1985 c. 6.] Companies Act 1985 (interpretation of references to “beneficial interest”), in paragraphs 1(1), 3(1) and 4(2) for “as respects section 23(4)” substitute “as this paragraph applies for the purposes of section 23(2)”