The Building Societies (Designation of Qualifying Bodies) Order 1995

Meaning of “qualifying activities condition”

7.—(1) In this Schedule “the qualifying activities condition” means a condition to the effect that—

(a) where a society holds 5 per cent. or more of the shares or corresponding membership rights in a body and becomes aware that any subordinate organisation of that body is, for the time being, excluded by the particular restrictions for financing bodies, the society shall, as soon as it is conveniently practicable to do so without undue loss, dispose of sufficient of its shares or corresponding membership rights so that it ceases to hold 5 per cent. or more or the issued shares or corresponding membership rights in that body,

(b) within four months after the end of each financial year of a body in which the society, at such financial year end, holds 15 per cent. or more of the issued shares or corresponding membership rights, the society shall satisfy itself whether, for such financial year, at least 60 per cent. of the gross income of that body, or if that body has any subordinate organisations, at least 60 per cent. of the consolidated gross income of the body and such subordinate organisations, is derived from carrying on qualifying activities, and

(c) if, for two successive financial years of a body less than 60 per cent. of the gross income (or, if appropriate, consolidated gross income) is derived from carrying on qualifying activities, the society shall, as soon as it is conveniently practicable to do so without undue loss, dispose of sufficient of its shares or corresponding membership rights so that it ceases to hold 15 per cent. or more of the issued shares or corresponding membership rights in that body.

(2) For the purposes of this paragraph—

(a) “qualifying activities” means activities for the purpose of which a society has power to invest in or support a qualifying body; however “additional activities” of the kind mentioned in article 3(2) above shall not be qualifying activities, and

(b) “subordinate organisation” means a body corporate in which another body corporate holds, directly or indirectly, 5 per cent. or more of the issued shares or corresponding membership rights where—

(i) “holds directly or indirectly” means that a body corporate holds shares or corresponding membership rights in another body corporate either directly or through another body corporate (or bodies corporate), or partly directly and partly through another body corporate (or bodies corporate);

(ii) methods the same as those set out in section 838 (subsidiaries) of the Income and Corporation Taxes Act 1988(1) shall be used to determine an indirect holding as if references to “own” in that section were references to “hold”, and other derivatives of “own” shall be construed accordingly; and

(iii) references to “ordinary share capital” in section 838 of the Income and Corporation Taxes Act 1988 shall be read as references to shares, or as the case may be, corresponding membership rights in a body corporate.

(1)

1988 c. 1.