The Building Societies (Designation of Qualifying Bodies) (No. 2) Order 1995

PART II INTERPRETATION

Meaning of “specified type of body corporate”

1.  In this Schedule “specified type of body corporate” means a body corporate which is—

(a) a company or an industrial and provident society,

(b) a body corporate formed in a member State other than the United Kingdom, or

(c) a body corporate formed in any of the following territories and countries:

• the Channel Islands, the Isle of Man, Iceland, Liechtenstein, Norway and Switzerland.

Meaning of “particular restrictions for personal lines insurance bodies”

2.—(1) In this Schedule the “particular restrictions for personal lines insurance bodies” means the provisions set out in sub-paragraph (2) below.

(2) A body corporate is not a personal lines insurance body for a society where—

(a) it is neither authorised nor otherwise entitled to carry on in any member State or any country or territory mentioned in paragraph l(c) above, nor (where applicable) a candidate for authorisation to carry on in any such member State, country or territory, insurance business of any class specified in Part I of Schedule 2 to the Insurance Companies Act 1982; or

(b) it carries on any activities otherwise than in connection with or for the purposes of its insurance business; or

(c) subject to sub-paragraphs (3) and (4) below, it effects, or carries out, a contract of insurance with a person that is not an individual; or

(d) it comes within the description of a mortgage indemnity insurance body as specified in the Schedule to the Building Societies (Designation of Qualifying Bodies) (No. 2) Order 1993(1).

(3) A body corporate is not prevented from being a personal lines insurance body for a society where it effects, or carries out, a contract of insurance—

(a) with a person (not being an individual) that holds the policy jointly with an individual who occupies land in which the person holds an interest, which insures the person or the individual against the risk of loss of or damage to the buildings so occupied or the chattels of such person or individual which are usually kept on or in such land and buildings and any other risks which are commonly insured against together with such risks;

(b) with a housing association or housing trust, which insures the housing association or housing trust against the risk of loss of or damage to buildings and any other risks which are commonly insured against together with such risks; or

(c) with the society or any subsidiary undertaking or associated body of the society.

(4) A body corporate is not prevented from being a personal lines insurance body for a society where it effects, or carries out, a contract of reinsurance with another body corporate which insures against risks which—

(a) are of a kind which, if insured against by a body corporate, would not prevent that body corporate from being a personal lines insurance body for a society; and

(b) arise under a contract of insurance effected and carried out by that other body corporate where—

(i) that other body corporate is a subsidiary undertaking or associated body of the society, or

(ii) the contract has been arranged by the society or any subsidiary undertaking or associated body of the society.

(5) For the purposes of sub-paragraph (2) above—

(a) a body corporate is “a candidate for authorisation” if it has been formed with a view to being authorised in respect of the carrying on of insurance business and is applying or is taking steps to apply for authorisation in that respect; and

(b) any activities that are treated by section 16(2) of the Insurance Companies Act 1982 as carried on in connection with insurance business shall be treated as carried on in connection with insurance business.

Meaning of “standard asset condition”

3.  In this Schedule “the standard asset condition”means a condition to the effect that—

(a) the relevant power is not available to a society which does not for the time being have a qualifying asset holding, unless the society is one to which sub-paragraph (b) below applies;

(b) the society is a successor to two or more societies which have amalgamated and that society does not have a qualifying asset holding by reason only that it does not have any annual accounts as referred to in section 118(2) of the Act, provided that at least one society to which the amalgamated society is a successor had a qualifying asset holding immediately before the specified date referred to in section 93(3)(b) of the Act;

(c) the cessation of the availability of the relevant power to such a society as is referred to in sub-paragraph (a) or (b) above because that society no longer has a qualifying asset holding does not require the disposal of any property or rights.

Meaning of “qualifying activities condition”

4.—(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 issued 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 personal lines insurance 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 of 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(2) 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.

Other definitions

5.  In this Schedule—

• “chattels” means—

  (a)

  in relation to England and Wales and Northern Ireland, all personal chattels including things in action and money, and

  (b)

  in relation to Scotland, all corporeal and incorporeal moveable property and money;

• “housing association” has the meaning which it bears in section 1 of the Housing Associations Act 1985(3) or article 3 of the Housing (Northern Ireland) Order 1992(4);

• “housing trust” has the meaning which it bears in section 2 of the Housing Associations Act 1985 or article 3 of the Housing (Northern Ireland) Order 1992; and

• “insurance business” has the same meaning as in the Insurance Companies Act 1982.

(1)

S.I. 1993/989, amended by S.I. 1993/2706.

(2)

1988 c. 1.

(3)

1985 c. 69; section 1 was amended by paragraph 6 of Schedule 2 to the Housing (Scotland) Act 1988 (c. 43).

(4)

S.I. 1982/1725 (N.I.15).