SCHEDULE

PART II INTERPRETATION

2 Meaning of group interest provision
(1) In this Schedule “the group interest provision” means a condition to the effect that—
(a) where a society has a relevant holding in an appropriate vehicle and becomes aware that a subordinate organisation of that appropriate vehicle is within the prohibited range, the society shall dispose of sufficient shares or corresponding membership rights as the case may be that it ceases to have a relevant holding, and shall do so as soon as it is conveniently practicable to do so without undue loss, and
(b) where a society holds 2% or more of shares or corresponding membership rights in an appropriate vehicle and by virtue of that investment in that appropriate vehicle has a relevant holding amounting to a relevant interest in a relevant body corporate, the society shall, within four months of the end of each financial year of that relevant body corporate at which year end the society has such an interest, seek to obtain a group income certificate in relation to that relevant body corporate, and, if no such certificate as is required by this paragraph is so obtained by the society for two successive financial years of the relevant body corporate, the society shall—
(i) notify the Commission in writing, within 14 days of the end of the four months following the end of the second such financial year, that subparagraph (ii) below applies to it,
(ii) as soon as it is conveniently practicable to do so without undue loss, dispose of sufficient shares or corresponding membership rights that it ceases to have a relevant interest ill that body corporate, and
(iii) within 14 days following that cessation, notify the Commission in writing thereof.
(2) For the purposes of subparagraph (1)(a) above, a subordinate organisation comes within the prohibited range where it comes within a description in paragraph 3(2)(a), (b), (c) or (d) below (or would do if it were an appropriate vehicle subject to the provisions of subparagraph (2) of paragraph 3 below).
(3) For the purposes of subparagraph (1)(b) above, “relevant interest” means—
(a) shares or corresponding membership rights in a body corporate which is not a company limited by shares, or
(b) sufficient shares in a body corporate which is a company limited by shares to give the society direct ownership or direct and indirect ownership (determined as specified in the definition of “subordinate organisation” in paragraph 6 below) of 15% or more of the ordinary share capital (as defined within that definition) of that company.
(4) For the purposes of subparagraph (1)(b) above, “relevant body corporate” means a particular body designated under section 18 of the Act or any body corporate designated by description under this or another Order under section 18 of the Act, which has any subordinate organisation which is not an associated body of the society.
(5) For the purposes of this paragraph—
(a) “group income certificate”, in relation to a relevant body corporate, means a certificate signed by a director of the relevant body corporate (and adequately supported by a report of its auditors) stating that at least 60% of the consolidated gross income of the relevant body corporate and its subordinate organisationsforthefinancial yeartowhich thecertificate relates was derived, subject to subparagraph (6) below, from carrying on qualifying activities, and
(b) “qualifying activities” means activities for which purpose a society has power to invest in or support a qualifying body.
(6) For the purposes of subparagraph (5)(a) above—
(a) in calculating the consolidated gross income of the relevant body corporate and its subordinate orgainisations derived from carrying on qualifying activities, any income derived by such a subordinate organisation, or by any particular body designated under section 18 of the Act, or any body corporate designated by description under this Order or another Order under section 18 of the Act, other than an appropriate estate agency vehicle, from activities which are qualifying activities only if they are undertaken together with estate agency work, shall be deemed to be derived from carrying on activities which are not qualifying activities, and
(b) a certificate is adequately supported by a report of the auditors of a relevant body corporate where the auditors have reported at least to the effect that—
(i) they have examined the certificate,
(ii) they have inquired into the affairs of the relevant body corporate, and obtained information from the society, to an extent necessary to consider whether there is any significant likelihood that the certificate is untrue in any material particular, and
(iii) they consider that there is no significant likelihood that the certificate is untrue in any material particular.