[F1Excluded activities: SME exceptionU.K.
7A.—(1) A ring-fenced body does not carry on an excluded activity by entering into a transaction to—
(a)acquire or dispose of shares in a UK SME, provided that the ring-fenced body only has a minority interest in the UK SME concerned,
(b)invest in an SME investment undertaking by acquiring an interest in the SME investment undertaking, or disposing of that interest, provided that—
(i)the interest is not a debt instrument issued by the SME investment undertaking, and
(ii)where the SME investment undertaking is an investment company, the ring-fenced body only has a minority interest in the SME investment undertaking concerned, or
(c)acquire, dispose of or exercise rights under instruments giving an entitlement to shares issued by a UK SME in consideration or part consideration for a loan made by the ring-fenced body to the UK SME.
(2) Paragraph (1) does not apply unless the sum of the value of relevant investments held by the ring-fenced body does not exceed ten per cent of the value of the tier 1 capital of the ring-fenced body on a sub-consolidated basis where this is required under the prudential requirements regulation, and otherwise on an individual basis, for a continuous period of twelve months, and for these purposes—
(a)“relevant investments” means—
(i)shares, instruments giving an entitlement to shares or other interests acquired by the ring-fenced body under paragraph (1), and
(ii)shares in a UK SME acquired by the ring-fenced body under article 6(4)(d),
but does not include any shares in a UK SME during any time in which the UK SME is a subsidiary undertaking of the ring-fenced body, or in which the ring-fenced body has a participating interest in the UK SME;
(b)the value of relevant investments is their fair value, assessed in accordance with International Financial Reporting Standard 13 (fair value measurement) issued by the International Accounting Standards Board in May 2011, as amended from time to time;
(c)tier 1 capital has the meaning given in Article 25 of the prudential requirements regulation, and the value of the tier 1 capital of the ring-fenced body on an individual basis or a sub-consolidated basis, as applicable, is to be calculated in accordance with the prudential requirements regulation;
(d)references to holding capital on a sub-consolidated basis are to be interpreted in accordance with Article 4(1)(49) of the prudential requirements regulation.
(3) For the purposes of paragraph (1)(b), investing in an SME investment undertaking includes—
(a)the acquisition of shares or other interests issued by a parent undertaking of an SME investment undertaking, provided that the ring-fenced body only has a minority interest in that parent undertaking;
(b)the acquisition of an interest in a feeder scheme of an SME investment undertaking, provided that any master scheme in which the feeder scheme invests complies with all the conditions set out in paragraph (4).
(4) For the purposes of paragraph (3)(b), a “feeder scheme” means a collective investment scheme, which—
(a)invests at least 85% of the total property which is subject to the collective investment scheme in units or shares of—
(i)a single collective investment scheme (a “master scheme”), or
(ii)two or more master schemes which each have identical investment strategies, or
(b)has an exposure of at least 85% of its assets to such a master scheme.
(5) In this article, an “SME investment undertaking” means an eligible undertaking which satisfies all the following conditions—
(a)it has an investment strategy of investing at least 50% of its investment capital in UK SMEs;
(b)it does not at any time invest more than 50% of its investment capital in enterprises which are not UK SMEs;
(c)it does not have an investment strategy of investing in other eligible undertakings.
(6) For the purposes of this article—
(a)the “investment capital” of an eligible undertaking which is a collective investment scheme, or the sub-fund of a collective investment scheme, is the sum of—
(i)the capital which investors have provided for investment by the collective investment scheme, and
(ii)the capital which investors may be required to provide for such investment under the terms of their investment in the collective investment scheme,
after the deduction of all fees, charges and expenses which are directly or indirectly borne by investors and which are agreed between the manager of the collective investment scheme and the investors;
(b)the “investment capital” of an eligible undertaking which is an investment company is the sum of the assets of the investment company after the deduction of all fees, charges and expenses which are directly or indirectly borne by investors and which are agreed between the manager of the investment company and the investors;
(c)a ring-fenced body has a “minority interest” in an undertaking if—
(i)it does not hold a majority of the voting rights in that undertaking,
(ii)it is a member of the undertaking, but does not control alone, pursuant to an agreement with other members of the undertaking, a majority of the voting rights in that undertaking,
(iii)it is a member of the undertaking, but does not have the right to appoint or remove a majority of the board of directors, or equivalent management body, of that undertaking, and
(iv)it does not have the right to exercise, nor actually exercises, dominant influence or control over that undertaking.
(7) Schedule 7 to the Companies Act 2006 (parent and subsidiary undertakings: supplementary provisions) applies for the interpretation of paragraph (6)(c).
(8) In this article—
“debt instrument” is—
a bond,
any other instrument creating or acknowledging a debt, or
an instrument giving rights to acquire a debt instrument;
“eligible undertaking” means—
a collective investment scheme,
the sub-fund of a collective investment scheme which is structured with a number of separate sub-funds, provided that the property subject to that sub-fund cannot be used to discharge any liabilities of, or meet any claims against, any person other than the participants in that sub-fund, and for the purposes of this sub-paragraph, “sub-fund” has the meaning given in section 90ZA(2) of the Act, or
an investment company, as defined by section 833(1) of the Companies Act 2006;
“UK SME” is an undertaking which—
is an SME at the time the ring-fenced body or SME investment undertaking first enters into a transaction to acquire shares, or instruments giving an entitlement to shares, in the undertaking, and
is registered in, and has its principal place of business in, the United Kingdom.]
Textual Amendments