Paragraph 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 becomes aware that a subordinate organisation of an appropriate vehicle is within the prohibited range, the society shall dispose of its shares or corresponding membership rights, as the case may be, in that appropriate vehicle and shall do so as soon as it is conveniently practicable to do so without undue loss, and

(b)

a society shall within four months of the end of each financial year of an appropriate vehicle seek to obtain a group income certificate inrelation to that appropriate vehicle, and, if no such certificate as is required by this paragraph is so obtained by the society for two successive financial years of that appropriate vehicle, 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 sub-paragraph (ii) below applies to it,

(ii)

as soon as it is conveniently practicable to do so without undue loss, dispose of its shares or corresponding membership rights, as the case may be, in that appropriate vehicle, and

(iii)

within 14 days following that cessation, notify the Commission in writing thereof.

(2)

For the purposes of sub-paragraph (1)(a) above, a subordinate organisation comes within the prohibited range where it comes within a description in paragraph 3(2)(a), (b), or (c) below (or would do if it were a vehicle subject to the provisions of sub-paragraph (2) of paragraph 3 below).

(3)

For the purposes of this paragraph—

(a)

“group income certificate”, in relation to an appropriate vehicle, means a certificate signed by a director of the appropriate vehicle (and adequately supported by a report of its auditors) stating that at least 60% of the consolidated gross income of the appropriate vehicle and its subordinate organisations for the financial year to which the certificate relates was derived, subject to sub-paragraph (4) below, from carrying on qualifying activities, and

(b)

“qualifying activities” means activities for which purpose a society has power to invest inand support, or support a body corporate.

(4)

For the purposes of sub-paragraph (3)(a) above—

(a)

in calculating the consolidated gross income of the appropriate vehicle and its subordinate organisations 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 an appropriate vehicle 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 appropriate vehicle, 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.