5(1)An authority which has been directed to form a company shall do so by forming it under the M1Companies Act 1985 as a company which—
(a)is limited by shares, and
(b)is a wholly-owned subsidiary of the authority or authorities forming it;
and it shall do so before such date as the Secretary of State specifies in the direction.
(2)The authority shall so exercise its control of the company as to secure that, at some time before the vesting date, the conditions specified in section 68(6)(a) to (h) of the M2Local Government and Housing Act 1989 (conditions for “arm’s length companies”) apply in relation to the company and shall, at some time before the vesting date, resolve that the company shall be an arm’s length company for the purposes of Part V of that Act.
(3)In this paragraph “wholly-owned subsidiary”, in relation to a company and an authority, is to be construed in accordance with section 736 of the Companies Act 1985.