Class 3 assets
3.—(1) A building society may acquire, hold and dispose of the following forms of property as class 3 assets, namely—
(a)relevant debts, and
(b)permitted investments.
(2) For the purposes of paragraph (1) above—
(a)“acquire”, in relation to a relevant debt created by way of loan, includes making the loan;
(b)“relevant debts” means debts which—
(i)are owed by a body of persons corporate or unincorporate, or a corporation sole, incorporated or established or having a place of business in a member State or the Channel Islands, the Isle of Man, Gibraltar, Iceland, Liechtenstein, Norway or Switzerland, and
(ii)are not excluded by paragraph (5) below, and equitable interests in such debts; and
(c)“permitted investments” means shares or corresponding membership rights, or rights in or to shares or corresponding membership rights, issued by a body corporate formed in a member State or the Channel Islands, the Isle of Man, Gibraltar, Iceland, Liechtenstein, Norway or Switzerland, which is the borrower under a loan owed to the society (alone or in a syndicate), or by a parent undertaking of such a borrower or a subsidiary undertaking of such a borrower or of such a parent undertaking, where either—
(i)the shares or rights are issued as partial consideration for granting the loan, and the amount paid (or treated as paid) for the shares or rights does not exceed 5 per cent. of the initial amount of the loan, or
(ii)the shares or rights are issued in consideration of the release of the borrower from liability to pay all or part of the amount due under the loan (whether principal, interest or otherwise), following default on the part of the borrower under the loan or pursuant to a compromise of the rights of the society and the borrower under the loan, and the amount paid (or treated as paid) for the shares or rights does not exceed the amount released.
(3) In paragraph (2)(c) above, “the initial amount of a loan”, in the case of a loan which may be advanced or drawn down in more than one instalment, means the maximum amount of principal that may be advanced or drawn down on the date the borrower first receives funds under the loan.
(4) A relevant debt acquired or held by a building society may be owed to the society alone or in a syndicate.
(5) A debt which is an advance fully secured on land or a class 3 asset (otherwise than by virtue of paragraph (2) above) is not a relevant debt unless paragraph (6) below applies and the debt is treated as a relevant debt pursuant to that paragraph.
(6) Where the society has entered into an arrangement which it could have entered into either under the power conferred by paragraph (1)(a) above or under one of the following powers, namely—
(i)the power conferred by section 10 of the Act to make advances fully secured on land, and
(ii)the power conferred by the Building Societies (Money Transmission Services) Order 1989(1),
the society shall record the power under which the arrangement is to be treated as having been entered into and it shall be so treated.
(7) The powers conferred by paragraph (1) above are available to a building society only while it has a qualifying asset holding or is treated as having one under paragraph (8) below, but if they cease to be available the society does not have to dispose of any property or rights.
(8) For the purposes of paragraph (7) above a society is treated as having a qualifying asset holding if it is a successor to two or more societies which have amalgamated, at least one of which had a qualifying asset holding immediately before the specified date referred to in section 93(3)(b) of the Act, and the amalgamated society does not have a qualifying asset holding by reason only of not having the annual accounts referred to in section 118(2) of the Act.
(9) For the purpose of section 19(4) of the Act, the power to acquire, hold and dispose of relevant debts and the power to acquire, hold and dispose of permitted investments are separate powers.
S.I. 1989/730.