The Companies (Membership of Holding Company) (Dealers in Securities) Regulations 1997

Amendment of section 23 of the Companies Act 1985 U.K.

2.  In section 23 of the Companies Act 1985 (membership by subsidiary of holding company)(1), for subsection (3) there shall be substituted the following—

“(3) The prohibition does not apply where shares in the holding company are held by the subsidiary in the ordinary course of its business as an intermediary.

• For this purpose a person is an intermediary if that person—

  (a)

  carries on a bona fide business of dealing in securities;

  (b)

  is a member of an EEA exchange (and satisfies any requirements for recognition as a dealer in securities laid down by that exchange) or is otherwise approved or supervised as a dealer in securities under the laws of an EEA State; and

  (c)

  does not carry on an excluded business.

(3A) The excluded businesses are the following—

(a) any business which consists wholly or mainly in the making or managing of investments;

(b) any business which consists wholly or mainly in, or is carried on wholly or mainly for the purpose of, providing services to persons who are connected with the person carrying on the business;

(c) any business which consists in insurance business;

(d) any business which consists in managing or acting as trustee in relation to a pension scheme or which is carried on by the manager or trustee of such a scheme in connection with or for the purposes of the scheme;

(e) any business which consists in operating or acting as trustee in relation to a collective investment scheme or is carried on by the operator or trustee of such a scheme in connection with or for the purposes of the scheme.

(3B) For the purposes of subsections (3) and (3A)—

(a) the question whether a person is connected with another shall be determined in accordance with the provisions of section 839 of the Income and Corporation Taxes Act 1988(2);

(b) ‘collective investment scheme’ has the meaning given in section 75 of the Financial Services Act 1986(3);

(c) ‘EEA exchange’ means a market which appears on the list drawn up by an EEA State pursuant to Article 16 of Council Directive 93/22/EEC on investment services in the securities field(4);

(d) ‘insurance business’ means long term business or general business as defined in section 1 of the Insurance Companies Act 1982(5);

(e) ‘securities’ include investments falling within paragraphs 7, 8 and 9 of Schedule 1 to the Financial Services Act 1986 and, so far as relevant to any of those paragraphs, paragraph 11 of that Schedule;

(f) ‘trustee’ and ‘the operator’ shall, in relation to a collective investment scheme, be construed in accordance with section 75(8) of the Financial Services Act 1986.

(3C) Where—

(a) a subsidiary which is a dealer in securities has purportedly acquired shares in its holding company in contravention of the prohibition in subsection (1); and

(b) a person acting in good faith has agreed, for value and without notice of that contravention, to acquire shares in the holding company from the subsidiary or from someone who has purportedly acquired the shares after their disposal by the subsidiary,

any transfer to that person of the shares mentioned in paragraph (a) shall have the same effect as it would have had if their original acquisition by the subsidiary had not been in contravention of the prohibition.”

Commencement Information

I1 Reg. 2 in force at 20.10.1997, see reg. 1

(1)

1985 c. 6; section 23 was substituted by section 129(1) of the Companies Act 1989 (c. 40).

(2)

1988 c. 1; section 839 was amended by section 74 of, and paragraph 20 of Part II of Schedule 17 to, the Finance Act 1995 (c. 4), and modified by S.I. 1988/745.

(3)

1986 c. 60; section 75 was amended by article 6(a) and (b) of S.I. 1990/349 and modified by regulation 55 of, and paragraph 24 of Schedule 9 to, S.I. 1992/3218.

(4)

O.J. L141, 11.6.93, p. 27.

(5)

1982 c. 50.