The Act – Section by Section Part 3 – Scottish Water’s Functions Section 27 – Subsidiaries of Scottish Water
41.This section inserts new sections 42A and 42B into the 2002 Act. The new section 42A enables the Scottish Ministers to pay grants directly to, or lend directly to, a subsidiary of Scottish Water (as well as to Scottish Water itself). It also allows a subsidiary of Scottish Water to borrow from any other person. However, Scottish Water’s consent is required to any subsidiary borrowing from the Scottish Ministers or any person other than Scottish Water itself. The section does not, however, apply to the water and sewerage undertaking established by Scottish Water under section 13 of the 2005 Act (currently ‘Scottish Water Business Stream Limited’), even if that entity is a subsidiary of Scottish Water.
42.Section 42(4) and (5) of the 2002 Act provide that Scottish Water’s net borrowings in each financial year must not exceed the limit to be set in a Budget Act. In light of the fact that, under new section 42A, subsidiaries of Scottish Water may now borrow, new section 42B provides that the net amount of sums borrowed by Scottish Water and any subsidiary of it must not exceed the amount specified in a Budget Act. Section 42(4) and (5) of the 2002 Act are repealed by this section.
43.A “subsidiary” for the purposes of new sections 42A and 42B of the 2002 Act is defined by reference to section 1159 of the Companies Act 2006 (c. 46), which provides that a company is a subsidiary of another company if that other company (a) holds a majority of the voting rights in it, (b) is a member of it and has the right to appoint or remove a majority of its board of directors, or (c) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it (or is a subsidiary of a company that is itself a subsidiary of that other company).