(141)-PARTICIPATING INTEREST

Participating Interest

Financial reporting standards (FRS) states that a participating interest is an interest is an interest held by an undertaking in the shares of another undertaking which it holds on a long term basis for the purpose of securing a contribution to its activities by the exercise of control or influence arising from or related to that interest.

• A holding of 20% or more of the shares of an undertaking is presumed to be a participating interest unless the contrary is shown.
• An interest in shares includes an interest which is convertible into an interest in shares, and includes an option to acquire shares or any interest which is convertible into shares.
• An interest held on behalf of an undertaking shall be treated as held by that undertaking.

A “participating interest”, like an investment in a “subsidiary undertaking”, need not be in a company, because an “undertaking” means one of three things.

1. A body corporate
2. A partnership
3. An unincorporated association carrying on a trade or business, with or without a view to profit

“Shares” therefore means allotted shares or for undertakings without share capital, the right to share in the capital and profits and the corresponding liability to meet losses and debt on winding up.