Building Societies Act 1986

• (ii) failing any such requirement, the period of 12 months beginning with 1st April;

• (b) “total audit remuneration received” means the total remuneration received for the auditing pursuant to legislation (including that of countries and territories outside the United Kingdom) of any accounts of any person.

Duty of auditor to supply information

4

The auditor of a building society must supply the directors of the society with such information as is necessary to enable the disclosure required by paragraph 1 to be made.

Meaning of “associate” and “distant associate” of auditor

5

• (1) This paragraph defines what is meant in this Schedule by an “associate” or a “distant associate” of a building society’s auditor.

• (2) The following are associates of a society’s auditor—

• (a) any person controlled by the society’s auditor or by any associate of the society’s auditor (whether alone or through two or more persons acting together to secure or exercise control), but only if that control does not arise solely by virtue of the society’s auditor or any associate of the society’s auditor acting—

• (i) as an insolvency practitioner in relation to any person,

• (ii) in the capacity of a receiver, or a receiver or manager, of the property of a society or other body corporate, or

• (iii) as a judicial factor on the estate of any person;

• (b) any person who, or group of persons acting together which, has control of the society’s auditor;

• (c) any person using a trading name which is the same as or similar to a trading name used by the society’s auditor, but only if the society’s auditor uses that trading name with the intention of creating the impression of a connection between the auditor and that other person;

• (d) any person who is party to an arrangement with the society’s auditor, with or without any other person, under which costs, profits, quality control, business strategy or significant professional resources are shared.

• (3) Where the society’s auditor is a partnership, the following are also associates of the auditor—

• (a) any partner in the society’s auditor;

• (b) any body corporate which is in the same group as a body corporate which is a partner in the society’s auditor;

• (c) any body corporate of which a partner in the society’s auditor is a director;

• (d) any partnership which has a partner in common with the society’s auditor;

• (e) any body corporate which is in the same group as a body corporate which is a partner in a partnership which has a partner in common with the society’s auditor.

• (4) Where a society’s auditor is a body corporate (other than one which is also a partnership as defined in sub-paragraph (6)(d)), the following are also associates of the auditor—

• (a) any director of the society’s auditor;

• (b) any body corporate which is in the same group as a body corporate which is a director of the society’s auditor;

• (c) any body corporate which is in the same group as the society’s auditor;

• (d) any partnership in which any such body corporate which is in the same group as the society’s auditor is a partner;

• (e) any partnership in which a director of the society’s auditor is a partner;

• (f) any body corporate which has a director in common with the society’s auditor;

• (g) any body corporate which is in the same group as a body corporate which has a director in common with the society’s auditor.

• (5) A distant associate of a society’s auditor is a person who is an associate of that auditor by reason only that that person is an associate within one or more of—

• (a) sub-paragraph (2)(a) where the person in question is controlled by a distant associate of the society’s auditor and not by the auditor or by an associate who is not a distant associate;

• (b) sub-paragraph (3)(c), (d) or (e);

• (c) sub-paragraph (4)(e), (f) or (g).

• (6) For the purposes of this paragraph—

• (a) “acting as an insolvency practitioner” shall be construed in accordance with section 388 of the Insolvency Act 1986 or Article 3 of the Insolvency (Northern Ireland) Order 1989;

• (b) “director” includes any person occupying the position of director, by whatever name called;

• (c) “partner” includes a member of a limited liability partnership;

• (d) “partnership” includes a limited liability partnership and a partnership constituted under the law of a country or a territory outside the United Kingdom;

• (e) a reference to “a receiver, or a receiver or manager, of the property of a society or other body corporate” includes a receiver, or (as the case may be) a receiver or manager, of part only of that property;

• (f) a person able, directly or indirectly to control or materially to influence the operating and financial policy of another person shall be treated as having control of that other person; and

• (g) a body corporate is in the same group as another body corporate if one is a subsidiary of the other.

Interpretation

6

In this Schedule—

• “associate of the society” means—any subsidiary of the society, other than a subsidiary in respect of which severe long-term restrictions substantially hinder the exercise of rights of the society over the assets or management of that subsidiary, orany associated pension scheme;

• “associated pension scheme”, in relation to a building society, means a scheme for the provision of benefits for or in respect of directors or employees (or former directors or employees) of the society or any subsidiary of the society where—the benefits consist of or include any pension, lump sum, gratuity or other like benefit given or to be given on retirement or on death or in anticipation of retirement or, in connection with past service, after retirement or death, andeither—a majority of the trustees are appointed by, or by a person acting on behalf of the society or a subsidiary of the society, orthe society, or a subsidiary of the society, exercises a dominant influence over the appointment of the auditor (if any) of the scheme;

• “remuneration” includes payments in respect of expenses and benefits in kind;

• “subsidiary” means a subsidiary undertaking that is a body corporate.

Removal of auditor on improper grounds

6A

• (1) Where an auditor of a building society is removed from office , other than by order of the High Court made under paragraph 6ZA, an application may be made to the High Court under this paragraph.

• (2) The persons who may make such an application are—

• (a) any member of the society who was also a member at the time of the removal;

• (b) the FCA; and

• (c) if the society is a PRA-authorised person, the PRA.

• (3) If the court is satisfied that the removal was—

• (a) on grounds of divergence of opinion on accounting treatments or audit procedures, or

• (b) on any other improper grounds,

it may make such order as it thinks fit for giving relief in respect of the removal.

• (4) The court may, in particular—

• (a) declare that any resolution of the society removing an auditor, or appointing a new auditor in his place, is void;

• (b) require the directors of the society to re-appoint the auditor until the next general meeting of the society;

• (c) give directions as to the conduct of the society’s affairs in the future.

Duty of auditor to notify appropriate audit authority

8A

• (1) Where an auditor of a building society ceases for any reason to hold office, he must notify the appropriate audit authority.

• (2) The notice must—

• (a) inform the appropriate audit authority that he has ceased to hold office, and

• (b) if the auditor resigns, be accompanied by a copy of the auditor’s notice of resignation.

• (3) The notice required by this paragraph must also be accompanied by a statement of the reasons for his ceasing to hold office unless—

• (a) the auditor resigns, and

• (b) the notice of resignation contains a statement under paragraph 7(2)(b).

• (4) The auditor must comply with this paragraph—

• (a) if the auditor resigns, at the same time as he deposits his notice of resignation at the principal office of the building society;

• (b) in any other case, not later than the end of the period of fourteen days beginning with the date on which he ceases to hold office.

• (5) A person ceasing to hold office as auditor who fails to comply with this paragraph commits an offence.

• (6) If that person is a firm an offence is committed by—

• (a) the firm, and

• (b) every officer of the firm who is in default.

• (7) A person guilty of an offence under this paragraph is liable—

• (a) on conviction on indictment, to a fine;

• (b) on summary conviction, to a fine not exceeding the statutory maximum.

Duty of building society to notify appropriate audit authority

8B

• (1) Where an auditor ceases to hold office before the end of his term of office, the building society must notify the appropriate audit authority.

• (2) The notice must—

• (a) inform the appropriate audit authority that the auditor has ceased to hold office, and

• (b) be accompanied by—

• (i) a statement by the society of the reasons for his ceasing to hold office, or

• (ii) if the auditor resigns, and his notice of resignation contains a statement under paragraph 7(2)(b), a copy of that statement.

• (3) The society must give notice under this paragraph—

• (a) if the auditor resigns, not later than the end of the period of fourteen days beginning with the date on which the auditor’s notice of resignation is deposited at the society’s principal office;

• (b) in any other case, not later than the end of the period of fourteen days beginning with the date on which the auditor ceases to hold office.

• (4) If a building society fails to comply with this paragraph, an offence is committed by—

• (a) the society, and

• (b) every officer of the society who is in default.

• (5) A person guilty of an offence under this paragraph is liable—

• (a) on conviction on indictment, to a fine, and

• (b) on summary conviction, to a fine not exceeding the statutory maximum.

Interpretation

8C

• (1) In this Schedule—

• “appropriate audit authority” means—the Secretary of State, orif the Secretary of State has delegated functions under section 1252 of the Companies Act 2006 to a body whose functions include receiving the equivalent notice under section 522 or 523 of that Act, that body;

• “audit committee” means a body which performs— the functions referred to in—rule 7.1.3 of the Disclosure Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000; or rule 2.4 of the Audit Committee Part of the Rulebook made by the Prudential Regulation Authority under that Act; orequivalent functions;

• “Audit Regulation” means Regulation 537/2014 of the European Parliament and of the Council on specific requirements regarding statutory audit of public interest entities and repealing Commission Decision 2005/989/EC; and

• “competent authority” means the Financial Reporting Council Limited .

• (1A) For the purposes of the definition of “audit committee”, references to rules made by the Prudential Regulation Authority or the Financial Conduct Authority are to those rules as they have effect on IP completion day.

• (2) For the purposes of this Schedule, a person is auditor of a building society in respect of a financial year if the auditor is required to report on the accounts of the society for that financial year.

Application of winding up legislation to building societies.

Application of bank insolvency and administration legislation to building societies

Consequences of false declaration.

Provisions supplementary to sections 102B and 102C.

Amendments, repeals, revocations and transitional and saving provisions.

Amendments, repeals, revocations and transitional and saving provisions.

The matters for which provision is, subject to Part III of this Schedule, to be made are the following:

89A

• (1) On a petition for a winding up order or an application for an administration order in respect of a building society the court may, instead, make a building society insolvency order (under section 94 of the Banking Act 2009 as applied by section 90C below).

• (2) A building society insolvency order may be made under subsection (1) only—

• (a) on the application of the appropriate authority made with the consent of the Bank of England, or

• (b) on the application of the Bank of England.

90C

• (1) Parts 2 (Bank Insolvency) and 3 (Bank Administration) of the Banking Act 2009 shall apply in relation to building societies with any modifications specified in an order made under section 130 or 158 of that Act and with the modifications specified in subsection (2) below.

• (2) In the application of Parts 2 and 3 of that Act to building societies—

• (a) references to “bank” (except in the term “bridge bank” and the terms specified in paragraphs (b) and (c)) have effect as references to “building society”;

• (b) references to “bank insolvency”, “bank insolvency order”, “bank liquidation” and “bank liquidator” have effect as references to “building society insolvency”, “building society insolvency order”, “building society liquidation” and “building society liquidator”;

• (c) references to “bank administration”, “bank administration order” and “bank administrator” have effect as references to “building society special administration”, “building society special administration order” and “building society special administrator”.

90D

• (1) An application for an administration order in respect of a building society may not be determined unless the conditions below are satisfied.

• (2) A petition for a winding up order in respect of a building society may not be determined unless the conditions below are satisfied.

• (3) A resolution for voluntary winding up of a building society may not be passed unless the conditions below are satisfied.

• (4) An administrator of a building society may not be appointed unless the conditions below are satisfied.

• (5) Condition 1 is that the FCA , the Bank of England and, if the society is a PRA-authorised person, the PRA have been notified—

• (a) by the applicant for an administration order, that the application has been made,

• (b) by the petitioner for a winding up order, that the petition has been presented,

• (c) by the building society, that a resolution for voluntary winding up may be passed, or

• (d) by the person proposing to appoint an administrator, of the proposed appointment.

• (6) Condition 2 is that a copy of the notice complying with Condition 1 has been filed with the court (and made available for public inspection by the court).

• (7) Condition 3 is that—

• (a) the period of 7 days , beginning with the day on which the notice is received, has ended, or

• (b) both—

• (i) the Bank of England has informed the person who gave the notice that it does not intend to exercise a stabilisation power under Part 1 of the Banking Act 2009 in relation to the building society (and condition 5 has been met, if applicable), and

• (ii) each of the PRA and the Bank of England has informed the person who gave the notice that it does not intend to apply for a building society insolvency order (under section 95 of the Banking Act 2009 as applied by section 90C).

• (8) Condition 4 is that no application for a building society insolvency order is pending.

• (8A) Condition 5—

• (a) applies only if a resolution instrument has been made under section 12A of the Banking Act 2009 with respect to the building society in the three months ending with the date on which the Bank of England receives the notification under Condition 1, and

• (b) is that the Bank of England has informed the person who gave the notice that it consents to the insolvency procedure to which the notice relates going ahead.

• (9) Arranging for the giving of notice in order to satisfy Condition 1 can be a step with a view to minimising the potential loss to a building society’s creditors for the purpose of section 214 of the Insolvency Act 1986 (wrongful trading) or Article 178 (wrongful trading) of the Insolvency (Northern Ireland) Order 1989 as applied in relation to building societies by section 90 of, and Schedule 15 to, this Act.

• (10) Where the society is a PRA-authorised person and notice has been given under Condition 1 —

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) the PRA shall inform the person who gave the notice, within the period in Condition 3(a), whether it intends to apply for a building society insolvency order, ...

• (c) if the Bank of England decides to apply for a building society insolvency order or to exercise a stabilisation power under Part 1 of the Banking Act 2009, the Bank shall inform the person who gave the notice, within the period in Condition 3(a); and

• (d) if Condition 5 applies, the Bank of England must, within the period in Condition 3(a), inform the person who gave the notice whether or not it consents to the insolvency procedure to which the notice relates going ahead.

• (11) Where the society is not a PRA-authorised person and notice has been received under Condition 1

• (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (b) if the Bank of England decides to apply for a building society insolvency order or to exercise a stabilisation power under Part 1 of the Banking Act 2009, the Bank shall inform the person who gave the notice, within the period in Condition 3(a); and

• (c) if Condition 5 applies, the Bank of England must, within the period in Condition 3(a), inform the person who gave the notice whether or not it consents to the insolvency procedure to which the notice relates going ahead.

• (12) References in this section to the insolvency procedure to which the notice relates are to the procedure for the determination, resolution or appointment in question (see subsections (1) to (4)).

90E

• (1) In this section “the Disqualification Act” means the Company Directors Disqualification Act 1986.

• (2) In the Disqualification Act—

• (a) a reference to liquidation includes a reference to building society insolvency and a reference to building society special administration,

• (b) a reference to winding up includes a reference to making or being subject to a building society insolvency order and a reference to making or being subject to a building society special administration order,

• (c) a reference to becoming insolvent includes a reference to becoming subject to a building society insolvency order and a reference to becoming subject to a building society special administration order, and

• (d) a reference to a liquidator includes a reference to a building society liquidator and a reference to a building society special administrator.

• (3) For the purposes of the application of section 7A of the Disqualification Act (office-holder’s report on conduct of directors) to a building society which is subject to a building society insolvency order—

• (a) the “office-holder” is the building society liquidator,

• (b) the “insolvency date” means the date on which the building society insolvency order is made, and

• (c) subsections (9) to (11) are omitted.

• (4) For the purposes of the application of that section to a building society which is subject to a building society special administration order—

• (a) the “office-holder” is the building society special administrator,

• (b) the “insolvency date” means the date on which the building society special administration order is made, and

• (c) subsections (9) to (11) are omitted.

• (5) In the application of this section to Northern Ireland, references to the Disqualification Act are to the Company Directors Disqualification (Northern Ireland) Order 2002 and in subsections (3) and (4)—

• (a) the reference to section 7A of the Disqualification Act is a reference to Article 10A of that Order (office-holder’s report on conduct of directors), and

• (b) the reference to subsections (9) to (11) of that section is a reference to paragraphs (9) to (11) of that Article.

Signing of balance sheet: documents to be annexed.

Application of bank insolvency and administration legislation to building societies

Regulated terms etc: distributions and share rights.

Transfer of engagements.

Transfer regulations.

Consequences of false declaration.

Provisions supplementary to sections 102B and 102C.

Provisions supplementary to sections 102B and 102C.

Commencement.

The matters for which provision is, subject to Part III of this Schedule, to be made are the following:

115A

• (1) For the purposes of this Act, a person is to be taken to have agreed with a building society to access a document, information or facility on a web site if—

• (a) the person has been asked individually by the society to agree to access documents, information or facilities generally, or documents, information or facilities of the description in question, on a web site, and

• (b) the society has not received a response within the period of 28 days beginning with the date on which the society's request was received.

This is subject to subsections (2) to (4).

• (2) A person is not to be taken to have so agreed if the society's request—

• (a) did not state clearly what the effect of a failure to respond would be, or

• (b) was sent less than 12 months after a previous request made to the person for the purposes of this section in respect of the same or a similar description of document, information or facility.

• (3) A person who is taken to have made an agreement by virtue of subsection (1) may revoke the agreement.

• (4) Subsection (1) does not apply in relation to the following documents—

• (a) a statement required to be sent to members by paragraph 1(1) of Schedule 16 (statements in connection with proposed mergers);

• (b) a merger statement (within the meaning of Part 2 of that Schedule) required to be sent to members by paragraph 3 of that Schedule;

• (c) a transfer statement or transfer summary (within the meaning of Part 1 of Schedule 17) required to be sent to members by paragraph 4(1) or (2) of that Schedule;

• (d) a transfer proposal notification (within the meaning of Part 1A of Schedule 17) required to be sent to members by paragraph 5B(1) of that Schedule.

115B

• (1) Where a person has received a document or information from a building society otherwise than in hard copy form, the person is entitled to require the society to send the person a version of the document or information in hard copy form.

• (2) The society must send the document or information in hard copy form within 21 days of receipt of the request from the person.

• (3) The society may not make a charge for providing the document or information in that form.

• (4) Subsection (1) does not apply if the recipient of the document or information is the FCA or the PRA.

• (5) A building society that fails to comply with this section is to be treated as having contravened rules made under section 137A of the Financial Services and Markets Act 2000.

• (6) For the purposes of this section a person is treated as receiving a document or information from a building society if—

• (a) the society is required by this Act to send the document or information to the person, and

• (b) the requirement to send it is treated as satisfied.

• (7) For the purposes of this section—

• (a) a document or information is sent or supplied in hard copy form if it is sent or supplied in a paper copy or similar form capable of being read, and

• (b) a document or information can be read only if it can be read with the naked eye, or (to the extent that it consists of images) it can be seen with the naked eye.

115C

• (1) A document or information that is sent or supplied by a building society otherwise than in hard copy form or electronically or by means of a web site is validly sent or supplied if it is sent or supplied in a form or manner that has been agreed by the intended recipient.

• (2) For the purposes of this section “hard copy form” is to be read in accordance with section 115B(7).

117A

• (1) A building society may by notice given to the FCA specify a new year-end date.

• (2) A notice given under subsection (1) has effect in relation to—

• (a) the financial year in which the notice is given (“the current financial year”), and

• (b) subsequent financial years.

• (3) The notice must state whether the current financial year—

• (a) is to be shortened, so as to come to an end on the first occasion on which the new year-end date falls or fell after the beginning of the current financial year, or

• (b) is to be extended, so as to come to an end on the second occasion on which that date falls or fell after the beginning of the current financial year.

• (4) A notice extending a building society's financial year is not effective if given less than 5 years after the end of an earlier financial year of the society that was extended under this section.

• (5) A financial year of a building society may not be extended so as to exceed 18 months and a notice under subsection (1) is ineffective if the current financial year as extended in accordance with the notice would exceed that limit.

The matters for which provision is, subject to Part III of this Schedule, to be made are the following:

1A

• (1) This paragraph applies for the purposes of paragraph (a) of the definition of “money purchase benefits” in paragraph 1(2).

• (2) A benefit other than a pension in payment falls within this paragraph if its rate or amount is calculated solely by reference to assets which (because of the nature of the calculation) must necessarily suffice for the purposes of its provision to or in respect of the director.

• (3) A benefit which is a pension in payment falls within this paragraph if—

• (a) its provision to or in respect of the director is secured by an annuity contract or insurance policy made or taken out with an insurer, and

• (b) at all times before coming into payment the pension was a benefit falling within this paragraph by virtue of sub-paragraph (2).

• (4) For the purposes of sub-paragraph (2) it is immaterial if the calculation of the rate or amount of the benefit includes deductions for administrative expenses or commission.

• (5) In this paragraph references to a pension do not include income withdrawal or dependants' income withdrawal (within the meaning of paragraphs 7 and 21 of Schedule 28 to the Finance Act 2004).

90B

• (1) The Treasury may by order make provision for the purpose of ensuring that, on the winding up, or dissolution by consent, of a building society, any assets available for satisfying the society's liabilities to creditors or to shareholders are applied in satisfying those liabilities pari passu.

• (2) Liabilities to creditors do not include—

• (a) liabilities in respect of subordinated deposits;

• (b) liabilities in respect of preferential debts;

• (c) any other category of liability which the Treasury specifies in the order for the purposes of this paragraph.

• (3) Liabilities to shareholders do not include liabilities in respect of deferred shares.

• (4) A preferential debt is a debt which constitutes a preferential debt for the purposes of any of the enactments specified in paragraph 1 of Schedule 15 to this Act (or which would constitute such a debt if the society were being wound up).

• (5) An order under this section may—

• (a) make amendments of this Act;

• (b) make different provision for different purposes;

• (c) make such consequential, supplementary, transitional and saving provision as appears to the Treasury to be necessary or expedient.

• (6) The power to make an order under this section is exercisable by statutory instrument but no such order may be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

1A

In this Schedule—

• “deposit” means rights of the kind described in—paragraph 22 of Schedule 2 to the Financial Services and Markets Act 2000 (deposits); orsection 1(2)(b) of the Dormant Bank and Building Society Accounts Act 2008 (balances transferred under that Act to authorised reclaim fund); and

• “relevant deposit” means—an “eligible deposit” within the meaning given by paragraph 15C(1) of Schedule 6 to the Insolvency Act 1986 (categories of preferential debts) or a deposit of the kind mentioned in paragraph 15BB of that Schedule; oran “eligible deposit” within the meaning given by paragraph 21(1) of Schedule 4 to the Insolvency (Northern Ireland) Order 1989 (categories of preferential debts) or a deposit of the kind mentioned in paragraph 20 of that Schedule.

6A

In the following provisions of the Act a reference to the creditors, general creditors or unsecured creditors of a company includes a reference to every shareholding member of the building society to whom a sum due from the society in relation to the member’s shareholding is due in respect of a deposit—

• (a) subsection (1) of section 143 (general functions of liquidator in winding up by the court);

• (b) subsection (3) of section 149 (debts due from contributory to company);

• (c) subsection (4) of section 168 (supplementary powers (England and Wales));

• (d) subsection (2)(b) of section 175 (preferential debts (general provision));

• (e) subsection (1) of section 176ZA (payment of expenses of winding up (England and Wales)); ...

• (f) subsections (3)(b) and (5)(a) of section 176A (share of assets for unsecured creditors);

• (g) subsection (1)(e) of section 391O (direct sanctions orders);

• (h) subsection (5) of section 391Q (direct sanctions order: conditions); and

• (i) subsection (3)(e) of section 391R (direct sanctions direction instead of order).

23A

Section 143 (general functions of liquidator in winding up by the court) of the Act has effect as if after subsection (1) there were inserted—

(1A) Subject to the provisions of Part 4 relating to preferential payments, a building society’s property in the winding up shall be applied in satisfaction of the society’s liabilities to creditors pari passu and, subject to that application, in accordance with the rules of the society. (1B) In subsection (1A) the reference to the society’s liabilities to creditors includes a reference to the society’s liabilities to shareholding members of the society in respect of deposits which are not relevant deposits.

34A

In the following provisions a reference to the creditors, general creditors or unsecured creditors of a company includes a reference to every shareholding member of the building society to whom a sum due from the society in relation to the member’s shareholding is due in respect of a deposit—

• (a) paragraph (1) of Article 121 (general functions of liquidator in winding up by the High Court);

• (b) paragraph (3) of Article 127 (debts due from contributory to company);

• (c) paragraph (4) of Article 143 (supplementary powers);

• (d) paragraph (2)(b) of Article 149 (preferential debts (general provision));

• (e) paragraph (1) of Article 150ZA (payment of expenses of winding up); ...

• (f) paragraphs (3)(b) and (5)(a) of Article 150A (share of assets for unsecured creditors);

• (g) paragraph (1)(e) of Article 350O (direct sanctions orders);

• (h) paragraph (5) of Article 350Q (direct sanctions order: conditions); and

• (i) paragraph (3)(e) of Article 350R (direct sanctions direction instead of order).

50A

Article 121 (general functions of liquidator in winding up by the High Court) of the Order has effect as if after paragraph (1) there were inserted—

(1A) Subject to the provisions of Part V relating to preferential payments, a building society’s property in the winding up shall be applied in satisfaction of the society’s liabilities to creditors pari passu and, subject to that application, in accordance with the rules of the society. (1B) In paragraph (1A) the reference to the society’s liabilities to creditors includes a reference to the society’s liabilities to shareholding members of the society in respect of deposits which are not relevant deposits.

The lending limit.

Discharge of mortgages.

The funding limit.

Raising funds and borrowing.

Rights of appeal.

Signature of auditors' report

Names to be stated in copies of auditor’s report filed or published

Acquisition or establishment of a business.

Provisions supplementary to sections 102B and 102C.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3B

• (1) This paragraph applies to the appointment of an auditor or auditors under section 77, where the building society has an audit committee.

• (2) Before an appointment to which this paragraph applies is made—

• (a) the audit committee of the building society must make a recommendation to the directors in connection with the appointment, and

• (b) the directors must propose an auditor or auditors for appointment ...

• (3) Before the audit committee makes a recommendation or the directors make a proposal under sub-paragraph (2), the committee... must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation.

• (4) The audit committee must in its recommendation—

• (a) identify its first and second choice candidates for appointment, drawn from those auditors who have participated in a selection procedure under sub-paragraph (3),

• (b) give reasons for the choices so identified,

• (c) state that—

• (i) the recommendation is free from influence by a third party, and

• (ii) no contractual term of the kind mentioned in Article 16(6) of the Audit Regulation has been imposed on the building society.

• (5) The directors must include in their proposal—

• (a) the recommendation made by the audit committee in connection with the appointment, and

• (b) if the proposal of the directors departs from the preference of the audit committee—

• (i) a recommendation for a candidate or candidates for appointment drawn from those auditors who have participated in a selection procedure under sub-paragraph (3), and

• (ii) the reasons for not following the audit committee’s recommendation.

• (6) Where the audit committee recommends re-appointment of the society’s existing auditor or auditors, and the directors are in agreement, sub-paragraphs (3) and (4)(a) and (b) do not apply.

3C

• (1) This paragraph applies to the appointment of an auditor or auditors under section 77, where the building society does not have an audit committee.

• (2) Before an appointment to which this paragraph applies is made the directors must propose an auditor or auditors for appointment.

• (3) Before the directors make a proposal under sub-paragraph (2), they must carry out a selection procedure in accordance with Article 16(3) of the Audit Regulation , from which their proposed auditor or auditors must be drawn .

• (4) Sub-paragraph (3) does not apply in relation to a proposal to re-appoint the society’s existing auditor or auditors.

Tenure

5A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Application to court to remove auditor from office

5B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6ZA

• (1) The competent authority may apply to the High Court for an order removing an auditor of a building society from office if the authority considers that there are proper grounds for removing the auditor from office.

• (2) The members of a building society may apply to the High Court for an order removing an auditor of the building society from office if the applicant or applicants consider that there are proper grounds for removing the auditor from office.

• (3) If the court is satisfied, on hearing an application under sub-paragraph (1), that there are proper grounds for removing the auditor from office, it may make an order removing the auditor from office.

• (4) If the court is satisfied, on hearing an application under sub-paragraph (2), that—

• (a) the applicants represent in total—

• (i) not less than 5% of the voting rights of all the members having a right to vote at a general meeting of the building society, or

• (ii) not less than 5% in nominal value of the amount standing to the credit of shares in a building society as shown by the latest balance sheet, and

• (b) there are proper grounds for removing the auditor from office,

the court may make an order removing the auditor from office.

• (5) For the purposes of this paragraph, divergence of opinions on accounting treatments or audit procedures are not to be taken to be proper grounds for removing an auditor from office.

The matters for which provision is, subject to Part III of this Schedule, to be made are the following:

27A

Sections 42 to 49 of the Act (administrative receivers) are omitted.

27B

Subsection (1) of section 51 of the Act (power to appoint receiver), as applied to a building society, has effect as if for the words “an incorporated company (whether a company registered under the Companies Act 2006 or not)” there were substituted “a building society”.

27C

Subsection (3) of section 59 of the Act (priority of debts), as applied to a building society, has effect as if the reference to ordinary creditors included a reference to shareholding members of the society in respect of deposits which are not relevant deposits.

27D

Subsection (1) of section 67 of the Act (report by receiver), as applied to a building society, has effect as if—

• (a) the reference to the Financial Conduct Authority included a reference to the scheme manager; and

• (b) in paragraph (d) the reference to other creditors included a reference to shareholding members of the society in respect of deposits which are not relevant deposits.

27E

Subsection (1) of section 70 of the Act (interpretation for Chapter 2), as applied to a building society, has effect as if—

• (a) in the definition of “company” for the words “an incorporated company (whether or not a company registered under the Companies Act 2006)” there were substituted “a building society”; and

• (b) the definition of “the register” were omitted.

27F

Chapter 4 of Part 3 of the Act (prohibition of appointment of administrative receiver), as applied to a building society, has effect as if—

• (a) in section 72A (floating charge holder not to appoint administrative receiver)—

• (i) in subsections (1) and (2) the word “qualifying” and in subsection (3) the definition of “holder of a qualifying floating charge in respect of a company’s property” were omitted; and

• (ii) subsections (4)(a), (5) and (6) were omitted; and

• (b) sections 72B to 72H (exceptions to prohibition) were omitted.

50

Articles 52 to 59 of the Order (administrative receivers) are omitted.

51

Article 59A of the Order (floating charge holder not to appoint administrative receiver), as applied to a building society, has effect as if—

• (a) in paragraph (1) the word “qualifying” were omitted; and

• (b) paragraphs (2), (3)(a), (4) and (5) were omitted.

52

Articles 59B to 59J of the Order (exceptions to prohibition) are omitted.

Insolvency practitioners: their qualification and regulation

33A

Section 390 of the Act (persons not qualified to act as insolvency practitioners) has effect as if for subsection (2) there were substituted—

(2) A person is not qualified to act as an insolvency practitioner in relation to a building society at any time unless at that time the person is fully authorised to act as an insolvency practitioner or partially authorised to act as an insolvency practitioner only in relation to companies.

.

33B

• (1) In the following provisions of the Act, in a reference to authorisation or permission to act as an insolvency practitioner in relation to (or only in relation to) companies, the reference to companies has effect without the modification in paragraph 3(1)(a) above—

• (a) sections 390A and 390B(1) and (3) (authorisation of insolvency practitioners); and

• (b) sections 391O(1)(b) and 391R(3)(b) (court sanction of insolvency practitioners in public interest cases).

• (2) In sections 391Q(2)(b) (direct sanctions order: conditions) and 391S(3)(e) (power for Secretary of State to obtain information) of the Act the reference to a company has effect without the modification in paragraph 3(1)(a) above.

Insolvency practitioners: their qualification and regulation

55F

Article 349 (persons not qualified to act as insolvency practitioners) has effect as if for paragraph (2) there were substituted—

(2) A person is not qualified to act as an insolvency practitioner in relation to a building society at any time unless at that time the person is fully authorised to act as an insolvency practitioner or partially authorised to act as an insolvency practitioner only in relation to companies.

.

55G

• (1) In the following provisions of the Order, in a reference to authorisation or permission to act as an insolvency practitioner in relation to (or only in relation to) companies, the reference to companies has effect without the modification in paragraph 3(1)(a) above—

• (a) Articles 349A and 349B(1) and (3) (authorisation of insolvency practitioners); and

• (b) Articles 350O(1)(b) and 350R(3)(b) (court sanction of insolvency practitioners in public interest cases).

• (2) In Articles 350Q(2)(b) (direct sanctions order: conditions) and 350S(3)(e) (power for Department to obtain information) the reference to a company has effect without the modification in paragraph 3(1)(a) above.

Insolvency practitioners: their qualification and regulation

27G

Section 390 of the Act (persons not qualified to act as insolvency practitioners) has effect as if for subsection (2) there were substituted—

(2) A person is not qualified to act as an insolvency practitioner in relation to a building society at any time unless at that time the person is fully authorised to act as an insolvency practitioner or partially authorised to act as an insolvency practitioner only in relation to companies.

.

27H

• (1) In the following provisions of the Act, in a reference to authorisation or permission to act as an insolvency practitioner in relation to (or only in relation to) companies the reference to companies has effect without the modification in paragraph 2(1)(a) above—

• (a) sections 390A and 390B(1) and (3) (authorisation of insolvency practitioners); and

• (b) sections 391O(1)(b) and 391R(3)(b) (court sanction of insolvency practitioners in public interest cases).

• (2) In sections 391Q(2)(b) (direct sanctions order: conditions) and 391S(3)(e) (power for Secretary of State to obtain information) of the Act the reference to a company has effect without the modification in paragraph 2(1)(a) above.

27I

In sections 391O, 391Q and 391R of the Act a reference to the creditors of a company includes a reference to every shareholding member of the building society to whom a sum due from the society in relation to the member’s shareholding is due in respect of a deposit.

Insolvency practitioners: their qualification and regulation

53

Article 349 of the Order (persons not qualified to act as insolvency practitioners) has effect as if for paragraph (2) there were substituted—

(2) A person is not qualified to act as an insolvency practitioner in relation to a building society at any time unless at that time the person is fully authorised to act as an insolvency practitioner or partially authorised to act as an insolvency practitioner only in relation to companies.

.

54

• (1) In the following provisions of the Order, in a reference to authorisation or permission to act as an insolvency practitioner in relation to (or only in relation to) companies the reference to companies has effect without the modification in paragraph 2(1)(a) above—

• (a) Articles 349A and 349B(1) and (3) (authorisation of insolvency practitioners); and

• (b) Articles 350O(1)(b) and 350R(3)(b) (court sanction of insolvency practitioners in public interest cases).

• (2) In Articles 350Q(2)(b) (direct sanctions order: conditions) and 350S(3)(e) (power for Department to obtain information) of the Order the reference to a company has effect without the modification in paragraph 2(1)(a) above.

55

In Articles 350O, 350Q and 350R of the Order a reference to the creditors of a company includes a reference to every shareholding member of the building society to whom a sum due from the society in relation to the member’s shareholding is due in respect of a deposit.

Acquisition or establishment of a business.

Protection of interests of beneficiaries in the case of trustee account holders.

Provisions supplementary to sections 102B and 102C.

Cancellation of registration.

3D

• (1) A person who has been, or will have been, auditor of a building society in respect of every financial year comprised in the maximum engagement period may not be appointed as auditor of the society in respect of any financial year which begins within the period of 4 years beginning with the day after the last day of the last financial year of the maximum engagement period.

• (2) A person who is a member of the same network as the auditor mentioned in sub-paragraph (1) may not be appointed as auditor of the society in respect of any financial year which begins within the period of 4 years mentioned in that sub-paragraph.

• (3) In this paragraph “network” means an association of persons, other than a firm, co-operating in audit work by way of—

• (a) profit-sharing;

• (b) cost-sharing;

• (c) common ownership, control or management;

• (d) common quality control policies and procedures;

• (e) common business strategy; or

• (f) use of a common name.

3E

• (1) Where a person is auditor of a building society in respect of consecutive financial years, the maximum engagement period of the person as auditor of the society—

• (a) begins with the first of those years (see the appropriate entry in the first column of the following Table), and

• (b) ends with the financial year specified in the corresponding entry in the second column of the Table:

First financial year of the maximum engagement period	Last financial year of the maximum engagement period
A financial year of the society beginning before 17 June 1994	The last financial year of the society to begin before 17 June 2020.
A financial year of the society beginning—(a) on or after 17 June 1994, and(b) before 17 June 2003	The last financial year of the society to begin before 17 June 2023.
A financial year of the society beginning—(a) on or after 17 June 2003, and(b) before 17 June 2016	No qualifying selection procedureWhere neither the first financial year of the maximum engagement period nor any subsequent financial year is one in respect of which the auditor has been appointed following the carrying out of a qualifying selection procedure, the later of-(a) the last financial year of the society to begin before 17 June 2016, and(b) the last financial year of the society to begin within the period of 10 years beginning with the first day of the first financial year of the maximum engagement period.No qualifying selection procedure within 10 yearsWhere the last day of the last financial year of the society to begin within the period of 10 years beginning with the first day of the last financial year of the society in respect of which the auditor was appointed following a qualifying selection procedure is before 17 June 2016—(a) the last financial year of the society to begin before 17 June 2016, unless(b) the auditor is appointed following a qualifying selection procedure for the first financial year of the society to begin on or after 17 June 2016, in which case it is the last financial year of the society to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.Qualifying selection procedure within 10 yearsIn any other case, the earlier of-(a) the last financial year of the society to begin within the period of 10 years beginning with the first day of the last financial year of the society in respect of which the auditor was appointed following a qualifying selection procedure, and(b) the last financial year of the society to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.
A financial year of the society beginning on or after 17 June 2016	The earlier of—(a) the last financial year of the society to begin within the period of 10 years beginning with the first day of the last financial year of the society in respect of which the auditor was appointed following a qualifying selection procedure, and(b) the last financial year of the society to begin within the period of 20 years beginning with the first day of the first financial year of the maximum engagement period.

• (2) Where the first financial year of the maximum engagement period begins on or after 17 June 2003, the maximum engagement period may be extended by a period of no more than 2 years with the approval of the competent authority.

• (3) Such approval may be given by the competent authority only if it is satisfied that exceptional circumstances exist.

• (4) Where the competent authority gives its approval as mentioned in sub-paragraph (2)—

• (a) the second column of the Table in sub-paragraph (1) has effect with the necessary modifications, and

• (b) the first appointment to be made after the end of the period as so extended must be made following a qualifying selection procedure.

• (5) In this paragraph “qualifying selection procedure” means—

• (a) in the case of an appointment in respect of a financial year beginning on or after 17 June 2016 made after the Statutory Auditors and Third Country Auditors Regulations 2017 come into force—

• (i) if the society has an audit committee, a selection procedure that complies with the requirements of paragraph 3B(3) and (4)(a) and (b), and

• (ii) if the society does not have an audit committee, a selection procedure that complies with the requirements of Article 16(3) of the Audit Regulation;

• (b) in any other case, a selection procedure that substantially meets the requirements of Article 16(2) to (5) of the Audit Regulation as it had effect immediately before IP completion day, having regard to the circumstances at the time (including whether the society had an audit committee).

Application to court to remove auditor from office

The matters for which provision is, subject to Part III of this Schedule, to be made are the following:

3DA

• (1) If—

• (a) a building society appoints, or purports to appoint, an auditor or auditors, and

• (b) the appointment or purported appointment is made in breach of paragraph 3B, 3C or 3D (requirements applying to appointment of auditors),

the appropriate authority may appoint another auditor or auditors in place of the auditor or auditors referred to in paragraph (a).

• (2) The breach of paragraph 3B, 3C or 3D does not invalidate any report made under this Part by the auditor or auditors on the building society’s annual reports or accounts before the auditor or auditors are replaced under sub-paragraph (1) of this paragraph.

• (3) But where the breach in question is a breach of paragraph 3D, sections 1248 and 1249 of the Companies Act 2006 (Secretary of State’s power to require second audit for companies) apply as if—

• (a) the building society were a company;

• (b) references to the Secretary of State were to the appropriate audit authority;

• (c) references to the registrar of companies were to the FCA and, if the society is a PRA-authorised person, to the PRA;

• (d) the auditor was not an appropriate person, or the auditors were not appropriate persons, for the period during which the audit was conducted;

• (e) section 1248(9) was omitted.

• (4) Within one week of becoming aware of the breach of paragraph 3B, 3C or 3D, the building society must give notice to the appropriate authority that the power under sub-paragraph (1) of this paragraph has become exercisable.

• (5) If the building society fails to give the notice required by sub-paragraph (4), the society shall be liable on summary conviction—

• (a) to a fine not exceeding level 3 on the standard scale; and

• (b) in the case of a continuing offence, to an additional fine not exceeding £40 for every day during which the offence continues;

and so shall any officer who is also guilty of the offence.

6ZA

Parts 4, 6, 7 and 12 of, and Schedule 10 to, the Act, in their application to building societies, have effect without the amendments of those Parts and that Schedule made by—

• (a) section 122 of the Small Business, Enterprise and Employment Act 2015 (abolition of requirements to hold meetings: company insolvency);

• (b) section 124 of that Act (ability for creditors to opt not to receive certain notices: company insolvency); and

• (c) Part 1 of Schedule 9 to that Act (sections 122 to 125: further amendments).

6A

Parts 1, 3, 6, 7 and 12 of the Act, in their application to building societies, have effect without the amendments of those Parts made by—

• (a) section 122 of the Small Business, Enterprise and Employment Act 2015 (abolition of requirements to hold meetings: company insolvency);

• (b) section 124 of that Act (ability for creditors to opt not to receive certain notices: company insolvency); and

• (c) Part 1 of Schedule 9 to that Act (sections 122 to 125: further amendments).

Protection of supplies

32A

Section 233B of the Act (protection of supplies of goods and services) does not apply.

Protection of supplies

55DA

Article 197B (protection of supplies of goods and services) does not apply.

Protection of supplies

27FA

Section 233B of the Act (protection of supplies of goods and services) is omitted.

Protection of supplies

52A

Article 197B of the Order (protection of supplies of goods and services) is omitted.

Restriction on creation of floating charges.

Advances secured on land.

Class 1 and class 2 advances: supplementary provisions.

Power to make prohibition orders.

Powers to petition for winding up etc.

Power to determine building society’s powers.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rights of appeal.

Determination of appeals.

Prohibition of tax-free payments to directors.

Building society insolvency as alternative order

Amalgamations.

Maximum engagement period: transitional arrangements

The matters for which provision is, subject to Part III of this Schedule, to be made are the following:

Maximum engagement period: transitional arrangements

34A

• (1) Nothing in this Part of this Schedule is to be taken to preclude the holding and conducting of a meeting of a building society in such a way that persons who are not present together at the same place may by electronic means attend, speak and vote at it.

• (2) The use of electronic means for the purpose of enabling participation in such a meeting may be made subject only to such requirements and restrictions as are—

• (a) necessary to ensure the identification of those attending and the security of the electronic communication, and

• (b) proportionate to the achievement of those objectives.

Directors: supplementary provisions as to elections, etc.

Amalgamations.

Transfer of engagements.

Protection of interests of beneficiaries in the case of trustee account holders.

Limited power to anticipate future statutory instrument powers.

Maximum engagement period: transitional arrangements

The matters for which provision is, subject to Part III of this Schedule, to be made are the following: