Legalize / United Kingdom / Public General Act

Building Societies Act 1986

Type Public General Act

Publication 1986-07-25

Last updated 2025-01-06

State In force

Department Statute Law Database

Source legislation.gov.uk

articles 16

Reform history JSON API

(7) The inspectors may, and if so directed by the body which appointed the inspectors shall, make interim reports to the body which appointed the inspectors , but they may at any time in the course of the investigation, without making an interim report, inform the body which appointed the inspectors of matters coming to their knowledge as a result of the investigation tending to show that an offence has been committed.

(8) The body which appointed the inspectors may, if it thinks fit—

(a) send a copy of any report made by the inspectors to the body whose affairs are or were the subject of the investigation;

(b) furnish a copy of any such report on request . . . to—

(i) any member of the body whose affairs are or were the subject of the investigation;

(ii) the auditors of that body;

(iii) any person whose conduct is referred to in the report;

(iv) any other person whose financial interests appear to the body which appointed the inspectors to be affected by matters dealt with in the report, whether as creditor or otherwise; and

(8A) The body which appointed the inspectors may charge a reasonable fee for furnishing to any person a copy of a report under subsection (8)(b) above.

(9) A copy of a report of inspectors appointed under section 56 to hold an investigation under that section, certified by the body which appointed the inspectors to be a true copy, is admissable in any legal proceedings as evidence of the opinion of the inspectors in relation to any matter contained in the report; and a document purporting to be such a certificate shall be received in evidence and be deemed to be such a certificate, unless the contrary is proved.

(10) The body which appointed the inspectors shall be entitled to be repaid the expenses of the investigation defrayed by it under section 56(6)(d) as provided in the following paragraphs, that is to say—

(a) by the applicants for the investigation, to such extent (if any) as the body which appointed the inspectors may direct;

(c) by any person convicted of an offence in proceedings instituted as a result of the investigation, to such extent (if any) as the court by or before which he was convicted may order;

and a person liable under any one of paragraphs (a) to (c) above is entitled to contribution from any other person liable under the same paragraph, according to the amount of their respective liabilities under it.

(11) In the application of this section to a building society whose principal office is in Scotland, any reference to the High Court shall be read as a reference to the Court of Session.

Part VII — Management of Building Societies

Directors and other officers

Directors: number

58

(1) Every building society shall have at at least two directors.

(2) One of the directors shall be appointed to be chairman of the board of directors.

Chief executive and secretary

59

(1) Every building society shall have a chief executive, that is to say, a person who is employed by the society and who either alone or jointly with one or more other persons, is or will be responsible under the immediate authority of the directors for the conduct of the business of the society.

(2) Every building society shall have a secretary.

(3) The offices of chief executive and secretary of a building society may be held by the same person.

(4) The chief executive and the secretary of a building society shall be appointed by the directors of the society.

(5) The directors of a building society shall, as regards the appointment of the secretary or the chief executive of the society, take all reasonable steps to secure that the person appointed is a person who has the requisite knowledge and experience to discharge the functions of his office.

(6) Where a person becomes or ceases to be the chief executive of a building society, the society shall within one month give notice of that fact to the FCA , stating the person’s full name and address and the date on which he became, or ceased to be, chief executive; and the FCA shall record the person’s name and the date on which he began to hold, or, as the case may be, ceased to hold office, in the public file of the society.

(7) Anything required or authorised to be done by or to the secretary or chief executive of a building society may, if the office is vacant or there is for any other reason no secretary or chief executive capable of acting, be done by or to any assistant or deputy secretary or assistant or deputy chief executive, as the case may be, or, if there is no assistant or deputy capable of acting, by or to any officer of the society authorised generally or specially for that purpose by the directors.

Directors: elections and retirement

60

(1) Except in so far as they may be co-opted by virtue of subsection (13) below, the directors of a building society must be elected to office, either—

(a) on a poll taken at the annual general meeting of the society, or

(b) by postal or electronic ballot of the members conducted during that part of the financial year of the society which precedes the date on which the annual general meeting is held,

as the rules provide.

(1A) Where directors of a building society are to be elected to office on a poll taken at the annual general meeting of the society, a form for the appointment of a proxy shall be sent to each person entitled to notice of the meeting.

(2) The persons entitled to vote in an election of directors of a building society are those members of the society who, on the voting date, are entitled to vote on an ordinary resolution of the society.

(3) Where, in the case of an election of directors of a building society, there are more candidates than vacancies to be filled by the election, a person entitled to vote in the election—

(a) shall have one vote in respect of every vacancy, but

(b) cannot be required to cast all or any of his votes.

(3A) Where, in the case of an election of directors of a building society, there are not more candidates than vacancies to be filled by the election—

(a) a person entitled to vote in the election shall have one vote in respect of every candidate, but cannot be required to cast all or any of his votes;

(b) each vote shall be capable of being cast either for or against the candidate concerned; and

(4) Subject to subsections (4A) ... and (9) below and to paragraph 5(3) of Schedule 2 to this Act, any natural person is eligible to be elected a director of a building society.

(4A) A person in relation to whom there is in force a prohibition order made under section 56(2) of the Financial Services and Markets Act 2000 shall not be eligible to be elected as a director of a building society.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) The rules of a building society may impose, as a condition of a person’s eligibility to be or to remain a director of the society, a requirement that he shall hold beneficially shares in the society not less in value than the amount prescribed by the rules, but the minimum holding to be required shall not exceed £1,000 or such other amount as may be substituted for it by order of the Treasury under this subsection.

(10) The rules of a building society may impose, as conditions of the validity of a person’s nomination for election as a director, requirements as to—

(a) the minimum number of members who must join in nominating him,

(b) their qualifications as respects length of membership and the value of their shares or the amount of their mortgage debt;

but no other requirements; and rules made by virtue of this subsection must comply with section 61.

(10A) A nomination of a candidate for election as a director of a building society—

(a) may be made at any time; but

(b) if made after the closing date for the nomination of candidates for the next election of directors, shall be carried forward (unless the candidate otherwise requires) as a nomination for the next election of directors after that;

and in this subsection and section 61 “the closing date for the nomination of candidates”, in relation to an election of directors, means the last day of the last financial year to end before the voting date.

(11) A director of a building society shall retire from office—

(a) in any case not provided for by ... rules under section 61(10), at the third annual general meeting of the society following the date of his election, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

subject ... to any provision for his earlier retirement on the grounds of ceasing to hold the requisite shares in the society contained in the rules of the society.

(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(13) If the rules of a building society so provide, the directors for the time being may appoint as additional directors or to fill any vacancy on the board of directors any person who—

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

(b) appears to them to be fit and proper to be a director.

not being a person who, having been nominated for election as a director at any election held within the preceding twelve months, was not elected as a director.

(14) A person who is co-opted under subsection (13) above shall cease to hold office at the end of the permitted period unless he is elected as a director of the society in accordance with this section within that period.

(15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(16) The power of the Treasury to make an order under subsection (9) above—

(a) includes power to make such transitional provision as they consider necessary or expedient, and

(b) shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(17) In this section—

“ordinary resolution” means a resolution which will be effective without being passed as a special resolution or borrowing members’ resolution;

“permitted period”, in relation to a co-opted director, has the meaning given by section 61(12); and

“the voting date” means—in the case of an election at a meeting, the date of the meeting, except where paragraph (c) below applies;in the case of an election conducted by postal ballot or by electronic ballot in the case of which not all the voting is electronic (within the meaning of paragraph 33A of Schedule 2), the date which the society specifies as the final date for the receipt of completed ballot papers;in the case of an election conducted by electronic ballot in which all the voting is electronic voting (within the meaning of that paragraph), the date which the society specifies as the final date for registering votes;in a case where a member appoints a proxy to vote at the meeting for him, the date which the society specifies as the final date for receipt of appointments of proxies to vote at the election;

and, for the purposes of this Act, the date of a person’s election to office as a director of a building society, in a case where the rules provide for election by postal or electronic ballot, is the date of the meeting at which the declaration of the result of the ballot is made.

Directors: supplementary provisions as to elections, etc.

61

(1) Rules made under section 60(10)(a), in order to comply with this section, must not require—

(a) in the case of a society whose total commercial assets do not exceed £100 million, more than 50 members;

(b) in the case of a society whose total commercial assets exceed £100 million but do not exceed £250 million, more than 100 members;

(c) in the case of a society whose total commercial assets exceed £250 million but do not exceed £1,000 million, more than 150 members;

(d) in the case of a society whose total commercial assets exceed £1,000 million but do not exceed £5,000 million, more than 200 members; and

(e) in the case of a society whose total commercial assets exceed £5,000 million, more than 250 members,

to join in nominating a person for election as a director.

(2) Rules under section 60(10)(b), in order to comply with this section, must not require a nominating member—

(a) to have been a member for more than two years before the date of the nomination; or

(b) if he claims eligibility as a shareholding member, to hold, or to have held at any time during that period, shares in the society to a value greater than £200; or

(c) if he claims eligibility as a borrowing member, to owe to the society, or to have owed to the society at any time during that period, a mortgage debt of an amount greater than £200.

(3) Rules made under section 60(10)(c), in order to comply with this section—

(a) must not require more than £500 to be deposited with the society;

(b) must not require the money to be deposited before the date which, under the rules, is the closing date for the nomination of candidates for the election; and

(i) not less than 5 per cent. of the total number of votes cast for all the candidates in the election; or

(ii) not less than 20 per cent. of the number of votes cast for the candidate who is elected with the smallest number of votes.

(3A) In subsection (1) above “total commercial assets”, in relation to a building society, means the difference between the total assets of the society as shown in the relevant accounts and the aggregate of—

(a) the liquid assets of the society as shown in those accounts in pursuance of regulations under section 72C or 72G, or in accordance with UK-adopted international accounting standards as appropriate; and

(b) the fixed assets of the society as so shown;

and in this subsection “the relevant accounts” means the accounts which, immediately before the closing date for the nomination of candidates, were the accounts last prepared by the society under section 72A or 72E and “liquid assets” and “fixed assets”, in the case of societies which produce IAS individual accounts or IAS group accounts, have the same meaning as given in section 6(16).

(4) The Treasury may, by order, substitute—

(a) for any amount or number specified in subsection (1) above;

(b) for any amount specified in subsection (2) above; or

such other amount, number or percentage as they think appropriate; and the Treasury may by order vary subsection (3A) above by adding to or deleting from it any provision or by varying any provision contained in it.

(5) The power to make orders under subsection (4) above—

(a) includes power to make such transitional provision as the Treasury consider necessary or expedient, and

(b) is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) If, before the closing date for the nomination of candidates, a duly nominated candidate for election as a director of a building society furnishes the society with an election address, or a revised election address, of not more than 500 words, then, subject to subsection (8) below—

(a) it shall be the duty of the society to send a copy of the address or, as the case may require, the revised address to each member of the society who is entitled to vote in the election;

(b) each member’s copy shall be sent in the same manner and, so far as practicable, at the same time as the notice of the meeting at which the election is to be conducted or the notice of the postal or electronic ballot is sent out, as the case may be, or as soon as is practicable thereafter; and

(c) if the building society fails to comply with the requirements of this subsection the society shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale and so shall any officer who is also liable for the offence;

but no such failure shall invalidate the election.

(7A) Subsection (7B) applies where, in a case in which—

(a) a society gives notice in accordance with paragraph 22A or 22B of Schedule 2 of the meeting at which the election is to be conducted;

(b) a society gives notice of a postal ballot by which the election is to be conducted by sending it electronically to an electronic address; or

the copy of the election address or revised election address that is required to be sent to a member under subsection (7)(b) is not transmitted or published at the same time as the notice.

(7B) The requirement of subsection (7)(b) to send a member his copy of the election address or revised election address in the same manner as the notice is satisfied if—

(a) a copy of the address or revised address is made available to the member in the same way as the notice; or

(b) such a copy (without being made available to the member in that way) is sent to the member in a manner set out by the society for the purpose in the notice.

(7C) Where a copy of an election address or revised election address is sent to a member electronically under subsection (7B), it must be sent to an electronic address notified by the member for the purpose.

(7D) The requirements of subsection (7)(b) or (7B)(a) are satisfied by the publication of a copy of the election address or revised election address on a web site only if—

(a) the notice of the election meeting or of the electronic ballot is a notice given to that member by being published on a web site;

(b) an agreement between the society and the member to his accessing information on a web site applies to copies of election addresses or revised election addresses for the meeting or ballot in question;

(i) the publication of a copy of the address or revised address on a web site,

(ii) the address of that web site, and

(iii) the place on that web site where the copy may be accessed, and how it may be accessed;

(d) the notification for the purposes of paragraph (c) above is given no later than the day after the date on which the copy of the election address or revised election address is first capable of being accessed on the notified web site; and

(e) that date was the same as the date on which the notice of the election meeting or of the electronic ballot was first capable of being accessed on a web site or (in a case to which subsection (7B) applies) was as soon as practicable after that date;

(f) a copy of the election address or revised election address is continuously published on the notified web site throughout the period beginning with the day on which it was first accessible on that site and ending with the voting date (within the meaning of section 60(17)).

(7E) Where, in a case in which subsection (7D) is relied on for compliance with a requirement under subsection (7)(b) or (7B)(a) above...—

(a) a copy is published for a part, but not all, of the period mentioned in subsection (7D)(f), but

(b) the failure to publish it throughout that period is wholly attributable to circumstances which it would not be reasonable to have expected the society to prevent or avoid,

the failure shall not invalidate the election of a director.

(8) Subsection (7) above does not require a building society to send copies of an address or a revised address to members of the society in any case where—

(a) publicity for the address or revised address would be likely to diminish substantially the confidence in the society of investing members of the public, or

(b) the rights conferred by that subsection are being abused to seek needless publicity for defamatory matter or for frivolous or vexatious purposes;

and that subsection shall not be taken to confer any rights on members, or to impose any duties on a building society, in respect of an address or a revised address which does not relate directly to the affairs of the society.

(9) The FCA shall hear and determine any dispute arising under subsection (8)(a) above, whether on the application of the society or of any other person who claims to be aggrieved.

(10) The rules of a building society, if they provide for the retirement by rotation of its directors, may provide that a person elected to fill a vacant seat on the board must retire at the annual general meeting at which, in accordance with the rules for retirement by rotation, the seat is to fall vacant.

(11) Subsection (10) above applies to any vacancy arising when an elected director ceases to hold office for any reason before the annual general meeting at which ... the seat is due to fall vacant under section 60(11)(a).

(12) For the purposes of section 60(17) “the permitted period”, with reference to the tenure of office of co-opted directors, is the period beginning with the date of the co-opted director’s appointment and ending with whichever of the following first occurs, that is to say—

(i) in the case of a building society which elects its directors at its annual general meeting, the conclusion of the next such meeting following his appointment;

(ii) in the case of a building society which elects its directors by postal or electronic ballot, the declaration at its annual general meeting of the result of the next such ballot conducted after his appointment;

(iii) the expiration of the period of sixteen months beginning with the date of his appointment;

but a general meeting or postal or electronic ballot shall be disregarded for the purposes of this paragraph if the closing date for the nomination of candidates falls before the date of the co-opted director’s appointment.

(13) Where a person becomes or ceases to be a director of a building society, the society shall within one month give notice of that fact to the FCA , stating the person’s full name and address and the date on which he became, or ceased to be, a director; and the FCA shall record the person’s name and the date on which he began to hold, or, as the case may be, ceased to hold office, in the public file of the society.

(14) If a building society fails to comply with subsection (13) above the society shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale and so shall any officer who is also guilty of the offence.

Dealings with directors

Prohibition of tax-free payments to directors

62

(1) A building society shall not pay a director remuneration (whether as director or otherwise) free of income tax, or otherwise calculated by reference to or varying with the amount of his income tax, or to or with any rate of income tax.

(2) Any rule of a building society and any provision of any contract, or in any resolution of a building society, for payment to a director of remuneration falling within subsection (1) above has effect as if it provided for payment, as a gross sum subject to income tax, of the net sum for which the rule, contract or resolution actually provides.

Directors to disclose interests in contracts and other transactions

63

(1) It is the duty of a director of a building society who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the society to declare the nature of his interest to the board of directors of the society in accordance with this section.

(2) In the case of a proposed contract, the declaration shall be made—

(a) at the meeting of the directors at which the question of entering into the contract is first taken into consideration; or

(b) if the director was not at the date of that meeting interested in the proposed contract, at the next meeting of the directors held after he became so interested.

(3) Where the director becomes interested in a contract after it is made, the declaration shall be made at the first meeting of the directors held after he becomes interested in the contract.

(4) For the purposes of this section, a general notice given to the directors of a building society by a director to the effect that—

(a) he is a member of a specified company or firm and is to be regarded as interested in any contract which may, after the date of the notice, be made with that company or firm, or

(b) he is to be regarded as interested in any contract which may, after the date of the notice, be made with a specified person who is connected with him,

is a sufficient declaration of interest in relation to any contract made after that date with that company, firm or person.

(5) A director need not make a declaration or give a notice under this section by attending in person at a meeting of the directors if he takes reasonable steps to secure that the declaration or notice is brought up and read at the meeting.

(6) The foregoing provisions of this section apply in relation to any transaction or arrangement as they apply in relation to a contract and, for the purposes of this section, a transaction or arrangement of a kind described in section 65 made by a society for a director of the society or a person connected with a director of the society is to be treated (if it would not otherwise be so treated, and whether or not it is prohibited by that section) as a transaction or arrangement in which that director is interested.

(7) A director who fails to comply with this section shall be guilty of an offence and liable—

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

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

Substantial property transactions involving directors and connected persons

64

(1) A building society shall not enter into an arrangement—

(a) whereby a director of the society, or a person connected with a director of the society, acquires or is to acquire one or more non-cash assets of the requisite value from the society; or

(b) whereby the society acquires or is to acquire one or more non-cash assets of the requisite value from a director of the society or a person connected with a director of the society,

unless the arrangement is first approved by a resolution of the society passed at a general meeting.

(2) For this purpose a non-cash asset is of the requisite value if at the time the arrangement in question is entered into its value is—

(a) except in a case falling within paragraph (b) below, not less than £200,000; and

(b) where the last balance sheet of the society showed reserves amounting to less than £1,000,000, not less than the higher of £2,000 or the amount which represents 10 per cent. of the reserves so shown.

(3) The Treasury may by order amend subsection (2) above so as to substitute for any of the amounts for the time being specified in paragraphs (a) and (b) of that subsection such other amount as they think appropriate.

(4) The power to make an order under subsection (3) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(5) In this section “non-cash asset” means any property or interest in property other than cash and a reference to the acquisition of a non-cash asset includes the creation or extinction of an estate or interest in, or a right over, any property and also the discharge of any person’s liability, other than a liability for a liquidated sum.

(6) An arrangement entered into by a building society in contravention of this section, and any transaction entered into in pursuance of the arrangement (whether by the society or any other person) is voidable at the instance of the society unless—

(a) restitution of any money or other asset which is the subject matter of the arrangement or transaction is no longer possible or the society has been indemnified in pursuance of subsection (7)(b) below for the loss or damage suffered by it, or

(b) any rights acquired in good faith, for value and without actual notice of the contravention by any person who is not a party to the arrangement or transaction would be affected by its avoidance, or

(c) the arrangement is affirmed by the society at a general meeting held not later than the next annual general meeting after the entry into the arrangement.

(7) Where an arrangement or transaction is entered into with a building society by a director of the society or a person connected with him in contravention of this section then, without prejudice to any other liability but subject to subsections (8) and (9) below, that director and the person so connected, and any other director of the society who authorised the arrangement of any transaction entered into in pursuance of such an arrangement, is liable—

(a) to account to the society for any gain which he has made directly or indirectly by the arrangement or transaction, and

(b) (jointly and severally with any other person liable under this subsection) to indemnify the society for any loss or damage resulting from the arrangement or transaction.

(8) Where an arrangement or transaction is entered into by a building society and a person connected with a director of the society in contravention of this section, that director is not liable under subsection (7) above if he shows that he took all reasonable steps to secure the society’s compliance with this section.

(9) In any case, a person so connected and any such other director as is mentioned in subsection (7) above is not so liable if he shows that, at the time the arrangement was entered into, he did not know the circumstances constituting the contravention.

Restriction on loans, etc. to directors and persons connected with them

65

(1) Subject to the following provisions of this section, a building society shall not—

(a) make a loan to a director or a person connected with a director of the society; or

(b) dispose of property by way of lease or hire to a director or a person connected with a director of the society; or

(c) make a payment on behalf of a director or a person connected with a director of the society in connection with the provision of any service of a kind which is provided by building societies for individuals in the ordinary course of business; or

(d) enter into a guarantee or provide any security which is incidental to or connected with any such loan, disposal of property or payment; or

(e) take part in any arrangement whereby—

(i) another person enters into a transaction which, if it had been entered into by the society, would have contravened any of paragraphs (a) to (d) above; and

(ii) that other person, in pursuance of the arrangement, has obtained or is to obtain any benefit from the society or a subsidiary of the society.

(2) Subsection (1)(a) above does not apply to—

(a) any loan of an amount which, when aggregated with any other relevant loans, does not exceed £10,000;

(b) any loan made in the ordinary course of the society’s business and of an amount not greater and made on other terms not more favourable than it is reasonable to expect the society to have offered to a person of the same financial standing but unconnected with the society; or

(c) any loan, the amount of which, when aggregated with any other relevant loans, does not exceed £200,000, made for or towards the purchase or improvement of a dwelling-house used or to be used as the director’s only or main residence if he is an executive director and loans of that description and on similar terms are ordinarily made by the society to its employees.

(3) Subsection (1)(b) above does not apply to—

(a) any lease or hiring of property the value of which, when aggregated with the value of any other relevant leases or hirings, does not exceed £20,000; or

(b) any lease or hiring made in the ordinary course of the society’s business and on terms not more favourable than it is reasonable to expect the society to have offered to a person unconnected with the society.

(4) Subsection (1)(c) above does not apply to—

(a) any payment amounting, when aggregated with any other relevant payment, to no more than £10,000 in respect of which the person on whose behalf it is made is under an obligation to reimburse the society within a period not exceeding two months beginning with the date of the payment; or

(b) any payment of an amount not greater and on other terms not more favourable than it is reasonable to expect the society to have offered to a person of the same financial standing but unconnected with the society.

(5) Subject to compliance with the requirements of subsection (6) below, subsection (1) above does not preclude a building society from doing anything to provide a director with funds to meet expenditure incurred or to be incurred by him for the purposes of the society or for the purpose of enabling him properly to perform his duties as a director of the society nor does it preclude the society from doing anything to enable a director to avoid incurring such expenditure.

(6) The following are the requirements referred to in subsection (5) above—

(a) the things must either be done with the prior approval of the society given at a general meeting at which the requisite matters are disclosed or be done on condition that, if the approval of the society is not so given at the next annual general meeting, the loan is to be repaid, or any other liability arising under the transaction is to be discharged , within six months from the conclusion of that meeting; and

(b) the amount provided, when aggregated with any other relevant provision of funds, does not exceed £40,000.

(7) The following are the requisite matters which must be disclosed for the purposes of subsection (6) above—

(a) the purpose of the expenditure incurred or to be incurred, or which would otherwise be incurred, by the director;

(b) the amount of the funds to be provided by the society; and

(8) The Treasury may by order made by statutory instrument substitute for any sum specified in this section a larger sum specified in the order.

(9) An order under subsection (8) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(10) In this section—

“authorising provision” and “authorised”, in relation to a transaction of a description falling within paragraph (a), (b) or (c) of subsection (1) above, mean respectively any provision of subsection (2), (3) or (4) or constituted by subsection (5) above and any transaction or thing done to which that paragraph does not apply or which is not precluded from being done by virtue of that provision;

“outstanding”, in relation to loans, means outstanding in respect of principal and interest and, in relation to the provision of funds subject to a condition for repayment or discharge of any other liability, means unpaid or undischarged to any extent;

“provision of funds” includes anything else which, by virtue of subsection (5) above, a society is not precluded from doing by subsection (1) above; and

“relevant”, in relation to a transaction of a description falling within paragraph (a), (b) or (c) of subsection (1) above, means an outstanding or, in the case of a lease or hiring, current transaction of that description (whether entered into by, or by arrangement with, the society) not being one authorised by any other authorising provision.

“subsidiary” has the meaning given by section 1159 of the Companies Act 2006.

(11) Section 70 has effect for the interpretation, in the subsequent provisions of this Part, of references to transactions or arrangements contravening this section and to such transactions or arrangements being made “for” a person.

Sanctions for breach of s. 65

66

(1) If a building society enters into a transaction or arrangement contravening section 65, the transaction or arrangement is voidable at the instance of the society unless—

(a) restitution of any money or any other assets which is the subject matter of the arrangement or transaction is no longer possible, or the society has been indemnified in pursuance of subsection (2)(b) below for the loss or damage suffered by it, or

(b) any rights acquired in good faith, for value and without actual notice of the contravention by a person other than the person for whom the transaction or arrangement was made would be affected by its avoidance.

(2) Where a transaction or arrangement contravening section 65 is made by a building society for a director of the society or a person connected with a director of the society then, without prejudice to any other liability but subject to subsections (3) and (4) below, that director and the person so connected and any other director of the society who authorised the transaction or arrangement (whether or not is has been avoided in pursuance of subsection (1) above) is liable—

(a) to account to the society for any gain which he has made directly or indirectly by the transaction or arrangement; and

(b) (jointly and severally with any other person liable under this subsection) to indemnify the society for any loss or damage resulting from the transaction or arrangement.

(3) Where a transaction or arrangement contravening section 65 is entered into by a building society and a person connected with a director of the society, that director is not liable under subsection (2) above if he shows that he took all reasonable steps to secure the society’s compliance with that section.

(4) In any case, a person so connected and any such other director as is mentioned in subsection (2) above is not so liable if he shows that, at the time the transaction or arrangement was entered into, he did not know the circumstances constituting the contravention.

(5) A director of a building society who authorises or permits the society to enter into a transaction or arrangement knowing or having reasonable cause to believe that the society was thereby contravening section 65 is guilty of an offence.

(6) A building society which enters into a transaction or arrangement contravening section 65 for one of its directors is guilty of an offence unless it shows that, at the time the transaction or arrangement was entered into, it did not know the circumstances constituting the contravention.

(7) A person who procures a building society to enter into a transaction or arrangement knowing or having reasonable cause to believe that the society was thereby contravening section 65 is guilty of an offence.

(8) A person other than a building society who commits an offence under this section shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or both; or

(b) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or both.

(9) A building society which commits an offence under this section shall be liable on conviction on indictment or on summary conviction to a fine which, on summary conviction, shall not exceed the statutory maximum.

Directors, etc. not to accept commissions in connection with loans

67

(1) This section applies to any person who holds office in or is employed by a building society as director, secretary, chief excecutive, manager, solicitor, surveyor or valuer or in connection with the assessment of the adequacy of securities for loans secured on land.

(2) No person to whom this section applies shall (in addition to the remuneration prescribed or authorised by the rules or any resolution of the society) accept from any other person any commission for or in connection with any loan made by the society.

(3) If a person to whom this section applies accepts a commission in contravention of subsection (2) ab ove—

(a) both he and, subject to subsection (4) below, the person who paid it shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale; and

(b) if, having been convicted of an offence under paragraph (a) above, the person accepting the commission fails to pay over to the society the amount or value of the commission, as and when directed to do so by the court which convicted him, he shall be guilty of an offence under this paragraph and liable on summary conviction to imprisonment for a term not exceeding six months.

(4) No offence under paragraph (a) of subsection (3) above is committed by the person who paid the commission unless he did so knowing the circumstances that constituted the offence under that paragraph on the part of the person who accepted it from him.

(5) Where—

(a) a charge upon a policy of life assurance is given as additional security for a loan made by a building society, or

(b) a building society makes an additional loan to enable payment to be made of a premium on a policy of insurance, or

(c) any policy of insurance is taken out so as to comply with the terms on which a loan is made by a building society, whether by way of insuring the property given as security for the loan or otherwise,

and the policy is effected through the building society, or the society nominates or selects a person by whom the policy is to be issued, it shall be unlawful for any person to whom this section applies, in connection with the effecting of the policy, to receive any commission from a person by or through whom the policy is issued.

(6) A person who pays, and a person who accepts, any commission which subsection (5) above makes it unlawful to receive shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale.

(7) In this section—

“charge upon a policy of life assurance”, in relation to a loan secured on land in Scotland, means an assignation in security in respect of such a policy;

“commission” includes any gift, bonus or benefit;

“solicitor”, in relation to England and Wales, includes any person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which constitutes a reserved instrument activity (within the meaning of that Act).

Records of loans, etc. for directors falling within s. 65

68

(1) A building society shall maintain a register containing a copy of every subsisting transaction or arrangement (other than an excepted transaction or arrangement) falling within section 65(1) made for a director or a person connected with a director of the society during the current financial year or any of the preceding ten financial years.

(2) In the case of a transaction or arrangement which is not in writing, there shall be kept in the register a written memorandum setting out its terms.

(3) A building society shall make available for inspection by members—

(a) at its principal office during the period of 15 days expiring with the date of its annual general meeting, and

(b) at the annual general meeting,

a statement containing the requisite particulars of the transactions and arrangements falling within section 65(1) which were included in the register under subsection (1) above at any time during the last complete financial year preceding the meeting.

(4) The requisite particulars are those specified in Schedule 9 to this Act.

(5) The society must send two copies of the statement required to be made available under subsection (3) to the FCA and, if the society is a PRA-authorised person, one copy to the PRA, on the date on which the statement is required to be first made available to members.

(5A) The FCA must keep a copy of the statement in the public file of the society.

(6) A copy of the statement required to be so made available shall also be sent, on demand and on payment of such fee (not exceeding £5) as the society may from time to time determine, to any member of the society.

(6A) Where a copy of a statement is required to be sent to a member under subsection (6)—

(a) it may be sent to him electronically only if it is sent to an electronic address notified by the member for the purpose; but

(b) the requirement to send it shall also be treated as satisfied if the conditions set out in subsection (6B) are satisfied.

(6B) The conditions of this subsection are satisfied in the case of a copy of a statement if—

(a) the society and the member have agreed that information that is required to be sent to him may instead be accessed by him on a web site;

(b) the agreement applies to the statement in question;

(i) the publication of the statement on a web site,

(ii) the address of that web site, and

(iii) the place on that web site where the statement may be accessed, and how it may be accessed; and

(d) a copy of the statement continues to be published on that web site throughout the period of 21 days beginning with the day on which the society notifies the member in accordance with paragraph (c).

(7) There are excepted from the obligations imposed by this section on a building society with respect to a financial year all transactions or arrangements made or subsisting during that year for a person who was at any time during that year a director of the society or was connected with a director of the society if the aggregate of the values of each transaction or arrangement made for that person, less the amount (if any) by which the value of those transactions or arrangements has been reduced, did not exceed £2,000 at any time during that year

(8) There are also excepted from the obligations imposed by this section on a building society with respect to a financial year all transactions or arrangements falling within paragraphs (b), (d) or (e) of section 65(1) made during that year for a person who was at any time during that year a director of the society or was connected with a director of the society if the aggregate of the values of each such transaction or arrangement so made for that director or any person connected with him, less the amount (if any) by which the value of those transactions or arrangements has been reduced, did not exceed £10,000 at any time during that year.

(9) The Treasury may by order amend subsection (7) or (8) above so as to substitute for the amount for the time being specified in that subsection such other amount as they think appropriate.

(10) The power to make an order under subsection (9) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(11) If a building society fails to comply with any provision of this section (or Schedule 9) the society shall be liable on conviction on indictment or on summary conviction to a fine not exceeding, on summary conviction, the statutory maximum, and so shall any officer who is also guilty of the offence.

(11A) Where, in a case in which subsection (6A)(b) is relied on for compliance with a requirement of subsection (6)—

(a) a statement is published for a part, but not all, of the period mentioned in subsection (6B)(d), but

(b) the failure to publish it throughout that period is wholly attributable to circumstances which it would not be reasonable to have expected the society to prevent or avoid,

no offence is committed under subsection (11) by reason of that failure.

69

(1) Where, at any time during a financial year of a building society, a person both is a director or other officer of a building society and is, or is a director of or partner in, a business associate of the society, this section shall apply, as respects that year, to that person in relation to the business of the business associate.

(2) A person is a “business associate” of a building society in any financial year of the society if that person—

(a) carries on a business which consists of or includes the provision of relevant services,

(b) provides relevant services during that year to, or to other persons in connection with loans secured on land made by, the society and

and “associated” has a corresponding meaning.

(3) The following are relevant services—

(a) conveyancing services provided by a solicitor;

(b) surveying and valuing land or other property;

(d) arranging for the provision of insurance against loss of or damage to property or on human life;

(e) any other services designated as relevant services.

(4) Where a business associate of a building society provides the society with services which are relevant services by virtue of subsection (3) above, any administrative services provided to the society by the business associate are also relevant services.

(5) The Treasury may by order in a statutory instrument—

(a) designate as relevant services services of any description specified in the order which are normally provided to building societies; and

(b) make such incidental, supplementary or transitional provision as they consider necessary or expedient;

and in subsection (3)(e) above “designated” means designated by an order under this subsection.

(6) Where this section applies, as respects a financial year of a building society, to a person as a director or other officer of the society in relation to the business of a business associate, that person shall furnish the society with the requisite particulars of that business.

(7) The requisite particulars of the business of a business associate of a building society are—

(a) except where an election under paragraph (b) below is in force, those specified in Part I of Schedule 10 to this Act;

(b) if a building society elects to adopt Part II of that Schedule for its directors and other officers as respects a financial year, those specified in Part II of that Schedule; and

(c) as regards relevant services designated by an order under subsection (5) above, such particulars as are specified in the order;

and Part III of the Schedule has effect to supplement Parts I and II and includes a definition of “the volume of the business” for the purposes of this section.

(8) An election by a building society to adopt Part II of Schedule 10 as regards the requisite particulars to be furnished by its directors and other officers must be made in writing to the FCA before the beginning of the financial year as respects which it is made and the requisite particulars must be furnished in writing within the period of six weeks beginning with the end of the financial year for which they are required.

(9) For the purpose of enabling him to furnish the requisite particulars of the business of a business associate of a building society the person who is under the obligation to furnish them to the society may require any person who is a member of or partner in, or holds any office or employment with, the business associate to furnish him with such information relating to its business as he may reasonably require for that purpose.

(10) Any person who, without reasonable excuse—

(a) fails to furnish the particulars required by subsection (6) above or furnishes particulars which are false or misleading in a material particular or, in the case of particulars under Part II to Schedule 10, are not a justified estimate, or

(b) fails to furnish any information lawfully required of him under subsection (9) above or furnishes information which is false or misleading in a material particular,

shall be liable on conviction on indictment or on summary conviction to a fine not exceeding, on summary conviction, the statutory maximum.

(11) Subject to subsection (12) below, a building society shall maintain at its principal office a register containing the particulars furnished to it under subsection (6) above as respects the last financial year and each of the ten financial years preceding that year.

(12) No particulars of the business of a business associate of a building society need be kept in the register provided for by subsection (11) above as respects any financial year of the society in which the volume of the business of which the requisite particulars are required did not exceed £10,000 or such other sum as may be substituted for it by order of the Treasury in a statutory instrument under this subsection.

(13) A building society shall make available for inspection by members—

(a) at its principal office during the period of 15 days expiring with the date of its annual general meeting, and

(b) at the annual general meeting,

a statement containing the particulars required to be kept in the register under subsection (11) above as respects the last financial year.

(14) The society must send two copies of the statement required to be made available under subsection (13) to the FCA and, if the society is a PRA-authorised person, one copy to the PRA, on the date on which the statement is required to be first made available to members.

(14A) The FCA must keep a copy of the statement in the public file of the society.

(15) A copy of the statement required to be so made available shall also be sent, on demand and on payment of such fee (not exceeding £5) as the society may from time to time determine, to any member of the society.

(15A) Where a copy of a statement is required to be sent to a member under subsection (15)—

(a) it may be sent to him electronically only if it is sent to an electronic address notified by the member for the purpose; but

(b) the requirement to send it shall also be treated as satisfied if the conditions set out in subsection (15B) are satisfied.

(15B) The conditions of this subsection are satisfied in the case of a statement if–

(a) the society and the member have agreed that information that is required to be sent to him may instead be accessed by him on a web site;

(b) the agreement applies to the statement in question;

(i) the publication of the statement on a web site,

(ii) the address of that web site, and

(iii) the place on that web site where the statement may be accessed, and how it may be accessed; and

(d) a copy of the statement continues to be published on that web site throughout the period of 21 days beginning with the day on which the society notifies the member in accordance with paragraph (c).

(16) . . . any statutory instrument containing an order made under subsection (5) or (12) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(17) In this section—

“administrative services” means services necessary or incidental to the conduct of the society’s business;

“conveyancing services” in relation to— land in England and Wales means the preparation of transfers, conveyances, contracts and other documents in connection with, and other services ancillary to, the disposition or acquisition of estates or interests in land; and for the purposes of this paragraph— “disposition”—does not include a testamentary disposition or any disposition in the case of such a lease as is referred to in section 54(2) of the Law of Property Act 1925 (short leases); butsubject to that, includes in the case of leases both their grant and their assignment; and“acquisition” has a corresponding meaning,land in Northern Ireland has the same meaning as in paragraph (a) above with the modification that “disposition” does not include any disposition in the case of such a lease as is excepted, by section 4 of the Landlord and Tenant Law Amendment Act (Ireland) 1860, from the requirements of that section, andheritable property in Scotland, includes drafting all writs relating to such property and negotiating and concluding missives for its purchase, sale, transfer, lease and sublease; and

“solicitor”, in relation to England and Wales, includes any person who, for the purposes of the Legal Services Act 2007, is an authorised person in relation to an activity which constitutes a reserved instrument activity (within the meaning of that Act).

Interpretation

Interpretation of this Part

70

(1) The following provisions apply for the interpretation of this Part.

(2) A person is “connected with” a director of a building society if, but only if, he (not being himself a director of it) is—

(a) that director’s spouse or civil partner, child or step-child; or

(b) a body corporate with which the director is associated; or

(i) the director, his spouse or civil partner or any children or step-children of his, or

(ii) a body corporate with which he is associated, or of a trust whose terms confer a power on the trustees that may be exercised for the benefit of the director, his spouse or civil partner, or any children or step-children of his or any such body corporate; or

(d) a person acting in his capacity as partner of that director or of any person who, by virtue of paragraph (a), (b) or (c) of this subsection, is connected with that director;

(e) a Scottish firm in which—

(i) that director is a partner,

(ii) a partner is a person who, by virtue of paragraph (a), (b) or (c) above, is connected with that director, or

(iii) a partner is a Scottish firm in which that director is a partner or in which there is a partner who, by virtue of paragraph (a), (b) or (c) above, is connected with that director.

(3) In subsection (2)—

(a) a reference to a child or step-child of any person includes an illegitimate child of his but does not include any person who has attained the age of 18, and

(b) paragraph (c) does not apply to a person acting in his capacity as trustee under an employees’ share scheme or a pension scheme.

(4) A director is “associated” with a body corporate if he, his spouse or civil partner, his child or step-child or a person acting in his capacity as trustee of any trust the beneficiaries of which include the director, his spouse or civil partner, child or step-child between them, either—

(a) own at least one-fifth of that body’s equity share capital (within the meaning of the Companies Acts (see section 548 of the Companies Act 2006)), or

(b) are entitled to exercise or control the exercise of more than one-fifth of the voting power of"that body at any general meeting.

(5) As regards transactions or arrangements falling within section 65, a “transaction contravening section 65” means a transaction to which subsection (1)(a), (b), (c) or (d) of that section applies and an “arrangement contravening section 65” means an arrangement to which subsection (1)(e) of that section applies and such a transaction or arrangement is made “for” a person if—

(a) in the case of a loan, disposal or payment within paragraph (a), (b) or (c), it is made, in the case of paragraph (a) or (b), to him or, in the case of paragraph (c) on his behalf;

(b) in the case of a guarantee or security within paragraph (d), it is made as an incident of or in connection with a loan or disposal to him or a payment on his behalf; and

(c) in the case of an arrangement within paragraph (e), the transaction to which the arrangement relates was made for him.

Part VIII — Accounts and Audit

Accounting records . . .

Accounting records and systems of business control, etc.

71

(1) Every building society shall—

(a) cause accounting records to be kept, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

in accordance with this section.

(2) The accounting records of a society must be such as to—

(a) explain its transactions;

(b) disclose, with reasonable accuracy and promptness, the state of the business of the society at any time;

(c) enable the directors properly to discharge the duties imposed on them by or under this Act (and, where applicable section 403(1) of the Companies Act 2006 (group accounts: applicable accounting framework)) and their functions of direction of the affairs of the society; and

(d) enable the society properly to discharge the duties imposed on it by or under this Act (and, where applicable section 403(1) of the Companies Act 2006 (group accounts: applicable accounting framework));

and must be kept in an orderly manner.

(3) The accounting records shall in particular contain—

(a) entries from day to day of all sums received and paid by the society and the matters in respect of which they are received or paid;

(b) entries from day to day of every transaction entered into by the society which will or there is reasonable ground for expecting may give rise to liabilities or assets of the society other than insignificant assets or liabilities in respect of the management of the society; and

(c) a record of the assets and liabilities of the society and in particular of assets and liabilities of any class specifically regulated by or under section 6 or 7.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) The accounting records shall be kept at the society’s principal office or at such other place or places as the directors think fit, and shall at all times be open to inspection by the directors.

(9) Accounting records shall be preserved for six years from the date on which they were made.

(10) Where a building society has connected undertakings, the society shall also secure that such accounting records are kept . . . by the society and the connected undertakings as will enable the society to comply with the requirements of this section in relation to the business of the society and those connected undertakings.

(10A) The Commission may, for the purpose of implementing the Council Directive on the supervision of credit institutions on a consolidated basis (No.92/30/EEC), direct that subsection (10) above shall have effect in relation to any building society specified in the direction as if any associated body of the society so specified were linked to it by resolution.

(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounts

Duty of directors to prepare annual accounts

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Contents and form of annual accounts

73

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Duty of directors to prepare annual business statement

74

(1) The directors of every building society shall, by reference to the annual accounts and other records and information at their disposal, prepare with respect to each financial year of the society a statement (referred to in this Act as “the annual business statement”) relating to prescribed aspects of the business of the society during the year.

(2) Where the society has connected undertakings the annual business statement shall deal also with prescribed aspects of the business of the connected undertakings during the year to which it relates.

(3) The annual business statement shall contain such information relating to such aspects of the business of the society and shall be in such form as the Treasury prescribe by regulations; and in this section “prescribed” means prescribed by regulations under this subsection.

(4) Without prejudice to the generality of subsections (1) to (3) above the regulations may require the annual business statements of building societies to include prescribed information about directors and past directors and persons connected with them ... and their financial interests.

(5) The information comprising the annual business statement shall give a true representation of the matters in respect of which it is given.

(6) To such extent as may be prescribed matters contained in the society’s annual business statement shall not be the subject of report by the auditor under section 78.

(7) The power to make regulations under subsection (3) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(8) It is the duty of every director ... of a building society to give notice to the society of such matters relating to himself or his financial interests as may be necessary for the purposes of compliance with the preceding provisions of this section.

(9) Any person who fails to comply with subsection (8) above shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(10) Any director who fails to comply with subsection (1) above shall be liable on conviction on indictment or on summary conviction to a fine not exceeding, on summary conviction, the statutory maximum.

Directors' report

75

(1) The directors of a building society shall prepare for submission to the annual general meeting a report on the business of the society containing—

(a) a fair review of the business of the society and its connected undertakings (if any), complying with section 75A,

(aa) a description of the principal risks and uncertainties facing the society and its connected undertakings (if any),

(b) such information relating to such aspects of the business of the society or the society and any connected undertakings as may be prescribed by regulations made by the . . . Treasury, and

(1A) The said matters are—

(a) whether the society has acquired or established, or allowed a subsidiary undertaking to acquire or establish, a business to which subsection (3) and subsection (4) or, as the case may be, subsection (5) of section 92A applied;

(b) if the society has acquired or established, or allowed such an undertaking to acquire or establish, such a business, what the business is and whether the society complied with the requirements of subsection (1) of that section; and

(c) if the society did not comply with those requirements, why the society nevertheless proceeded, or allowed the undertaking to proceed, with the acquisition or establishment.

(1B) If the building society has subsidiary undertakings, the report may, where appropriate, give greater emphasis to those matters which are significant to the society and its subsidiary undertakings taken as a whole.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The power to make regulations under subsection (1) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(4) If a directors’ report does not contain the review, information and statement required by subsection (1) above and, where applicable, the review required by subsection (2) above, each director shall be liable on conviction on indictment or on summary conviction to a fine not exceeding, on summary conviction, the statutory maximum.

Summary financial statement for members and depositors

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(1) The directors of a building society shall, with respect to each financial year, prepare for members and depositors a summary financial statement for that year, that is to say, a statement derived from the annual accounts, annual business statement and director’s report, giving a summary account of the society’s financial development during and financial position at the end of the year.

(2) Where the society has connected undertakings the statement shall (so far as they are dealt with in the group accounts) give an account of the financial development and position of the society and its connected undertakings.

(3) The Treasury may by regulations make provision with respect to—

(a) the form of the summary financial statement, and

(b) the information which must be included in it.

(4) Every summary financial statement shall also include in the prescribed form statements to the effect that—

(a) it is only a summary of information in the accounts, business statement and directors’ report;

(b) in so far as it summarises the information in the accounts, those accounts have been audited;

(c) the accounts, business statement and director’s report will be available to members and depositors free of charge on demand at every office of the society after a specified date.

(5) Every summary financial statement shall include a statement of the auditor’s opinion as to its consistency with the accounts, business statement and directors’ report and its conformity with the requirements of this section and regulations made under it.

(6) The power to make regulations under subsection (3) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(7) The summary financial statement shall be signed by two directors on behalf of the board of directors and by the chief executive of the society.

(8) Not later than 21 days before the date of the annual general meeting at which the accounts and reports are to be considered, the society shall send one copy of the documents to which this subsection applies to every member of the society who is entitled to receive notice of the meeting, and two copies of the documents to which this subsection applies to the FCA and, if the society is a PRA-authorised person, one copy to the PRA .

(8A) The documents to which subsection (8) applies are—

(a) the summary financial statement, and

(b) where subsection (8) extends under section 78(6) to the auditor’s report also, the auditor’s report.

(8AA) The society shall also—

(a) publish the summary financial statement and (where applicable) the auditor's report on a web site, and

(b) ensure that the statement and (where applicable) the report may be accessed on the web site until the publication of the next summary financial statement.

(8B) Where a copy of the summary financial statement or of the auditor’s report is required to be sent to a member under subsection (8)—

(a) it may be sent to him electronically only if it is sent to an electronic address notified to the society by the member for the purpose; but

(b) the requirement to send it shall also be treated as satisfied if the conditions set out in subsection (8C) are satisfied.

(8C) The conditions of this subsection are satisfied in the case of a copy of a summary financial statement or auditor’s report if—

(a) the society and the member have agreed that information that is required to be sent to him may instead be accessed by him on a web site;

(b) the agreement applies to the summary financial statement or auditor’s report in question;

(i) the publication of the summary financial statement and (where applicable) the auditor’s report on a web site,

(ii) the address of that web site, and

(iii) the place on that web site where the statement and (where applicable) the report may be accessed, and how it may be accessed;

(d) the notification given for the purposes of paragraph (c) is given not less than 21 days before the date of the annual general meeting at which the accounts and reports are to be considered; and

(e) a copy of the statement and (where applicable) the report is published on the web site throughout a period beginning at least 21 days before the date of meeting.

(8D) Where, in a case in which subsection (8C) is relied on for compliance with a requirement of subsection (8)—

(a) a copy of a summary financial statement or auditor’s report is published for a part, but not all, of the period mentioned in subsection (8C)(e), and

(b) the failure to publish it throughout that period is wholly attributable to circumstances which it would not be reasonable to have expected the society or the officer to prevent or avoid,

the failure shall not invalidate the proceedings of the meeting at which the accounts and reports are considered, and no offence is committed under subsection (10) by reason of that failure.

(8E) If, at any time during the period beginning with the publication of the summary financial statement and ending with the publication of the next summary financial statement, an individual for the first time subscribes for shares in the society, the society shall at that time notify the individual of the information in subsection (8C)(c)(i) to (iii).

(8F) In a case where subsection (8E) applies, the society is not required under section 115B (right to hard copy version) to send the individual a version of the summary financial statement or (where applicable) the auditor's report in hard copy form (within the meaning of that section).

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) If default is made by a building society in complying with subsection (8) above, the society shall be liable on summary conviction—

(a) to a fine not exceeding level 5 on the standard scale; and

(b) in the case of a continuing offence, to an additional fine not exceeding £200 for every day during which the offence continues,

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

(11) If default is made by a building society in complying with subsection (8AA) or (8E) above, 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.

(12) The FCA shall keep one of the copies of the summary financial statement received by it under subsection (8) above in the public file of the society.

Auditors and audit of accounts

Auditors: appointment, tenure, qualifications, etc.

77

(1) Every building society shall at each annual general meeting appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting.

(2) Schedule 11 to this Act has effect as regards the appointment, resignation and removal of auditors.

(3) Appointment as auditor of a building society is an appointment as a statutory auditor to which the provisions of Part 42 of the Companies Act 2006 apply.

Auditors' report

78

(1) The auditor of a building society shall make a written report to the members on the annual accounts which are to be laid before the society at the annual general meeting during his tenure of office.

(2) The auditor’s report shall . . . be open to inspection by any member at the annual general meeting of the building society.

(3) The auditor shall, in his report under subsection (1) above, also make a report to the members on—

(a) the annual business statement, and

(b) the directors’ report,

in so far as subsection (7) below requires him to do so.

(3A) The auditor's report must include—

(a) the identity of the building society whose annual accounts are the subject of the audit,

(b) a description of the annual accounts that are the subject of the audit (including the period covered by those accounts),

(d) a description of the scope of the audit identifying the auditing standards in accordance with which the audit was conducted.

(4) The report must clearly state the opinion of the auditor as to whether the accounts—

(a) give a true and fair view—

(i) in the case of an individual balance sheet, of the state of affairs of the society as at the end of the financial year,

(ii) in the case of an individual income and expenditure account, of the income and expenditure of the society for the financial year, and

(iii) in the case of group accounts, of the state of affairs as at the end of the financial year and the income and expenditure for the financial year of the society and the subsidiary undertakings dealt with in the group accounts, so far as concerns members of the society,

(b) have been properly prepared in accordance with the relevant financial reporting framework, and

(c) have been prepared in accordance with the requirements of this Act (and, where applicable, section 403(1) of the Companies Act 2006).

(4A) The auditor's report must—

(a) be either unqualified or qualified,

(b) include a reference to any matters to which the auditor wishes to draw attention by way of emphasis without qualifying the report,

(c) include a statement on any material uncertainty relating to events or conditions that may cast significant doubt about the building society's ability to continue to adopt the going concern basis of accounting, and

(d) identify the auditor's place of establishment.

(6) If the auditor’s report includes a qualification of his opinion that the annual accounts give a true and fair view of the matters specified in subsection (4)(a) above, subsection (8) of section 76 extends also to the auditor’s report.

(7) The auditor's report, in so far as it deals with the documents specified in subsection (3) above, must—

(a) state whether, in his opinion, based on the work undertaken in the course of the audit—

(i) the documents have been prepared so as to conform to the requirements of, or made under, sections 74 and 75 respectively,

(ii) the information given in the annual business statement gives a true representation of the matters in respect of which it is given, and

(iii) the information given in the directors' report for the financial year for which the accounts are prepared is consistent with those accounts,

(b) state whether, in the light of the knowledge and understanding of the building society and its environment obtained in the course of the audit, the auditor has identified material misstatements in the directors' report, and

(8) The auditor’s report on the annual business statement shall not deal with any matters which, by virtue of section 74(6), are not to be the subject of report under this section.

(9) The auditor of a building society shall, as regards the statement of particulars of transactions falling within section 65 which the society is to make available for "inspection by members under section 68(3), examine the statement before it is made available to members and make a report to the members on it; and the report shall be annexed to the statement before it is so made available.

(10) The auditor’s report under subsection (9) above shall state whether in his opinion the statement contains the particulars required by section 68; and where his opinion is that it does not, he shall include in his report, so far as he is reasonably able to do so, a statement giving the requisite particulars.

(11) Where more than one person is appointed as an auditor—

(a) all the persons appointed must jointly make a report under this section and the report must include a statement as to whether all the persons appointed agree—

(i) on the matters contained in the report, and

(ii) on the statements and indications given under subsection (7); and

(b) if all the persons appointed cannot agree on—

(i) the matters contained in the report, or

(ii) on the statements and indications given under subsection (7),

the report must include the opinions of each person appointed and give reasons for the disagreement.

Auditors' duties and powers

79

(1) It is the duty of the auditor of a building society in preparing his report to the members under section 78, to carry out such investigations as will enable him to form an opinion as to the following matters—

(a) whether adequate accounting records have been kept under section 71,

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) If the auditor is of the opinion that—

(a) adequate accounting records have not been kept under section 71, or

(b) the annual accounts are not in agreement with the accounting records,

the auditor must state that fact in his report.

(3) Every auditor of a building society has—

(a) a right of access at all times to the accounting and other records of the society and all other documents relating to its business, and

(b) a right to require from the officers of the society such information and explanations as he thinks necessary for the performance of the duties of the auditors.

(4) Where a building society has a connected undertaking, then—

(a) if the connected undertaking is a body corporate incorporated in any part of the United Kingdom, it is the duty of the connected undertaking and its auditor to give to the society’s auditor such information and explanation, and such access to documents, as that auditor may reasonably require for the purposes of his duties as auditor of the society;

(b) in any other case, it is the duty of the society, if required by its auditor to do so, to take all such steps as are reasonably open to it to obtain from the connected undertaking such information and explanation and such access as are mentioned above.

(5) Subsection (4) above applied as regards any body associated with the society which is not a subsidiary undertaking as it applies as regards a subsidiary undertaking of the society.

(6) If the auditor fails to obtain all the information and explanations and the access to documents which, to the best of his knowledge and belief, are necessary for the purposes of his audit, he shall state that fact in his report.

(6A) Where more than one person is appointed as auditor, the report must include a statement as to whether all the persons appointed agree on any statements given under subsections (2) and (6) and, if they cannot agree on those statements, the report must include the opinions of each person appointed and give reasons for the disagreement.

(7) The auditor of a building society have the right—

(a) to attend any general meeting of the society, and to receive all notices of and other communications relating to any general meeting which any member of the society is entitled to receive, and

(b) to be heard at any meeting which he attends on any part of the business of the meeting which concerns him as auditor.

(8) If a building society or other body corporate fails to comply with subsection (4) above, the society or other body shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale and so shall any officer of the society or, as the case may be, of the other body who is also guilty of the offence; and if an auditor fails without reasonable excuse to comply with paragraph (a) of that subsection he shall be liable, on summary conviction, to such a fine.

(9) If a person who is an officer of a building society or of a body which is a connected undertaking of the society knowingly or recklessly makes to the auditor of that or another society or body a statement which—

(a) conveys or purports to convey any information or explanation which the auditor requires, or is entitled to require, as auditor of the society or other body, as the case may be, and

(b) is false or misleading in a material particular,

that person shall be liable—

(i) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine, or both; and

(ii) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum, or both.

Procedure on completion of accounts

Signing of balance sheet: documents to be annexed

80

(1) Every balance sheet of a building society shall be signed by one director on behalf of the board of directors ....

(2) The income and expenditure account, . . . and the annual business statement shall be annexed to the balance sheet, and so shall any group accounts; and the auditor’s report shall be attached to it.

(3) The income and expenditure account, . . . and the annual business statement shall be approved by the board of directors before the balance sheet is signed on their behalf, and so shall any group accounts; and the date of their approval of those documents shall be endorsed on the balance sheet.

(4) The directors’ report shall be attached to the balance sheet.

(5) If a balance sheet has not been signed as required by subsection (1) above, and a copy of it is issued, circulated or published, the building society shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale and so shall any officer who is also guilty of the offence.

(6) If any copy of a balance sheet is issued, circulated or published—

(a) without having annexed to it a copy of the income and expenditure account, or

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) without having attached to it a copy of the auditor’s report, or

(e) without having attached to it a copy of the directors’ report,

the building society shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale and so shall any officer who is also guilty of the offence.

Laying and furnishing accounts, etc. to members, Commission and central office

81

(1) The directors of every building society shall lay before the society at the annual general meeting the annual accounts for the last financial year.

(2) The directors of every building society shall send two copies of the annual accounts for the last financial year to the FCA, and, if the society is a PRA-authorised person, one copy to the PRA, not later than 14 days before the annual general meeting at which the accounts are to be considered.

(3) Every building society shall, as from the date by which at the latest its directors are required to send them to the FCA and, if the society is a PRA-authorised person, the PRA , make copies of the annual accounts available free of charge to members of and depositors with the society at every office of the society and, free of charge, shall send copies of those documents to any member or depositor who demands it.

(3A) Where a copy of the annual accounts is required to be sent to a member or depositor under subsection (3)—

(a) they may be sent to him electronically only if they are sent to an electronic address notified to the society by that member or depositor for the purpose; but

(b) the requirement to send them shall also be treated as satisfied if the conditions set out in subsection (3B) are satisfied.

(3B) The conditions of this subsection are satisfied in the case of a copy of the annual accounts if—

(a) the society and the member or depositor have agreed that information that is required to be sent to him may instead be accessed by him on a web site;

(b) the agreement applies to the annual accounts in question;

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