Building Societies Act 1997

(92A) (1) A building society— (a) in order to acquire, or allow a subsidiary undertaking to acquire, a business to which subsections (3) and (4) below apply; or (b) in order to establish, or allow such an undertaking to establish, a business to which subsections (3) and (5) below apply, must resolve so to do by an ordinary resolution; but a failure to comply with this subsection shall not invalidate any transaction or other act. (2) In order to be effective for the purposes of subsection (1) above, an ordinary resolution of a building society must be passed by a majority of the members of the society entitled to vote on such a resolution and voting either— (a) in person or by proxy on a poll on the resolution at a meeting of the society; or (b) in a postal ballot on the resolution; and in a case falling within paragraph (a) above, a form for the appointment of a proxy shall be sent to each person entitled to notice of the meeting. (3) This subsection applies to a business which is proposed to be acquired or established if, in the opinion of the board of directors of the society— (a) the greater part of the income of the business is or will be derived from activities having no connection with loans secured on residential property; (b) the greater part of the resources of the business are or will be devoted to such activities; or (c) the greater part of the business consists or will consist of such activities. (4) This subsection applies to a business which is proposed to be acquired if X is not less than 15 per cent of Y where— - X = the amount or value of the consideration to be given for the shares, voting rights or assets proposed to be acquired; - Y = the amount of the society’s own funds as at the relevant date. (5) This subsection applies to a business which is proposed to be established if X is not less than 15 per cent of Y where— X = the aggregate of the following as estimated by the society, namely— (a) the cost of acquiring, developing, adapting or repairing any premises required for the purposes of the business; (b) the initial cost of acquiring any plant or equipment, or any intellectual property, so required; (c) the initial cost of employing or training staff so required; (d) the cost of obtaining any professional advice required in connection with the establishment of the business; (e) any other non-recurring items of expenditure to be incurred in that connection; and (f) in the case of a business proposed to be established by a subsidiary undertaking, the amount of any capital to be provided by the society which will not be used for defraying items of expenditure falling within the foregoing paragraphs; Y = the amount of the society’s own funds as at the relevant date. (6) Where a business is proposed to be acquired or established by a syndicate whose members include a building society or subsidiary undertaking— (a) subsection (1) above shall have effect as if the business were proposed to be acquired or (as the case may be) established by the society; and (b) whichever of subsections (4) and (5) above is applicable shall have effect as if X were only so much of X as is referable to participation in the syndicate by the society or undertaking. (7) For the purposes of subsections (1)(a) and (4) above, two or more proposed acquisitions by a building society or subsidiary undertaking which will form part of a larger acquisition or series of acquisitions shall be treated as a single acquisition. (8) Nothing in this section shall apply in relation to a building society in so far as it undertakes, in accordance with section 94 and Schedule 16 to this Act, to fulfil engagements transferred to it in accordance with that section and that Schedule. (9) In this section— - “initial”, in relation to any cost, means incurred, or likely in the directors' opinion to be incurred, not later than 12 months after the establishment of the business; - “intellectual property” includes— any patent, know-how, trade mark, service mark, registered design, copyright or design right; and any licence under or in respect of any such right; - “the relevant date”, in relation to a building society, means— the date of the end of its last financial year or, failing that, the date of its establishment; or where it has been involved in a transfer of engagements, the date of that transfer, whichever is the later. (10) The Commission may, with the consent of the Treasury, by order substitute for the percentage specified in subsection (4) or (5) above such other percentage as appears to it to be appropriate; and an order under this subsection may make such supplementary, transitional and saving provision as appears to the Commission to be necessary or expedient. (11) The Commission may, with the consent of the Treasury, by order vary subsections (5) and (9) above by adding to or deleting from them any provision or by varying any provision contained in them; and an order under this subsection may make— (a) different provisions for different cases or purposes; and (b) such supplementary, transitional and saving provision as appears to the Commission to be necessary or expedient. (12) The power to make an order under subsection (10) or (11) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Information about transfers or proposed transfers of business

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• (1) In subsection (1) of section 98 of the 1986 Act (transfers of business: supplementary provisions), after the word “statements” there shall be inserted the words “or summaries”.

• (2) After that subsection there shall be inserted the following subsection—

(1A) Part IA of that Schedule shall have effect for imposing requirements for notification by a building society, to its members and to the central office, of the receipt by the society of a proposal for the transfer of the whole of its business to a company.

• (3) For Part I of Schedule 17 to the 1986 Act there shall be substituted, as Parts I and IA, the provisions set out in Parts I and II respectively of Schedule 5 to this Act (information about transfers or proposed transfers of business).

Transfers of business: increased remuneration etc

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After section 99 of the 1986 Act there shall be inserted the following section—

(99A) (1) Subject to subsection (2) below, the terms of a transfer of business by a building society to the company which is to be its successor may include provision for any director or other officer of the society to receive increased emoluments in consequence of the transfer, whether by way of increased remuneration or the grant of share options or otherwise. (2) An ordinary resolution approving any such provision must be put before a meeting of the society.

Part IV — Protection of investors and investigation of complaints

Amalgamation of building society and banking protection schemes

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• (1) The Treasury, after consultation with the Commission, the Bank, the Building Societies Investor Protection Board and the Deposit Protection Board, may by order—

• (a) amalgamate those Boards into a single board to be known as the Deposit Protection Board; and

• (b) amalgamate the Deposit Protection Fund and the Building Societies Investor Protection Fund into a single fund to be known as the Deposit Protection Fund.

• (2) An order under this section shall make, in relation to the amalgamated board and the amalgamated fund, provisions corresponding to those of sections 50 to 57 and 63 to 66 of and Schedule 4 to the 1987 Act but—

• (a) with the modifications mentioned in subsection (3) below; and

• (b) with or without the modifications mentioned in subsection (4) below.

• (3) The modifications referred to in subsection (2)(a) above are modifications—

• (a) providing for the chairman of the Commission to be an ex officio member of the amalgamated board and to be consulted by the Governor of the Bank on the appointment of ordinary members of that board;

• (b) enabling officers or employees of the Commission to be appointed as ordinary members of that board;

• (c) providing for building societies, and for institutions which, but for the order, would be or would be entitled to become participating EEA institutions within the meaning of section 24 of the 1986 Act, to be or to be entitled to become participating institutions within the meaning of the corresponding provisions;

• (d) providing for authorised building societies, and for institutions which, but for the order, would be or would be liable to become contributory institutions within the meaning of the protective scheme provisions of Part IV of the 1986 Act, to be or to be liable to become contributory institutions within the meaning of the corresponding provisions; and

• (e) providing for the deposit base of any such society or institution as is mentioned in paragraph (d) above to include an amount determined by the amalgamated board as representing the average value, over the period mentioned in section 52(4) of the 1987 Act, of shareholdings in the society or institution.

• (4) The modifications referred to in subsection (2)(b) above are modifications—

• (a) increasing the number of ordinary members of the joint board that may be appointed; and

• (b) providing for contributions to be levied on contributory institutions of different descriptions at different rates and at different times.

• (5) An order under this section—

• (a) shall repeal sections 50 to 57 and 63 to 66 of and Schedule 4 to the 1987 Act, and sections 24, 25, 26 and 29 to 31 of and Schedule 5 to the 1986 Act;

• (b) shall provide for—

• (i) any reference in sections 58 to 62 of the 1987 Act to the Deposit Protection Board or to the Deposit Protection Fund; and

• (ii) any reference in section 27 or 28 of, or Schedule 6 to, the 1986 Act to the Building Societies Investor Protection Board or to the Building Societies Investor Protection Fund,

to have effect as a reference to the amalgamated board or to the amalgamated fund, as the case may require; and

• (c) may make such other consequential amendments of those Acts and of other enactments and instruments, and such incidental, supplemental and transitional provisions, as may appear to the Treasury to be necessary or expedient.

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

• (7) In this section—

• “the 1987 Act” means the Banking Act 1987;

• “the Bank” means the Bank of England.

Liability of insolvent society in respect of payments made by Board

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• (1) In subsection (2) of section 28 of the 1986 Act (liability of insolvent society in respect of payments made by Board), in paragraph (a) the words “as in respect of a contractual debt incurred immediately before the institution began to be wound up” shall cease to have effect.

• (2) After that subsection there shall be inserted the following subsection—

(2A) The liability imposed by subsection (2)(a) above shall have effect— (a) where the liability of the institution to the investor is referable to deposits, as a liability in respect of deposits received immediately before the time when the institution began to be wound up; (b) where that liability is referable to shares, as a liability in respect of shares issued immediately before that time.

• (3) In subsections (4)(b) and (5)(b) of that section, for the words “apart from this section” there shall be substituted the words “apart from this paragraph”.

Recognised schemes for investigation of complaints

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• (1) For section 83 of the 1986 Act there shall be substituted the following section—

(83) (1) A person to whom section 83A applies shall, by virtue of and in accordance with a scheme under this section, have the right, as against a building society, to have investigated under the scheme any complaint of his about action— (a) which has been taken by the society in relation to a relevant service provided by it; and (b) which affects him in prescribed respects. (2) A person to whom section 83A applies shall also, by virtue of and in accordance with a scheme under this section, have the right, as against any connected undertaking of a building society, to have investigated under the scheme any complaint of his about action— (a) which has been taken by the undertaking in relation to a relevant service provided by it; and (b) which affects him in prescribed respects. (3) Every authorised building society shall be a member (or the sole member) of one or more recognised schemes which or which between them confer the rights required to be conferred by subsection (1) above in relation to every relevant service provided by the society. (4) Every authorised building society shall secure that each of its connected undertakings is a member (or the sole member) of one or more recognised schemes which or which between them confer the rights required to be conferred by subsection (2) above in relation to every relevant service provided by the undertaking. (5) Schedule 12 to this Act has effect for the purposes of this section and, in that Schedule— (a) Part I prescribes the matters for which provision must be made by a scheme if it is to be a scheme which qualifies for recognition for the purposes of this section; and (b) Part III contains other requirements to which a scheme must conform if it is to be so recognised. (6) The Commission, with the consent of the Treasury, may by order vary Part I or Part III of Schedule 12 by adding to or deleting from it any provision or by varying any provision contained in it; and an order under this subsection may make such incidental, supplementary and transitional provision as appears to the Commission to be necessary or expedient. (7) The Commission shall have the function, in accordance with Schedule 13 to this Act, of granting recognition of schemes and of withdrawing any recognition it has granted; but recognition does not extend to, and is not required for, provisions in a scheme which are not required to be made in pursuance of Schedule 12. (8) The Commission shall have power to do anything which is calculated to facilitate the discharge of its functions under subsection (7) above, or is incidental or conducive to their discharge, but this does not extend to expenditure for the purpose of operating a scheme. (9) The central office shall have the function, in accordance with Schedule 13, of recording accessions to schemes and of confirming any withdrawal from a scheme. (10) A building society’s withdrawal from membership of a recognised scheme shall not be effective except in accordance with the applicable provisions of Schedule 13. (11) The power to make an order under subsection (6) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (12) In this section, section 84 and Schedules 12 and 13— - “accede”, in relation to a scheme, means assume the obligations and rights of membership and “accession” has a corresponding meaning; - “action” includes any failure to act, and so as regards “exercise” in relation to any power; and “action”, in relation to a society, includes action on its behalf by any person; - “prescribed”, in relation to the respects in which a complainant is affected by any action, means prescribed for the time being in Part III of Schedule 12 as grounds for making action subject to investigation under the scheme; - “recognition” means recognition of a scheme by the Commission for the purposes of this section; - “relevant service” means a service of a kind which is provided by building societies for individuals in the ordinary course of business.

• (2) For paragraph 1 (grounds of complaint) of Part III of Schedule 12 to the 1986 Act there shall be substituted the following paragraph—

(1) (1) The grounds for making action by a building society or connected undertaking subject to investigation under the scheme must be that the action constitutes— (a) in the case of a building society, a breach of the society’s obligations under this Act, its rules or any contract, or (b) in the case of a connected undertaking, a breach of the undertaking’s obligations under its rules (if any) or any contract, or (c) unfair treatment, or (d) maladministration, or (e) a decision to which sub-paragraph (2) below applies, or action consequential on such a decision, in relation to the complainant and has caused him pecuniary loss or expense or inconvenience. (2) This sub-paragraph applies to any decision in connection with the provision of a relevant service which is made otherwise than in the legitimate exercise of commercial judgment.

• (3) In paragraph 2 (permissible exclusions from investigation) of that Part of that Schedule—

• (a) in paragraph (d), after the word “scheme” there shall be inserted the words “, or in furnishing evidence in support of the complaint”; and

• (b) after the second Note there shall be inserted the following Note—

Delay in furnishing evidence in support of the complaint is not “undue delay” unless at least six months have elapsed since the adjudicator acknowledged receipt of the complaint.

Persons entitled to have complaints investigated

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After section 83 of the 1986 Act there shall be inserted the following section—

(83A) (1) This section applies to any individual. (2) This section applies to any partnership, club or other unincorporated body if the amount of the body’s turnover for its last financial year does not exceed £1 million. (3) This section applies to any body corporate if— (a) where it is not a member of a group, the amount of its turnover for its last financial year; or (b) where it is such a member, the amount of the group’s turnover for its last financial year, does not exceed £1 million. (4) The Commission may, with the consent of the Treasury, by order substitute for the amount specified in subsection (2) or (3) above such other amount as it thinks appropriate. (5) The power to make an order under subsection (4) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (6) The amount of a body’s or group’s turnover for a financial year— (a) shall be the amount shown as such in its accounts for that year; or (b) where it has not prepared accounts for that year, shall be determined in such manner as may be provided by the scheme in accordance with which the complaint is made. (7) Where the amount of a body’s or group’s turnover for a financial year is expressed otherwise than in sterling, it shall be converted into sterling at the rate of exchange prevailing at the end of that year. (8) For a period which is a body’s or group’s financial year but is not in fact a year the amount specified in subsection (2) or, as the case may be, subsection (3) above shall be proportionately adjusted. (9) In this section— - “body corporate” does not include a Scottish firm; - “group” means a parent undertaking and its subsidiary undertakings; - “last financial year”, in relation to a body or group, means its last financial year to end before the complaint is made; - “parent undertaking” shall be construed in accordance with the relevant provisions; - “the relevant provisions” means the provisions of section 258 of the Companies Act 1985, read in conjunction with sections 259 and 260 of, and Schedule 10A to, that Act. (10) Any person who, if he were an undertaking within the meaning given by section 259(1) of the Companies Act 1985, would be a parent undertaking shall be treated as if he were such an undertaking for purposes of— (a) the definition of “group” in subsection (9) above; and (b) the relevant provisions as they apply for the purposes of the definition of “subsidiary undertaking” in section 119(1).

Part V — Miscellaneous and supplemental

Miscellaneous

Registered and business names

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• (1) For sub-paragraph (2) of paragraph 9 of Schedule 2 to the 1986 Act (building society not to use any name or title other than registered name) there shall be substituted the following sub-paragraphs—

(2) Every building society shall paint or affix, and keep painted or affixed, its registered name on the outside of every office or place in which its business is carried on, in a conspicuous position and in letters easily legible. (2A) Every building society shall state its registered name in legible characters in all of the following documents, namely— (a) its business letters; (b) its account statements, including those relating to deposit, share, loan or mortgage accounts; (c) its passbooks; (d) its notices and publications, including all documents sent to members; (e) its invoices and receipts; (f) its letters of credit and any instruments creating or acknowledging its indebtedness; (g) its contracts, agreements, mortgages and deeds; and (h) its bills of exchange, promissory notes, endorsements, cheques and orders for money or goods.

• (2) After sub-paragraph (7) of that paragraph there shall be inserted the following sub-paragraph—

(8) For the purposes of this paragraph and paragraphs 10 to 10C below “registered name”, in relation to a building society, means the name of the society which is for the time being registered with the central office.

• (3) For paragraph 10 of Schedule 2 to the 1986 Act (offences relating to society name) there shall be substituted the following paragraph—

(10) (1) If a building society does not— (a) paint or affix its registered name; or (b) keep its registered name painted or affixed, as required by paragraph 9(2) above, the society shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (2) A building society which, without reasonable excuse, does not comply with paragraph 9(2A) above shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (3) If an officer of a building society or a person on its behalf issues or authorises the issue of any document mentioned in paragraph 9(2A)(a) to (g) above, in which the society’s registered name is not stated as required by that paragraph, he shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (4) If an officer of a building society or a person on its behalf signs or authorises to be signed on behalf of the building society any document mentioned in paragraph 9(2A)(h) above in which the society’s registered name is not stated as required by that paragraph— (a) he shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale; and (b) he shall be further personally liable to the holder of the bill of exchange, promissory note, cheque or order for money or goods for the amount of it (unless it is duly paid by the building society). (5) If a building society fails to send to the central office a notice which it is required to send to it under paragraph 9(4) above, the 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.

• (4) After that paragraph there shall be inserted the following paragraphs—

(10A) (1) This paragraph and paragraph 10B below apply where a building society carries on business under a name other than the following, namely— (a) its registered name; (b) its registered name with the omission of the words “Building Society”; and (c) its registered name with an addition which merely indicates that the business is carried on in succession to a former building society with which it has merged. (2) The society shall not, without the written approval of the Commission, carry on business under a name which— (a) would be likely to give the impression that the business is connected with Her Majesty’s Government or with any local authority, or (b) includes any word or expression for the time being specified in regulations made under sub-paragraph (3) below. (3) The Commission may, with the consent of the Treasury, by regulations— (a) specify words or expressions for the use of which as or as part of a business name the approval of the Commission is required by sub-paragraph (2) above, and (b) in relation to any such word or expression, specify a Government department or other body for the purposes of sub-paragraph (4) below. (4) Where the society proposes to carry on business under a name which is or includes any such word or expression, and a government department or other body is specified under sub-paragraph (3)(b) above in relation to that word or expression, the society shall— (a) request (in writing) the relevant body to indicate whether (and if so why) it has any objections to the proposal, and (b) submit to the Commission a statement that such a request has been made and a copy of any response received from the relevant body. (5) For the purposes of this paragraph “local authority” means— (a) any local authority within the meaning of the Local Government Act 1972, the Common Council of the City of London or the Council of the Isles of Scilly; (b) any local authority within the meaning of the Local Government etc. (Scotland) Act 1994; (c) any district council within the meaning of the Local Government Act (Northern Ireland) 1972. (10B) (1) Paragraph 9(2A) above shall have effect as if after the words “in legible characters” there were inserted the words “which are reasonably prominent”. (2) The society shall in all documents mentioned in paragraph 9(2A) above state in legible characters an address in the United Kingdom at which service of any document relating in any way to the business will be effective. (3) The society shall also in any premises where the business is carried on and to which the members of the society, the customers of the business or suppliers of any goods or services to the business have access, display in a prominent position so that it may easily be read by such persons a notice containing the society’s registered name and the address mentioned in sub-paragraph (2) above. (4) The society shall secure that the registered name and the address mentioned in sub-paragraph (2) above is immediately given, by written notice, to any person with whom anything is done or discussed in the course of the business and who asks for the registered name or the address. (5) The Commission may, with the consent of the Treasury, by regulations require a notice under sub-paragraph (3) or (4) above to be displayed or given in a specified form. (10C) (1) A building society which contravenes paragraph 10A(2) above shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (2) A building society which, without reasonable excuse, does not comply with paragraph 9(2A) or 10B(2), (3) or (4) above, or any regulations made under paragraph 10B(5) above, shall be liable on summary conviction to a fine not exceeding level 3 on the standard scale. (3) Where paragraph 10A above applies any legal proceedings brought by the society to enforce a right arising out of a contract made in the course of the business in respect of which the society was, at the time the contract was made, in breach of paragraph 9(2A) or 10B(2), (3) or (4) above shall be dismissed if the defendant (or, in Scotland, the defender) to the proceedings shows— (a) that he has a claim against the plaintiff (pursuer) arising out of that contract which he has been unable to pursue by reason of the plaintiff’s (pursuer's) breach of paragraph 9(2A) or 10B(2), (3) or (4) above, or (b) that he has suffered some financial loss in connection with the contract by reason of the latter’s breach of paragraph 9(2A) or 10B(2), (3) or (4) above, unless the court before which the proceedings are brought is satisfied that it is just and equitable to let the proceedings continue. (4) Sub-paragraph (3) above is without prejudice to the right of any person to enforce such rights as he may have against another person in any proceedings brought by that person. (5) Regulations made under paragraph 10A(3) or 10B(5) above shall be made by statutory instrument subject to annulment by resolution of either House of Parliament. (6) Such regulations may contain such transitional provisions and savings as the Commission thinks fit, and may make different provision for different cases or classes of case.

Access to registers of members

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• (1) For sub-paragraphs (1) and (2) of paragraph 15 of Schedule 2 to the 1986 Act (right of members to obtain particulars from register) there shall be substituted the following sub-paragraphs—

(1) At any time when a building society— (a) has had its authorisation revoked under section 43; and (b) has not been re-authorised under section 44, a member of the society shall, subject to sub-paragraph (1A) below, have the right to obtain, from the register kept under paragraph 13 above, the names and addresses of members of the society, for the purpose of communicating with them on a subject relating to the affairs of the society. (1A) Sub-paragraph (1) above shall not apply unless the member in question— (a) is qualified under the rules of the society to join in a members' requisition for a special meeting, or to join in nominating a person for election as a director; or (b) would be so qualified if any requirements as to length of time a person must have been a shareholding or borrowing member were omitted. (2) If, at any time not falling within sub-paragraph (1) above, a member of a building society who is qualified under the rules of the society to join in a members' requisition for a special meeting, or to join in nominating a person for election as a director, makes a written application to the Commission for the right to obtain names and addresses from the register, the Commission— (a) if satisfied that the applicant— (i) requires that right for the purpose of communicating with members of the society on a subject relating to its affairs; and (ii) has not, since making the application, voluntarily ceased to be a member of the society; and (b) having regard to the interests of the members as a whole and to all the other circumstances; and (c) on payment by the applicant of a fee of £25 or such other amount as may be prescribed, may direct that the applicant shall have the right to obtain from the register the names and addresses of the members for the purpose of communicating with them on that subject.

• (2) After sub-paragraph (6) of that paragraph there shall be inserted the following sub-paragraphs—

(7) No information obtained under sub-paragraph (1) or (2) above or this sub-paragraph and relating to a member of the society may be disclosed except— (a) with the consent of that member; or (b) in the case of information obtained under sub-paragraph (1) or (2) above, for purposes connected with the purpose mentioned in that paragraph. (8) Any person who discloses information in contravention of sub-paragraph (7) above shall be liable— (a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or both; and (b) on summary conviction, to a fine not exceeding the statutory maximum. (9) The Treasury may, by regulations, prescribe the amount of any fees payable under sub-paragraph (2) above; and regulations under this sub-paragraph may include— (a) provision for any fees so payable to be reduced or for payment of any fees to be waived by the Commission in circumstances determined by or under the regulations; and (b) such incidental, supplementary and transitional provision as appears to the Treasury to be necessary or expedient. (10) The power to make regulations under sub-paragraph (9) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. (11) The amounts received by the Commission under sub-paragraph (2) above shall be applied as an appropriation in aid of money provided by Parliament for the expenses of the Commission under this Act, and in so far as not so applied, shall be paid into the Consolidated Fund.

Transactions with directors and persons connected with them

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After section 66 of the 1986 Act there shall be inserted the following section—

(66A) (1) This section applies where a building society enters into a transaction the parties to which include— (a) a director of the society; or (b) a person connected with such a director, and the board of directors, in connection with the transaction, exceed any limitation on their powers by reason of anything included in the society’s constitution, that is to say, its memorandum and rules. (2) The transaction is voidable at the instance of the society. (3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (1)(a) or (b) above, and any director of the society who authorised the transaction, is liable— (a) to account to the society for any gain which he has made directly or indirectly by the transaction, and (b) to indemnify the society for any loss or damage resulting from the transaction. (4) Nothing in the above provisions shall be construed as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the society may arise. (5) The transaction ceases to be voidable if— (a) restitution of any money or other asset which was the subject-matter of the transaction is no longer possible, or (b) the society is indemnified for any loss or damage resulting from the transaction, or (c) rights acquired bona fide for value and without actual notice of the directors' exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or (d) the transaction is ratified by the society in general meeting, by ordinary or special resolution or otherwise as the case may require. (6) A person other than a director of the society is not liable under subsection (3) above if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers. (7) This section does not affect the operation of sub-paragraph (1) of paragraph 17 of Schedule 2 in relation to any party to the transaction not within subsection (1)(a) or (b) above. But where a transaction is voidable by virtue of this section and valid by virtue of that sub-paragraph in favour of such a person, the court may, on the application of that person or of the society, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just. (8) In this section “transaction” includes any act; and the reference in subsection (1) above to limitations under the society’s constitution includes limitations deriving— (a) from a resolution of the society passed at a general or special meeting or on a postal ballot; or (b) from any agreement between the members of the society.

Application of certain insolvency legislation

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• (1) After section 90 of the 1986 Act there shall be inserted the following section—

(90A) For the purpose of— (a) enabling voluntary arrangements to be approved in relation to building societies, (b) enabling administration orders to be made in relation to building societies, and (c) making provision with respect to persons appointed in England and Wales or Northern Ireland as receivers and managers of building societies' property, the enactments specified in paragraph 1(2) of Schedule 15A to this Act shall apply in relation to building societies with the modifications specified in that Schedule.

• (2) After Schedule 15 to the 1986 Act there shall be inserted, as Schedule 15A, the provisions set out in Schedule 6 to this Act (application of other companies insolvency legislation to building societies).

Abolition of priority liquidation distribution rights

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In section 100 of the 1986 Act (distribution and share rights), the following provisions (which confer rights to priority liquidation distributions) shall cease to have effect, namely—

• (a) in subsection (2), paragraph (c) and the word “and” immediately before that paragraph; and

• (b) subsections (5) and (6).

Protective provisions for specially formed successors

41

For section 101 of the 1986 Act there shall be substituted the following section—

(101) (1) No company specially formed by a building society to be its successor shall, at any time during the protective period— (a) offer for sale or invite subscription for any shares in the company or allot or agree to allot any such shares with a view to their being offered for sale, or (b) allot or agree to allot any share in the company, or (c) register a transfer of shares in the company, if the effect of the offer, the invitation, the allotment or the registration of the transfer would be that more shares than the permitted proportion would be held by any one person (other than the society), or by any two or more persons who are parties to a concert party agreement which relates to shares in the company. (2) The articles of association of the company shall include provision such as will secure that the company does not offer, invite subscription for, allot or register transfers of, shares in contravention of subsection (1) above and no alteration in those provisions may be made by the company during the protective period. (3) Any provision (including any altered provision) of the company’s articles of association which is to any extent inconsistent with subsection (1) above shall, to that extent, be void; and any allotment or registration of a transfer of shares in contravention of that subsection shall be void. (4) This section shall cease to apply to a company if— (a) a financial institution becomes a subsidiary undertaking of the company, or the company or such an undertaking acquires the whole, or substantially the whole, of the business of such an institution; (b) a special resolution to that effect is passed by the requisite majority of the members of the company; or (c) the Bank by notice to the company gives a direction to that effect; and the Bank shall not give such a direction unless it considers it desirable to do so in the interests of the depositors and potential depositors of the company. (5) If this section ceases to apply to a company, any provision included by virtue of subsection (2) above in its articles of association shall cease to have effect. (6) In this section— - “the Bank” means the Bank of England; - “concert party agreement” means an agreement to which section 204 of the Companies Act 1985 or Article 212 of the Companies (Northern Ireland) Order 1986 applies; - “EEA country or territory” has the same meaning as in sections 6A and 6B; - “financial institution” means any of the following, namely— a building society authorised under this Act; an institution authorised under section 3 or 4 of the Insurance Companies Act 1982 to carry on business of a class specified in Schedule 1 or 2 to that Act; a person authorised under Chapter III of Part I of the Financial Services Act 1986 or included in the list maintained by the Bank under section 43 of that Act; an institution authorised under section 9 of the Banking Act 1987; a friendly society authorised under section 32(9) of the Friendly Societies Act 1992; any body formed in or incorporated under the law of an EEA country or territory outside the United Kingdom and carrying on in the United Kingdom business of a kind which, if it were formed in or incorporated under the law of any part of the United Kingdom, it would be precluded from carrying on there without being authorised as mentioned in the preceding paragraphs; - “the permitted proportion”, in relation to shares in the company, is 15 per cent. of the company’s issued share capital; - “the protective period” is the period beginning with the date of the company’s incorporation and ending five years after the vesting date or, if this section ceases to apply to the company, ending on the date on which it so ceases; - “the requisite majority” means a majority of the members having the right to attend and vote at a general meeting of the company, being a majority together holding not less than 75 per cent in nominal value of the shares giving that right; - “transfer”, in relation to shares, does not include a transfer to a person to whom the right to any shares has been transmitted by operation of law; and any expression used in this section and in the Companies Act 1985 or, as regards Northern Ireland, the Companies (Northern Ireland) Order 1986 has the same meaning in this section as in that Act or that Order. (7) For the purposes of this section— (a) shares held by a person in a fiduciary capacity shall be treated as not held by him; (b) shares held by a person as nominee for another shall be treated as held by the other; and (c) shares shall be regarded as held as nominee for another if any voting rights attaching to them are exercisable only on his instructions or with his consent or concurrence. (8) Any reference in this section to shares includes a reference— (a) to any warrant or other instrument entitling the holder to subscribe for shares; and (b) to any certificate or other instrument issued by or on behalf of the company and conferring a right to acquire shares otherwise than by subscription; and for the purposes of subsection (1) above any shares to which any such instrument relates shall be deemed to be held by the holder of the instrument.

Registration of charges by building societies

42

After section 104 of the 1986 Act there shall be inserted the following section—

(104A) (1) For the purpose of securing the registration of charges created by building societies, the Secretary of State may, by order made with the concurrence of the Treasury and after consultation with the Commission, provide that such of the provisions of— (a) Part XII of the Companies Act 1985 (registration of charges); and (b) Part XIII of the Companies (Northern Ireland) Order 1986, as may be specified in the order shall apply in relation to building societies, and charges created by building societies, with such modifications as may be so specified. (2) An order under this section may make different provision for different cases or different areas and may contain such incidental, supplemental and transitional provisions as may appear to the Secretary of State to be necessary or expedient. (3) The power to make an order under this section is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Other amendments of 1986 Act

43

Schedule 7 to this Act (which contains other amendments of the 1986 Act including some that are minor amendments or amendments consequential on the foregoing provisions of this Act) shall have effect.

Supplemental

Financial provisions

44

There shall be paid out of money provided by Parliament any increase attributable to this Act in the sums payable out of money so provided under the 1986 Act.

Minor and consequential amendments

45

• (1) In section 10 of the Bankers' Books Evidence Act 1879 (interpretation of “legal proceeding” etc.), in the definition of “legal proceeding” for the words from “an arbitration” to the end there shall be substituted the following paragraphs—

(a) an arbitration; (b) an application to, or an inquiry or other proceeding before, the Solicitors Disciplinary Tribunal or any body exercising functions in relation to solicitors in Scotland or Northern Ireland corresponding to the functions of that Tribunal; and (c) an investigation of a complaint by the adjudicator of a recognised scheme for the purposes of section 83 of the Building Societies Act 1986.

• (2) In paragraph 2(3) of Schedule 12 to the Finance Act 1988 (meaning of “financial stock” in relation to a building society), for the words “by virtue of regulations under section 21(7) of the Building Societies Act 1986 (liquid assets etc.)” there shall be substituted the words “in liquid form (within the meaning given by section 45(7) of the Building Societies Act 1986)”.

Transitional provisions, savings and repeals etc

46

• (1) The transitional provisions and savings contained in Schedule 8 to this Act shall have effect; but those provisions and savings are without prejudice to sections 16 and 17 of the Interpretation Act 1978 (effect of repeals).

• (2) The enactments and instruments specified in Schedule 9 to this Act are hereby repealed or revoked to the extent specified in the third column of that Schedule.

Short title, interpretation, commencement and extent

47

• (1) This Act may be cited as the Building Societies Act 1997.

• (2) In this Act “the 1986 Act” means the Building Societies Act 1986 and expressions which are also used in that Act have the same meanings as in that Act.

• (3) This Act, except—

• (a) sections 40 and 41 above;

• (b) paragraphs 9 and 10 of Schedule 8 to this Act and section 46(1) above so far as relating to those paragraphs; and

• (c) section 46(2) above and Schedule 9 to this Act so far as relating to the repeals in section 100 of the 1986 Act and the revocations in the Building Societies (Transfer of Business) Regulations 1988,

shall come into force on such day as the Treasury may by order made by statutory instrument appoint, and different days may be appointed for different purposes or for building societies of different descriptions.

• (4) Where any enactment amended or repealed by this Act extends to any part of the United Kingdom, the amendment or repeal extends to that part.

• (5) Subject to subsection (4) above, this Act extends to Northern Ireland.

SCHEDULE 1

Capacity of society and power of directors to bind it

Capacity of society not limited by its memorandum

16

• (1) The validity of an act done by a building society shall not be called into question on the ground of lack of capacity by reason of anything included in the society’s memorandum.

• (2) A member of a building society may bring proceedings to restrain the doing of an act which but for sub-paragraph (1) above would be beyond the society’s capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.

• (3) It remains the duty of the directors of a building society to observe any limitations on their powers flowing from the society’s memorandum; and action by the directors which but for sub-paragraph (1) above would be beyond the society’s capacity may only be ratified by the society by special resolution.

• (4) A resolution ratifying such action shall not affect any liability incurred by the directors or any other person; relief from any such liability must be agreed to separately by special resolution.

Power of directors to bind society

17

• (1) In favour of a person dealing with a building society in good faith, the power of the board of directors to bind the society, or authorise others to do so, shall not be limited by reason of anything included in the society’s constitution, that is to say, its memorandum and rules.

• (2) For this purpose—

• (a) a person deals with a building society if he is a party to any transaction or other act to which the society is a party;

• (b) a person shall not be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the society’s constitution; and

• (c) a person shall be presumed to have acted in good faith unless the contrary is proved.

• (3) The references above to limitations on the directors' powers under the society’s constitution include limitations deriving from a resolution of the society passed at a general meeting or special meeting or on a postal ballot, or from any agreement between the members of the society.

• (4) Notwithstanding anything in paragraph 3(2) above, sub-paragraph (1) above applies in relation to members of the society, and to persons claiming on account of members or under the rules of the society, as it applies in relation to other persons.

• (5) Sub-paragraph (1) above does not affect any right of a member of the society to bring proceedings to restrain the doing of an act which is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.

• (6) Nor does that sub-paragraph affect any liability incurred by the directors, or any other person, by reason of the directors' exceeding their powers.

No duty to enquire as to capacity of society etc.

18

• (1) A party to a transaction with a building society is not bound to enquire as to whether it is permitted by the society’s constitution or as to any limitation on the powers of the board of directors to bind the society or authorise others to do so.

• (2) Notwithstanding anything in paragraph 3(2) above, sub-paragraph (1) above applies in relation to members of the society as it applies in relation to other persons.

SCHEDULE 2

Discharge of mortgages: supplementary provisions

Main provisions

1

• (1) When all money intended to be secured by a mortgage given to a building society has been fully paid or discharged, the society may endorse on or annex to the mortgage one or other of the following—

• (a) a receipt in the prescribed form signed by any person acting under the authority of the board of directors;

• (b) a reconveyance of the mortgaged property to the mortgagor;

• (c) a reconveyance of the mortgaged property to such person of full age, and on such trusts (if any), as the mortgagor may direct.

• (2) Where in pursuance of sub-paragraph (1) above a receipt is endorsed on or annexed to a mortgage, not being a charge or incumbrance registered under the Land Registration Act 1925, the receipt shall operate in accordance with section 115(1), (3), (6) and (8) of the Law of Property Act 1925 (discharge of mortgages by receipt) in the like manner as a receipt which fulfils all the requirements of subsection (1) of that section.

• (3) Section 115(9) of the Law of Property Act 1925 shall not apply to a receipt in the prescribed form endorsed or annexed by a building society in pursuance of sub-paragraph (1) above; and in the application of that subsection to a receipt so endorsed or annexed which is not in that form, the receipt shall be taken to be executed in the manner required by the statute relating to the society if it is signed as mentioned in sub-paragraph (1)(a) above.

• (4) The foregoing sub-paragraphs shall, in the case of a mortgage of registered land, have effect without prejudice to the operation of the Land Registration Act 1925 or any rules in force under it.

• (5) In this paragraph—

• “mortgage” includes a further charge;

• “the mortgagor”, in relation to a mortgage, means the person for the time being entitled to the equity of redemption; and

• “registered land” has the same meaning as in the Land Registration Act 1925.

• (6) This paragraph does not extend to Scotland.

Application of paragraph 1 to Northern Ireland

2

• (1) In its application to Northern Ireland, paragraph 1 above shall have effect with the following modifications.

• (2) In sub-paragraph (1) after the words “on such trusts” there shall be inserted the words “or uses”.

• (3) In sub-paragraph (2)—

• (a) for the words from “charge” to “Property Act 1925” there shall be substituted the words “charge on registered land, the receipt shall operate in accordance with Article 3(1), (7) and (9) of the Property (Discharge of Mortgage by Receipt) (Northern Ireland) Order 1983”; and

• (b) for the words “subsection (1) of that section” there shall be substituted the words “paragraph (1) of that Article”.

• (4) For sub-paragraphs (3) and (4) there shall be substituted the following sub-paragraphs—

(3) If the mortgage is registered in accordance with the Registration of Deeds Act (Northern Ireland) 1970, the registrar under that Act shall— (a) on production of the receipt mentioned in sub-paragraph (1) above make a note in the Abstract Book against the entry relating to the mortgage that the mortgage is satisfied; and (b) grant a certificate, either on the mortgage or separately, that the mortgage is satisfied. (4) The certificate granted under sub-paragraph (3)(b) above shall— (a) be received in all courts and proceedings without further proof; and (b) have the effect of clearing the register of the mortgage.

• (5) In sub-paragraph (5) for the definition of “registered land” there shall be substituted the following definition—

“registered land” means land the title to which is registered under Part III of the Land Registration Act (Northern Ireland) 1970.

Power to prescribe form of documents

3

• (1) The Chief Registrar may make rules for prescribing anything authorised or required by paragraph 1 above to be prescribed; and in this Schedule “prescribed” means prescribed by rules made under this paragraph.

• (2) The power to make rules under this paragraph shall be exercisable by statutory instrument.

SCHEDULE 3

Directions: supplementary provisions

Preliminary

1

In this Schedule “direction” means a direction under section 36(3), (5), (6), (7) or (10).

Procedure for giving proposed direction

2

• (1) If the Commission proposes to give a direction, it shall serve on the society and, subject to paragraph 5 below, on every director of the society and its chief executive a notice stating—

• (a) that the Commission proposes to give the direction;

• (b) what the direction will be;

• (c) the grounds for giving it; and

• (d) that the society may make representations with respect to the proposed direction within such period of not less than 14 days as may be specified in the notice and that, if the society so requests, the Commission will afford to it an opportunity of being heard by the Commission within that period.

• (2) If a direction proposed to be given to the society includes a requirement for the removal from office of any officer of the society, the Commission shall also serve the notice specified in sub-paragraph (1) above on the officer whose removal is proposed giving him the like right to make representations and to be heard with respect to his proposed removal from office.

• (3) The Commission shall—

• (a) before deciding whether to give a direction and, if so, what direction, consider any representations made in accordance with sub-paragraph (1) or (2) above; and

• (b) except where paragraph 3 below applies, serve on the society and, subject to paragraph 5 below, on every director of and the chief executive of the society and every other person on whom a notice was served under sub-paragraph (2) above, a notice stating its decision.

• (4) If the Commission decides to give a direction, the notice under sub-paragraph (3) above shall—

• (a) specify the direction, and

• (b) state the grounds for the decision to give it.

• (5) The Commission may not give a direction on grounds other than those stated, or grounds included in those stated, in the notice served by it under sub-paragraph (1) above.

Procedure for giving different direction

3

• (1) This paragraph applies where the Commission has decided to give a direction but proposes to give a direction different from and more onerous than that stated in the notice served by the Commission under paragraph 2(1) above.

• (2) The Commission shall serve on the society and, subject to paragraph 5 below, on every director of the society and its chief executive, a notice stating—

• (a) what direction the Commission proposes to give;

• (b) the grounds for the giving of that direction instead of the direction stated in the notice under paragraph 2(1) above; and

• (c) that the society may make representations with respect to the direction the Commission proposes to give within such period of not less than seven days as may be specified in the notice and that, if the society so requests, the Commission will afford to it an opportunity of being heard by the Commission within that period.

• (3) If any direction proposed to be given to the society includes a requirement for the removal from office of any officer of the society, the Commission shall also serve the notice specified in sub-paragraph (2) above on the officer whose removal is proposed giving him the like right to make representations and to be heard with respect to his proposed removal from office.

• (4) The Commission shall—

• (a) before deciding whether to give a direction different from that stated in the notice served under paragraph 2(1) above and, if so, what direction, consider any representations made in accordance with sub-paragraph (2) or (3) above; and

• (b) serve on the society and, subject to paragraph 5 below, on every director of and the chief executive of the society and every other person on whom a notice was served under sub-paragraph (3) above, a notice stating its decision.

• (5) If the Commission decides to give a different direction, the notice under sub-paragraph (4) above shall—

• (a) specify the direction, and

• (b) state the grounds for the decision to give it.

• (6) The Commission may not give a direction on grounds other than those stated, or grounds included in those stated, in the notice served by it under sub-paragraph (2) above.

Different directions on appeal

4

• (1) The modifications of the provisions of paragraph 2 and 3 above in their application to the giving of a different direction by the Commission in pursuance of a direction of an appeal tribunal under section 47(6) or (7A) are as follows.

• (2) The notice under paragraph 2(1) shall be served on the society and the other persons there specified within the period of 14 days beginning with the date on which the Commission received notice of the tribunal’s decision under section 47(10); and a copy shall also be sent within that period to the tribunal.

• (3) The notice under paragraph 2(1) may specify, as the period within which representations may be made, a period of not less than 7 days.

• (4) If the Commission serves a notice under paragraph 3(2) on the society and the other persons there specified it shall send a copy of the notice to the tribunal.

Notice to directors and chief executives

5

Where any provision of this Schedule requires notice of any matter to be served on every director of a building society, that requirement is satisfied by serving notice on each director whose appointment has been officially notified and the non-receipt of a notice of a matter by a director or the chief executive does not affect the validity of any action on the part of the Commission.

SCHEDULE 4

Part I — Directions under section 42B(3)

Preliminary

1

This Part of this Schedule applies where a direction is given under section 42B(3) (“the direction”).

Compensation for loss of office

2

• (1) The consent of the Commission shall be sufficient authority for the provision for any such compensation as is mentioned in section 96(1)(a).

• (2) A resolution of the board of directors passed in pursuance of the direction shall be sufficient authority for any such payments as are mentioned in section 96(1)(b).

Statements to members

3

• (1) The following provisions of this paragraph shall apply in place of paragraph 1 of Schedule 16.

• (2) The society shall send to every member entitled to notice of a meeting of the society, a statement containing—

• (a) the particulars required, in relation to prescribed matters, by regulations under section 42B(8); and

• (b) particulars of any other matters required by the Commission in the case of the particular transfer of engagements,

with or without other particulars regarding that transfer.

• (3) The statement shall be sent—

• (a) where the Commission has given the society a direction under section 42B(1)(a), within the period (not being less than 28 days) specified in the notice of confirmation under section 42C(2)(b);

• (b) where the Commission has not given the society such a direction, within 14 days of the board of directors passing a resolution in pursuance of the direction.

• (4) No statement shall be sent unless its contents, so far as they concern the prescribed matters or any matter of which particulars are required to be given under sub-paragraph (2)(b) above, have been approved by the Commission.

• (5) A failure to comply with a requirement of this paragraph shall not invalidate the transfer of engagements; but, if the society fails without reasonable excuse to comply with such a requirement 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.

Application for confirmation

4

No application for confirmation by the Commission of the transfer of engagements may be made under Part III of Schedule 16 until after the society has complied with the requirements of paragraph 3 above.

Grounds for not confirming transfer

5

Section 95 shall apply as if—

• (a) for paragraphs (a) and (b) of subsection (4) there were substituted the following paragraph—

(a) the members or a proportion of them would be unreasonably prejudiced by the transfer;

; and

• (b) in subsection (6), for the words “paragraphs (a), (b) and (c)” there were substituted the words “paragraphs (a) and (c)” and, in paragraph (a), the words “, including the calling of a further meeting,” were omitted.

Part II — Directions under section 42B(4)

Preliminary

6

This Part of this Schedule applies where a direction is given under section 42B(4) (“the direction”).

Compensation for loss of office

7

• (1) The consent of the Commission shall be sufficient authority for the provision for any such compensation as is mentioned in section 99(2)(a).

• (2) A resolution of the board of directors passed in pursuance of the direction shall be sufficient authority for any such payments as are mentioned in section 99(2)(b).

Increased remuneration

8

If the Commission consents to the inclusion of any such provision as is mentioned in section 99A(1), it shall not be necessary for an ordinary resolution approving the provision to be put before a meeting of the society.

Statements to members

9

• (1) The following provisions of this paragraph shall apply in place of Part I of Schedule 17.

• (2) The society shall send to every member entitled to notice of a meeting of the society, a statement containing—

• (a) the particulars required, in relation to prescribed matters, by regulations under section 42B(8); and

• (b) particulars of any other matters required by the Commission in the case of the particular transfer of business,

with or without other particulars regarding that transfer.

• (3) The statement shall be sent—

• (a) where the Commission has given the society a direction under section 42B(1)(b), within the period (not being less than 28 days) specified in the notice of confirmation under section 42C(2)(b);

• (b) where the Commission has not given the society such a direction, within 14 days of the board of directors passing a resolution in pursuance of the direction.

• (4) No statement shall be sent unless its contents, so far as they concern the prescribed matters or any matter of which particulars are required to be given under sub-paragraph (2)(b) above, have been approved by the Commission.

• (5) A failure to comply with a requirement of this paragraph shall not invalidate the transfer of business; but, if the society fails without reasonable excuse to comply with such a requirement 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.

Application for confirmation

10

No application for confirmation by the Commission of the transfer of business may be made under Part II of Schedule 17 until after the society has complied with the requirements of paragraph 9 above.

Grounds for not confirming transfer

11

Section 98 shall apply as if—

• (a) for paragraphs (a) and (b) of subsection (3) there were substituted the following paragraph—

(a) the members or a proportion of them would be unreasonably prejudiced by the transfer;

;

• (b) in subsection (5), for the words “paragraphs (a), (b), (c) and (d)” there were substituted the words “paragraphs (a), (c) and (d)”; and

• (c) in subsection (6), the words “the calling of a further meeting,” were omitted.

SCHEDULE 5

Part I — [Part I of Schedule 17 to 1986 Act]

Issue of statement or summary to members

Preliminary

1

In this Part of this Schedule—

• “prescribed matters” in relation to any transfer of the business of a building society to its successor, means the matters relating to the transfer, the society, its officers, members or depositors, or the successor, which are prescribed in regulations made under paragraph 5(1) below;

• “transfer statement”, in relation to a transfer of business by a building society, means the statement with respect to the transfer which may be sent or handed to members of the society under paragraph 2 below;

• “transfer summary”, in relation to a transfer of business by a building society, means the summary of the transfer statement which may be sent to members of the society under that paragraph.

Duty to send transfer statements or summaries to members

2

A building society which desires to transfer its business shall, in accordance with this Part of this Schedule, send a transfer statement, or a transfer summary, to every member entitled to notice of a meeting of the society.

3

• (1) A transfer statement, in relation to a transfer of business by a building society, shall contain—

• (a) the particulars required, in relation to the prescribed matters, by the regulations made under paragraph 5(1) below, and

• (b) particulars of any other matters required by the Commission in the case of the particular transfer,

with or without other particulars regarding the transfer.

• (2) A transfer summary, in relation to a transfer of business by a building society, shall contain—

• (a) the information required by the regulations made under paragraph 5(2) below, and

• (b) any other information required by the Commission in the case of the particular transfer,

with or without other particulars regarding the transfer.

4

• (1) Subject to sub-paragraph (3) below, a building society shall, in relation to a transfer of business, include a transfer statement, or a transfer summary, in or with the notice to be sent to its members of the meeting of the society at which the requisite transfer resolutions are to be moved.

• (2) Subject to sub-paragraph (3) below, where a building society sends a transfer summary, a transfer statement—

• (a) shall be handed forthwith and free of charge to any member to whom the summary was sent who asks for such a statement at an office or branch of the society; and

• (b) shall be sent forthwith and free of charge to any such member who asks for such a statement otherwise than at such an office or branch.

• (3) No transfer statement shall be sent or handed to a member unless its contents, so far as they concern the prescribed matters or any matter of which particulars are required to be given under paragraph 3(1)(b) above, have been approved by the Commission.

5

• (1) The Commission, with the consent of the Treasury, may make regulations for the purpose of specifying, as prescribed matters, the matters of which transfer statements are to give particulars; and the regulations may also require particulars to be given of any alternatives to the particular transfer which were available to the society making the transfer.

• (2) The Commission, with the consent of the Treasury, may make regulations for the purpose of specifying the information which transfer summaries are to give.

• (3) Any power to make regulations under this paragraph is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Part II — [Part IA of Schedule 17 to 1986 Act]

Notification of proposals for transfers of business

Preliminary

5A

In this Part of this Schedule—

• “requisite particulars”, in relation to a transfer proposal, means the particulars required by paragraph 5B(2) below to be given in a transfer proposal notification;

• “transfer”, in relation to a building society, means a transfer of the whole of its business to a company under section 97;

• “transfer proposal”, in relation to a building society, means a proposal in writing by a company for a transfer by the society to the company, with or without terms for the transfer; and “proposer” has a corresponding meaning;

• “transfer proposal notification” means a notification containing the requisite particulars of a transfer proposal;

• “transfer resolutions”, in relation to a building society, means the resolutions required for the approval of a transfer by the society under section 97.

Duty to notify members

5B

• (1) Subject to sub-paragraph (3) below, it shall be the duty of a building society receiving a transfer proposal to send, in accordance with this Part of this Schedule, a transfer proposal notification in respect of the proposal to every member entitled to notice of a meeting of the society.

• (2) A transfer proposal notification must contain the following particulars—

• (a) the fact that a transfer proposal has been made, and

• (b) the identity of the proposer;

with or without other particulars regarding the proposal.

• (3) Sub-paragraph (1) above does not require a transfer proposal notification to be sent to members if the proposer has requested in writing that the requisite particulars are to be treated as confidential; and, where such a request is made and is at a later date withdrawn in writing, the society receiving the proposal shall, for the purposes of this Part of this Schedule, treat the proposal as having been received on that date instead of any earlier date.

5C

A building society shall include in or with every notice of its annual general meeting a transfer proposal notification with respect to any transfer proposal, other than a proposal of which notice has already been given under this paragraph—

• (a) received by it during the period of 12 months ending with the ninth month of the last financial year of the society before that meeting; or

• (b) treated by paragraph 5B(3) above as having been received by it during the last three months of that financial year;

and the society may also include, under this paragraph, a transfer proposal notification with respect to any proposal received, or treated as received, by it after the end of either period.

Duty to notify central office

5D

• (1) Where a building society sends a transfer proposal notification to its members under paragraph 5C above in connection with a meeting of the society, it shall send a copy of the notification to the central office at least 14 days before the date of the meeting.

• (2) The central office shall keep the copy of a transfer proposal notification received by it from a building society in the public file of that society.

Penalty

5E

If default is made by a building society in complying with paragraph 5C or 5D 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.

SCHEDULE 6

Part I — General mode of application

1

• (1) Subject to the provisions of this Schedule, the enactments specified in sub-paragraph (2) below (referred to in this Schedule as “the enactments”) apply in relation to building societies as they apply in relation to companies limited by shares and registered under the Companies Act 1985 or (as the case may be) the Companies (Northern Ireland) Order 1986.

• (2) The enactments referred to in sub-paragraph (1) above are—

• (a) Parts I and II, Chapter I of Part III, Parts VI, VII, XII and XIII, section 434 and Part XVIII of the Insolvency Act 1986, or

• (b) Parts I to IV, VII, XI and XII and Article 378 of the Insolvency (Northern Ireland) Order 1989,

and, in so far as they relate to offences under any such enactment, sections 430 and 432 of, and Schedule 10 to, the Insolvency Act 1986 or Article 2(6) and 373 of, and Schedule 7 to, the Insolvency (Northern Ireland) Order 1989.

2

• (1) The enactments shall, in their application to building societies, have effect with the substitution—

• (a) for “company” of “building society”;

• (b) for “the registrar of companies” or “the registrar” of “the central office”;

• (c) for “the articles” of “the rules”; and

• (d) for “registered office” of “principal office”.

• (2) In the application of the enactments to building societies—

• (a) every reference to the officers, or to a particular officer, of a company shall have effect as a reference to the officers, or to the corresponding officer, of the building society and as including a person holding himself out as such an officer; and

• (b) every reference to an administrative receiver shall be omitted.

3

• (1) Where any of the enactments as applied to building societies requires a notice or other document to be sent to the central office, it shall have effect as if it required the central office to keep the notice or document in the public file of the society concerned and to record in that file the date on which the notice or document is placed in it.

• (2) Where any of the enactments, as so applied, refers to the registration, or to the date of registration, of such a notice or document, that enactment shall have effect as if it referred to the placing of the notice or document in the public file or (as the case may be) to the date on which it was placed there.

4

• (1) Rules may be made under section 411 of the Insolvency Act 1986 or, as the case may be, Article 359 of the Insolvency (Northern Ireland) Order 1989 for the purpose of giving effect, in relation to building societies, to the provisions of the enactments.

• (2) An order made by the competent authority under section 414 of the Insolvency Act 1986 may make provision for fees to be payable under that section in respect of proceedings under the enactments and the performance by the official receiver or the Secretary of State of functions under them.

• (3) An order made by the Department of Economic Development under Article 361 of the Insolvency (Northern Ireland) Order 1989 may make provision for fees to be payable under that Article in respect of proceedings under the enactments and the performance by the official receiver or that Department of functions under them.

5

Any enactment which specifies a money sum altered by order under section 416 of the Insolvency Act 1986, or, as the case may be, Article 362 of the Insolvency (Northern Ireland) Order 1989, (powers to alter monetary limits) applies with the effect of the alteration.

Part II — Modified Application of Parts I and II and Chapter I of Part III of Insolvency Act 1986

Preliminary

6

In this Part of this Schedule, the Insolvency Act 1986 is referred to as “the Act”.

Voluntary arrangements

7

Section 1 of the Act (proposals for voluntary arrangements) has effect as if—

• (a) it required any proposal under Part I of the Act to be so framed as to enable a building society to comply with the requirements of this Act; and

• (b) any reference to debts included a reference to liabilities owed to the holders of shares in a building society.

8

In section 2 (procedure where nominee is not liquidator or administrator) and section 3 (summoning of meetings) of the Act as applied to a building society, any reference to a meeting of the society is a reference to—

• (a) a meeting of both shareholding and borrowing members of the society; and

• (b) a meeting of shareholding members alone.

9

In section 6 of the Act (challenge of decisions) as applied to a building society, “contributory”—

• (a) means every person liable to contribute to the assets of the society in the event of its being wound up, and

• (b) for the purposes of all proceedings for determining, and all proceedings prior to the determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory, and

• (c) includes persons who are liable to pay or contribute to the payment of—

• (i) any debt or liability of the building society being wound up, or

• (ii) any sum for the adjustment of rights of members among themselves, or

• (iii) the expenses of the winding up;

but does not include persons liable to contribute by virtue of a declaration by the court under section 213 (imputed responsibility for fraudulent trading) or section 214 (wrongful trading) of the Act.

Administration orders

10

• (1) Section 8 of the Act (power of court to make administration order) has effect as if it included provision that, where—

• (a) an application for an administration order to be made in relation to a building society is made by the Commission (with or without other parties); and

• (b) the society has defaulted in an obligation to pay any sum due and payable in respect of any deposit or share,

the society shall be deemed for the purposes of subsection (1) to be unable to pay its debts.

• (2) In subsection (3) of that section, paragraph (c) and, in subsection (4) of that section, the words from “nor where” to the end are omitted.

11

• (1) Subsection (1) of section 9 of the Act (application for administration order) as applied to a building society has effect as if—

• (a) it enabled an application to the court for an administration order to be by petition presented, with or without other parties, by the Commission or by a shareholding member entitled under section 89(3) of this Act to petition for the winding up of the society; and

• (b) the words from “or by the clerk” to “on companies)” were omitted.

• (2) In subsection (2)(a) of that section as so applied, the reference to any person who has appointed, or is or may be entitled to appoint, an administrative receiver of the society is a reference to the Commission (unless it is a petitioner).

• (3) Subsection (3) of that section, and in subsection (4) of that section, the words “Subject to subsection (3),” are omitted.

12

In section 10 of the Act (effect of application for administration order), the following are omitted, namely—

• (a) in subsection (2), paragraphs (b) and (c); and

• (b) subsection (3).

13

In section 11 of the Act (effect of administration order), the following are omitted, namely—

• (a) in subsection (1), paragraph (b) and the word “and” immediately preceding that paragraph;

• (b) in subsection (3), paragraph (b);

• (c) in subsection (4), the words “an administrative receiver of the company has vacated office under subsection (1)(b), or”; and

• (d) subsection (5).

14

In subsection (1) of section 12 of the Act (notification of administration order), the reference to every invoice, order for goods or business letter is a reference to every statement of account, order for goods or services, business letter or advertisement.

15

Subsection (3) of section 13 of the Act (appointment of administrator) has effect as if it enabled an application for an order under subsection (2) of that section to be made by the Commission.

16

• (1) Subject to sub-paragraph (2) below, section 14 of the Act (general powers of administrator) has effect as if it required the administrator of a building society, in exercising his powers under that section—

• (a) to ensure compliance with the provisions of this Act; and

• (b) not to appoint to be a director any person who is not a fit and proper person to hold that position.

• (2) Sub-paragraph (1)(a) above does not apply in relation to section 5, 6 or 7 of this Act or paragraph (a) of the seventh criterion in section 45(3) of this Act.

• (3) In subsection (4) of that section as applied to a building society, the reference to any power conferred by the Act or the Companies Act 1985 or by the memorandum or articles of association is a reference to any power conferred by this Act or by the society’s memorandum or rules.

• (4) Subsection (8) of section 45 of this Act applies for the purposes of sub-paragraph (1)(b) above as it applies for the purposes of the seventh criterion in subsection (3) of that section.

17

• (1) Subject to sub-paragraph (3) below, paragraph 16 of Schedule 1 to the Act (powers of administrators) as applied to a building society has effect as if it conferred power to transfer liabilities in respect of deposits with or shares in the society.

• (2) No transfer under that paragraph shall be a transfer of engagements for the purposes of Part X of this Act.

• (3) No transfer under that paragraph which, apart from sub-paragraph (2) above, would be a transfer of engagements for the purposes of that Part shall be made unless it is approved by the court, or by meetings summoned under section 23(1) or 25(2) of the Act (as modified by paragraph 21 or 23 below).

18

In section 15 of the Act (power to deal with charged property etc.)—

• (a) subsection (1) is omitted; and

• (b) for subsections (3) and (4) there is substituted the following subsection—

(3) Subsection (2) applies to any security other than one which, as created, was a floating charge.

19

• (1) Section 17 of the Act (general duties of administrator) has effect as if, instead of the requirement imposed by subsection (3), it required the administrator of a building society to summon a meeting of the society’s creditors if—

• (a) he is requested, in accordance with the rules, to do so by 500 of the society’s creditors, or by one-tenth, in number or value, of those creditors, or

• (b) he is directed to do so by the court.

• (2) That section also has effect as if it required the administrator of a building society to summon a meeting of the society’s shareholding members if—

• (a) he is requested, in accordance with the rules, to do so by 500 of the society’s shareholding members, or by one-tenth, in number, of those members, or

• (b) he is directed to do so by the court.

20

In subsection (4) of section 19 of the Act (vacation of office) as applied to a building society, the words “in priority to any security to which section 15(1) then applies” are omitted.

21

• (1) Subsection (1) of section 23 of the Act (statement of proposals) as applied to a building society has effect as if—

• (a) the reference to the central office included a reference to the Commission and the Investor Protection Board;

• (b) the reference to all creditors included a reference to all holders of shares in the society; and

• (c) the reference to a meeting of the society’s creditors included a reference to a meeting of holders of shares in the society.

• (2) In subsection (2) of that section as so applied, references to members of the society do not include references to holders of shares in the society.

22

Section 24 of the Act (consideration of proposals by creditors' meeting) as applied to a building society has effect as if any reference to a meeting of creditors included a reference to a meeting of holders of shares in the society.

23

• (1) Section 25 of the Act (approval of substantial revisions) as applied to a building society has effect as if—

• (a) subsection (2) required the administrator to send a statement in the prescribed form of his proposed revisions to the Commission and to the Investor Protection Board; and

• (b) the reference in that subsection to a meeting of creditors included a reference to a meeting of holders of shares in the society.

• (2) In subsection (3) of that section as so applied, references to members of the society do not include references to holders of shares in the society.

24

Subsection (1) of section 27 of the Act (protection of interests of creditors and members) has effect—

• (a) as if it enabled the Commission or Investor Protection Board to apply to the court by petition for an order under that section; and

• (b) in relation to an application by the Commission or that Board, as if the words “(including at least himself)” were omitted.

Receivers and managers

25

In section 38 of the Act (receivership accounts), “prescribed” means prescribed by regulations made by statutory instrument by the Commission.

26

In subsection (1) of section 39 of the Act (notification that receiver or manager appointed), the reference to every invoice, order for goods or business letter is a reference to every statement of account, order for goods or services, business letter or advertisement.

27

Section 40 (payment of debts out of assets subject to floating charge) and sections 42 to 49 (administrative receivers) of the Act are omitted.

Part III — Modified Application of Parts II, III and IV of Insolvency (Northern Ireland) Order 1989

Preliminary

28

In this Part of this Schedule, the Insolvency (Northern Ireland) Order 1989 is referred to as “the Order”.

Voluntary arrangements

29

Article 14 of the Order (proposals for voluntary arrangements) has effect as if—

• (a) it required any proposal under Part II of the Order to be so framed as to enable a building society to comply with the requirements of this Act; and

• (b) any reference to debts included a reference to liabilities owed to the holders of shares in a building society.

30

In Article 15 (procedure where nominee is not liquidator or administrator) and Article 16 (summoning of meetings) of the Order as applied to a building society, any reference to meetings of the society is a reference to—

• (a) a meeting of both shareholding and borrowing members of the society; and

• (b) a meeting of shareholding members alone.

31

In Article 19 of the Order (challenge of decisions) as applied to a building society, “contributory”—

• (a) means every person liable to contribute to the assets of the society in the event of its being wound up, and

• (b) for the purposes of all proceedings for determining, and all proceedings prior to the determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory, and

• (c) includes persons who are liable to pay or contribute to the payment of—

• (i) any debt or liability of the building society being wound up, or

• (ii) any sum for the adjustment of rights of members among themselves, or

• (iii) the expenses of the winding up;

but does not include persons liable to contribute by virtue of a declaration by the High Court under Article 177 (imputed responsibility for fraudulent trading) or Article 178 (wrongful trading) of the Order.

Administration orders

32

• (1) Article 21 of the Order (power of High Court to make administration order) has effect as if it included provision that, where—

• (a) an application for an administration order to be made in relation to a building society is made by the Commission (with or without other parties); and

• (b) the society has defaulted in an obligation to pay any sum due and payable in respect of any deposit or share,

the society shall be deemed for the purposes of paragraph (1) to be unable to pay its debts.

• (2) In paragraph (3) of that Article, sub-paragraph (c) and, in paragraph (4) of that Article, the words from “nor where” to the end are omitted.

33

• (1) Paragraph (1) of Article 22 of the Order (application for administration order) as applied to a building society has effect as if—

• (a) it enabled an application to the High Court for an administration order to be by petition presented, with or without other parties, by the Commission or by a shareholding member entitled under section 89(3) of this Act to petition for the winding up of the society; and