Mutuals' Deferred Shares Bill (HC Bill 145)

1 Power to permit or facilitate the issue of deferred shares

(1) The Treasury may by regulations make provision to permit or facilitate the
issue of deferred shares by a friendly society or mutual insurer.

(2) “Deferred shares” are instruments that—

(a) 5are issued by a friendly society or mutual insurer (“the issuer”) with the
consent of the appropriate authority,

(b) can be transferred but not withdrawn,

(c) prohibit repayment of principal other than—

(i) on the winding up or dissolution of the issuer where all other
10sums due from the issuer to creditors claiming in the winding
up or dissolution are paid in full, or

(ii) where the appropriate authority has consented to the
repayment, and

(d) have such characteristics as are specified in regulations made by the
15Treasury under this paragraph.

(3) Regulations under subsection (1) may modify any of the following—

(a) the Friendly Societies Act 1992 (as amended from time to time);

(b) the Companies Act 2006 (as amended from time to time);

(c) any other primary legislation relating to friendly societies or mutual
20insurers (whenever passed);

(d) any instrument made under the legislation mentioned in any of
paragraphs (a) to (c) (whenever made).

(4) Regulations under subsection (1)—

(a) may not make provision that would permit or facilitate the issue of
deferred shares by a friendly society or mutual insurer where it is not
authorised to do so by its memorandum, rules or constitution;

(b) may make consequential, supplementary, incidental, transitional or
5saving provision;

(c) may make different provision for different purposes.

(5) A deferred share issued by virtue of regulations made under subsection (1) is
not a share within the meaning of the Companies Acts.

(6) The power to make regulations under this section is exercisable by statutory
10instrument.

(7) A statutory instrument containing regulations under this section may not be
made unless a draft of it has been laid before and approved by a resolution of
each House of Parliament.

2 Restriction on voting rights

(1) 15Regulations under section 1(1) must make provision to ensure that no friendly
society or mutual insurer will confer—

(a) more than one vote per person as a member on holders of deferred
shares who are members of the society or insurer by virtue only of
being such a holder;

(b) 20additional voting rights on a member of the society or insurer by virtue
of being a holder of a deferred share where the member is a member
other than by virtue of being such a holder.

(2) Regulations under section 1(1) must make provision prohibiting the holder of
a deferred share who is a member of a friendly society or mutual insurer by
25virtue only of being such a holder from proposing or voting in respect of any
of the following—

(a) a resolution under section 85, 86 or 91 of the Friendly Societies Act 1992
(amalgamation, transfer of engagements or conversions);

(b) a resolution to similar effect in the case of a mutual insurer, including a
30compromise or arrangement proposed at a meeting called under
section 896 of the Companies Act 2006 (court order for holding
meeting);

(c) an arrangement made in pursuance of section 110 of the Insolvency Act
1986 (acceptance of shares etc as consideration for sale of company
35property) or Article 96 of the Insolvency (Northern Ireland) Order 1989
(S.I. 1989 / 2405 (N.I. 19));

(d) such other matters as the regulations may specify.

(3) References in this section to the holder of a deferred share are to the holder of
a deferred share issued by virtue of regulations made under section 1(1).

3 40Definitions

(1) In this Act—

• “the appropriate authority” means—

  (a)

  in relation to a friendly society or mutual insurer which is
  authorised by the Prudential Regulation Authority, the
  45Prudential Regulation Authority; and

  Mutuals\xd5 Deferred Shares BillPage 3

  (b)

  in relation to a friendly society or mutual insurer which is not
  authorised by the Prudential Regulation Authority, the
  Financial Conduct Authority;

• “the Companies Acts” has the same meaning as in the Companies Act
  52006;

• “friendly society” means a friendly society registered and incorporated
  under the Friendly Societies Act 1992;

• “modify” includes amend, repeal or revoke;

• “mutual insurer” means a body corporate that—

  (a)

  10is a mutual undertaking that—

  (i)

  is neither a friendly society nor a registered society
  within the meaning of the Co-operative and
  Community Benefit Societies Act 2014, and

  (ii)

  is of such description as the Treasury may specify by
  15regulations,

  (b)

  has no share capital, and

  (c)

  has permission to effect or carry out contracts of insurance
  under Part 4A of the Financial Services and Markets Act 2000;

• “primary legislation” means—

  (a)

  20an Act of Parliament,

  (b)

  an Act of the Scottish Parliament,

  (c)

  an Act or Measure of the National Assembly for Wales, or

  (d)

  Northern Ireland legislation.

(2) The power to make regulations conferred by paragraph (a)(ii) of the definition
25of “mutual insurer” is exercisable by statutory instrument.

(3) A statutory instrument containing them is subject to annulment in pursuance
of a resolution of either House of Parliament.

4 Short title, commencement and extent

(1) This Act may be cited as the Mutuals’ Deferred Shares Act 2014.

(2) 30This Act shall come into force on such day as the Treasury may by regulations
made by statutory instrument appoint, and different days may be appointed
for different purposes.

(3) This Act extends to the whole of the United Kingdom.