1 Power to permit the use of new classes of redeemable shares and deferred
shares

(1) The Secretary of State may, by regulations, amend the Industrial and Provident
Societies Act 1965, hereafter called “the 1965 Act”, the Friendly Societies Act
51992, hereafter called “the 1992 Act”, the Companies Act 2006 and any
legislation governing a mutual insurer to permit and facilitate the use of new
and additional classes of redeemable shares and deferred shares in a society or
mutual insurer.

(2) This subsection applies to redeemable shares and to deferred shares referred to
10in subsection (1)—

(a) a redeemable share in a society (other than a society incorporated
under the 1992 Act) may be transferable but may not be withdrawable;

(b) a deferred share in a society incorporated under the 1992 Act shall have
such characteristics as may be provided by amendments made to that
15Act by regulations made under this section but shall not be
withdrawable;

(c) a deferred share in a mutual insurer shall have such characteristics as
are specified in regulations made under this Act and shall be subject to
such provisions of the Companies Act 2006 (whether or not they are
20amended or inserted by regulations under this Act) as are applied to
them by such regulations;

(d) regulations made under this Act shall ensure, in respect of redeemable
shares whose use is permitted or facilitated by any such regulations,
that every holder of such shares is or becomes—

(i) a member of the society or mutual insurer;

(ii) 5entitled to only one vote as a member regardless of the value or
number of shares that they hold and regardless of any
entitlement they may have as a result of their participation in
the society or mutual insurer otherwise than as a holder of such
shares;

(iii) 10entitled to only the level of remuneration payable under the
rules of the society or the constitution of the mutual insurer;

(iv) entitled to repayment of the nominal value of the share on
redemption of a redeemable share, or the earlier solvent
liquidation of the society and to no other bonus or part of any
15surplus;

(v) entitled, subject to the provisions of the memorandum or rules
of any society incorporated under the 1992 Act or the
constitution of any mutual insurer, to repayment of the nominal
value of a deferred share on the solvent liquidation of the
20society or the mutual insurer and to no other bonus or part of
any surplus.

(3) The power to make regulations under this Act is exercisable by statutory
instrument and must not be made unless a draft of it has been laid before and
approved by a resolution of each House of Parliament.

2 25Redeemable shares

(1) Regulations made under section 1(1) may provide for a society (other than a
society incorporated under the 1992 Act) to issue either—

(a) shares that will be redeemed on a fixed or ascertainable date stated in
the terms of issue of the share, or

(b) 30shares that can be redeemed on a date chosen either by the society or by
the member who holds the share in accordance with the terms of issue
of the share.

(2) The memorandum or rules of any society may exclude or restrict the issue of
redeemable shares.

(3) 35A society may only issue redeemable shares if it is authorised to do so by its
memorandum or rules.

(4) A society with share capital may only redeem a redeemable share if it has, at
the time of redemption, at least one issued share which is neither redeemable
nor withdrawable.

3 40Terms and manner of redemption of redeemable shares

(1) Regulations made under section 1 may permit the directors or committee of a
society registered under the 1965 Act to determine the terms, conditions and
manner of redemption of shares if they are authorised to do so—

(a) by the society’s rules, or

(b) 45by a resolution of the society.

(2) Regulations made under section 1 may provide that, notwithstanding any
provision of any legislation or of the society’s rules, a resolution under
subsection (1)(b) may be an ordinary resolution, even if it amends the society’s
rules.

(3) 5Where the directors, committee or committee of management can be
authorised by regulations, in accordance with subsection (1), to determine the
terms, conditions and manner of redemption of shares, regulations shall
provide—

(a) that they must do so before the shares are allotted, and

(b) 10that any obligation of the society to state in a statement of capital the
rights attached to the shares extends to the terms, conditions and
manner of redemption.

(4) Where the directors, committee or committee of management are not so
authorised, the terms, conditions and manner of redemption of any
15redeemable shares must be stated in the society’s rules.

(5) Regulations made under section 1 may apply sections 658 to 737 of the
Companies Act 2006, with such modifications as HM Treasury may think fit,
to any society to be permitted by those regulations to issue redeemable shares.

4 Deferred shares

(1) 20Regulations made under section 1(1) may provide for a society incorporated
under the 1992 Act or a mutual insurer to issue deferred shares, being shares
that incorporate a term which prohibits the repayment of any principal to the
shareholders save in either or each of the following events—

(a) the winding up or dissolution of the society or mutual insurer in
25circumstances where all sums due from the society or mutual insurer to
creditors claiming in the winding up or dissolution are paid in full;

(b) the granting of relevant consent by the appropriate authority.

(2) The memorandum or rules of any society or constitution of any mutual insurer
may exclude or restrict the issue of deferred shares.

(3) 30A society may only issue deferred shares if it is authorised to do so by its
memorandum or rules and a mutual insurer may only issue deferred shares if
it is authorised to do so by its constitution.

5 Restriction on voting rights

No holder of a redeemable share or a deferred share, who is a member of a
35society or mutual insurer only by virtue of holding such a share, shall be
entitled to propose, or vote in respect of, any resolution under section 50, 51 or
52 of the 1965 Act, or section 85, 86 or 91 of the 1992 Act (amalgamation,
transfer of engagements or conversion into a company) or any resolution or
proposal to similar effect in the case of a mutual insurer, including a
40compromise or arrangement proposed at a meeting called under section 896 of
the Companies Act 2006 or, in any case, a proposed transfer or sale of business
or property under section 110 of the Insolvency Act 1986.

6 Definitions

In this Act—

Mutuals\xd5 Redeemable and Deferred Shares BillPage 4

• the “appropriate authority” means—

  (a)

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

  (b)

  5in relation to a society or mutual insurer which is not authorised
  by the Prudential Regulation Authority, the Financial Conduct
  Authority;

• a “society” is—

  (a)

  a society registered under the 1965 Act other than a credit union
  10registered under that Act by virtue of the Credit Unions Act
  1979; or

  (b)

  a friendly society incorporated and registered under the
  Friendly Societies Act 1992; or

  (c)

  a body which is a co-operative or mutual undertaking of such
  15description as HM Treasury may specify by order and which is
  established or operates in accordance with the laws of an EEA
  State or any of the Channel Islands or the Isle of Man;

• a “mutual insurer” is a body corporate, other than a society, which has no
  share capital and which has permission to effect or carry out contracts
  20of insurance pursuant to the Financial Services and Markets Act 2000;

• “the 1965 Act” includes the Industrial and Provident Societies Acts 1965
  to 2003, all later Acts amending or replacing them and any secondary
  legislation made under any such Acts;

• “the 1992 Act” includes the Friendly Societies Act, all later Acts amending
  25or replacing it, and any secondary legislation made under any such
  Acts.

7 Short title, commencement and extent

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

(2) 30This Act shall come into force on such day as the Secretary of State may by
order 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.