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Building Societies (Funding) and Mutual Societies (Transfers) Bill


 

Building Societies (Funding) and Mutual Societies (Transfers) Bill

 

 
 

Contents

1   

Funding limit for building societies

2   

Power to alter priorities on dissolution and winding up

3   

Transfers to subsidiaries of other mutuals

4   

Transfers to subsidiaries: distribution of funds

5   

Short title, commencement and extent

 

HL Bill 65                                                                                              

54/2

 
 

Building Societies (Funding) and Mutual Societies (Transfers) Bill

1

 

A

Bill

To

Make provision in relation to funding limits in respect of building societies; to

provide consequential rights to building society members; and to make

provision in connection with the transfer of the business of certain mutual

societies. 

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and

consent of the Lords Spiritual and Temporal, and Commons, in this present

Parliament assembled, and by the authority of the same, as follows:—

1       

Funding limit for building societies

(1)   

In section 7 of the Building Societies Act 1986 (c. 53) (funding limit)—

(a)   

after subsection (6) insert—

“(6A)   

The Treasury may, by order—

(a)   

provide for subsection (1) to have effect as if the

5

reference to 50 per cent were a reference to such greater

percentage (not exceeding 75) as they think appropriate;

(b)   

prohibit a society from applying the increased

percentage unless a resolution of the society of such

description as the Treasury think appropriate is passed

10

in favour of applying the increased percentage.

(6B)   

An order under subsection (6A) is of no effect at any time

unless, at the same time, there is also in force an order under

section 90B (power to alter priorities on dissolution and

winding up).

15

(6C)   

An order under subsection (6A)(a)—

(a)   

may not be amended so as to reduce the percentage

specified in the order;

(b)   

may not be revoked, unless it is replaced by another

such order specifying the same or a greater percentage.”;

20

(b)   

in subsection (8), after “subsection” insert “(6A) or”;

 
HL Bill 65 54/2
 
 

Building Societies (Funding) and Mutual Societies (Transfers) Bill

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(c)   

after subsection (8) insert—

“(8A)   

The power to make an order under subsection (6A) is

exercisable by statutory instrument but no such order may be

made unless a draft of it has been laid before and approved by

a resolution of each House of Parliament.”.

5

(2)   

In section 5 of that Act (establishment, constitution and powers), after

subsection (10) insert—

“(11)   

The Treasury may by order amend subsection (1)(a) so as to alter the

extent to which the making of loans is required to be funded by a

society’s members.

10

(12)   

An order under this section may make such consequential, saving,

supplementary or transitional provision as the Treasury think

necessary or expedient.

(13)   

The consequential provision that may be made by virtue of subsection

(12) includes, in particular, provision amending any the following so

15

far as relating to funding by the members of a society—

(a)   

section 1(1)(a) (functions of the Financial Services Authority in

relation to building societies);

(b)   

section 93(2)(a) (amalgamations);

(c)   

paragraph 2 of Schedule 2 to this Act (memorandum).

20

(14)   

The power to make an order under this section is exercisable by

statutory instrument, but no such order may be made unless a draft of

it has been laid before and approved by a resolution of each House of

Parliament.”.

2       

Power to alter priorities on dissolution and winding up

25

After section 90A of the Building Societies Act 1986 (c. 53) insert—

“90B    

Power to alter priorities on dissolution and winding up

(1)   

The Treasury may by order make provision for the purpose of ensuring

that, on the winding up, or dissolution by consent, of a building society,

any assets available for satisfying the society’s liabilities to creditors or

30

to shareholders are applied in satisfying those liabilities pari passu.

(2)   

Liabilities to creditors do not include—

(a)   

liabilities in respect of subordinated deposits;

(b)   

liabilities in respect of preferential debts;

(c)   

any other category of liability which the Treasury specifies in

35

the order for the purposes of this paragraph.

(3)   

Liabilities to shareholders do not include liabilities in respect of

deferred shares.

(4)   

A preferential debt is a debt which constitutes a preferential debt for the

purposes of any of the enactments specified in paragraph 1 of Schedule

40

15 to this Act (or which would constitute such a debt if the society were

being wound up).

(5)   

An order under this section may—

(a)   

make amendments of this Act;

 
 

Building Societies (Funding) and Mutual Societies (Transfers) Bill

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(b)   

make different provision for different purposes;

(c)   

make such consequential, supplementary, transitional and

saving provision as appears to the Treasury to be necessary or

expedient.

(6)   

The power to make an order under this section is exercisable by

5

statutory instrument but no such order may be made unless a draft of

it has been laid before and approved by a resolution of each House of

Parliament.”.

3       

Transfers to subsidiaries of other mutuals

(1)   

The Treasury may, by order, make such modifications of the transfer

10

provisions as it thinks appropriate to facilitate, or in consequence of, the

transfer of the whole of the business of a mutual society (the transferor) to a

subsidiary of a mutual society (whether or not of the same type) (the

transferee).

(2)   

An order under this section may make provision as to the rights (including

15

rights of and pertaining to membership) in relation to the mutual society of

which the transferee is a subsidiary—

(a)   

of the members of the transferor;

(b)   

of persons who, after the transfer, become customers of the transferee.

(3)   

An order under this section may confer such functions on the Financial

20

Services Authority as the Treasury think appropriate.

(4)   

An order under this section—

(a)   

may make such consequential, saving, supplementary or transitional

provision as the Treasury think appropriate;

(b)   

may make different provision for different purposes.

25

(5)   

The power to make an order under this section is exercisable by statutory

instrument.

(6)   

An order which—

(a)   

makes modifications of a provision mentioned in paragraph (a), (b) or

(c) of subsection (10), or

30

(b)   

amends paragraph (a) or (b) of subsection (11),

   

(whether or not it contains any other provision) must not be made unless a

draft of it has been laid before and approved by resolution of each House of

Parliament.

(7)   

Otherwise, an order is subject to annulment in pursuance of a resolution of

35

either House of Parliament.

(8)   

Modifications include omissions, additions and alterations.

(9)   

A mutual society is—

(a)   

a building society incorporated or deemed to be incorporated under the

Building Societies Act 1986 (c. 53);

40

(b)   

a friendly society within the meaning of the Friendly Societies Act 1992

(c. 40);

(c)   

an industrial and provident society registered or deemed to be

registered under the Industrial and Provident Societies Act 1965 (c. 12).

 
 

Building Societies (Funding) and Mutual Societies (Transfers) Bill

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(10)   

The transfer provisions are—

(a)   

sections 97 to 102D of the Building Societies Act 1986 (c. 53), paragraph

30 of Schedule 2 to that Act and Schedule 17 to that Act;

(b)   

sections 86 and 88 of and Schedule 15 to the Friendly Societies Act 1992

(c. 40);

5

(c)   

section 52 of the Industrial and Provident Societies Act 1965 (c. 12);

(d)   

provision contained in subordinate legislation (within the meaning of

the Interpretation Act 1978) made under any provision mentioned in

paragraph (a), (b) or (c).

(11)   

A subsidiary of a mutual society is a company (within the meaning of the

10

Companies Act 2006 (c. 46) (or, before the commencement of Part 1 of that Act,

the Companies Act 1985 (c. 6)) or the Companies (Northern Ireland) Order

1986 (S.I. 1986/1032 (N.I. 6)))—

(a)   

in which the society holds a majority of the voting rights or of which the

society is a member and alone controls, pursuant to an agreement with

15

other shareholders or members, a majority of the voting rights, and

(b)   

in relation to which the society has the right to appoint or remove a

majority of the company’s board of directors,

   

but the Treasury may, by order, amend paragraphs (a) and (b) to make the

degree of control required more or less onerous.

20

4       

Transfers to subsidiaries: distribution of funds

(1)   

An order under section 3 may provide for this section to have effect.

(2)   

Subsection (3) applies if the terms of a transfer to which the order applies

include provision for part of the funds of the transferor or the mutual society

of which the transferee is a subsidiary (the holding mutual) to be distributed in

25

consideration of the transfer among the members of—

(a)   

the transferor,

(b)   

the holding mutual, or

(c)   

both the transferor and the holding mutual.

(3)   

The provision for the distribution must be authorised as follows—

30

(a)   

it must not exceed the limits prescribed by order under subsection (4),

and the distribution must be approved (in the case of the transferor) by

the transfer resolution or (in the case of the holding mutual) by a

resolution of such description as the Treasury specifies by order;

(b)   

if the provision for a distribution exceeds the prescribed limits, it must

35

be approved by each of the resolutions mentioned in paragraph (a).

(4)   

The Treasury must by order authorise distributions of funds to members by

mutual societies participating (directly or through a subsidiary) in transfers to

which an order mentioned in subsection (1) applies, subject to limits specified

by or determined in accordance with the order.

40

(5)   

A transfer resolution is—

(a)   

in relation to a building society, each of the resolutions required

pursuant to paragraph 30 of Schedule 2 to the Building Societies Act

1986;

(b)   

in relation to a friendly society, the resolution required by section

45

86(2)(b) of the Friendly Societies Act 1992;

 
 

Building Societies (Funding) and Mutual Societies (Transfers) Bill

5

 

(c)   

in relation to an industrial and provident society, the resolution

required by section 52 of the Industrial and Provident Societies Act

1965 (c. 12).

(6)   

Expressions used in this section and in section 3 have the same meaning as in

that section.

5

(7)   

Subsections (4) to (7) of that section apply to an order under this section as they

apply to an order under that section.

5       

Short title, commencement and extent

(1)   

This Act may be cited as the Building Societies (Funding) and Mutual Societies

(Transfers) Act 2007.

10

(2)   

The preceding sections of this Act 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.

(3)   

This Act extends to the whole of the United Kingdom.

 
 

 
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