§ DISSOLUTION OF BUILDING SOCIETY WOUND UP (ENGLAND AND WALES, SCOTLAND AND NORTHERN IRELAND)
56.—(1) Where a building society has been wound up voluntarily, it is dissolved as from 3 months from the date of the placing in the public file of the society of the return of the final meetings of the society and its creditors made by the liquidator under—
(2) Where a building society has been wound up by the Court, it is dissolved as from 3 months from the date of the placing in the public file of the society of—
57.—(1) Section 654 to 658 of the Companies Act 1985 or Articles 605 to 609 of the Companies (Northern Ireland) Order 1986 (provisions as to corporate property as bona vacantia) shall have the same effect in relation to the property of a dissolved building society (whether dissolved under section 87 or following its winding up) as they have in relation to the property of a dissolved company, but with the following modifications.
(2) Paragraph 3(1) above shall apply to those sections for the purpose of their application to building societies.
(3) Subsection (2) of section 654 and subsections (1) and (3) of section 655 apply without the words "or 653"; and the references in those subsections to section 651 shall have effect as references to section (Power to court to declare dissolution of building society void) of this Act.
(4) Paragraph (2) of Article 605 and paragraph (1) of Article 606 apply without the words "or 604".
§ Insolvency rules and fees: England and Wales and Scotland
(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 applicable winding up legislation and the performance by the official receiver or the Secretary of State of functions under it.
§ Insolvency rules and fees: Northern Ireland
59.—(1) Rules may be made under Article 615 of the Companies (Northern Ireland) Order 1986 for the purpose of giving effect, in relation to building societies, to the provisions of the applicable winding up legislation.
(2) Rules made by the Department of Economic Development under paragraph (6) of Article 613 may make provision for fees to be payable under that paragraph in respect of proceedings under the applicable winding up legislation and the performance by the Official Assignee for company liquidations or that Department of functions under it.").
§ The noble Lord said: Again, I spoke to this amendment with Amendment No. 72. I beg to move.
Before we move from this amendment, I would point out to my noble friend that there is a star against this amendment, which, as he well knows, means that it is either a new amendment or it has been altered. I wonder whether he can tell me the nature of the alteration, if there is an alteration, and whether he can help in that direction when we come to Amendments Nos. 236 and 243, which are likewise starred? Although they have been debated, I think that is important.
§ Lord Skelmersdale
I am very grateful for the intervention of my noble friend. The change in Schedule 15 is in paragraph 57 concerning provisions as to corporate property as bona vacantia. Noble Lords will appreciate that the words added to sub-paragraph (4) merely mirror for Northern Ireland the provisions already made for Great Britain in sub-paragraph (3), concerning the application of the new clause, Power of court to declare dissolution of building society void, which we have just agreed with Amendment No. 200.
§ On Question, amendment agreed to.
§ Clause 91 [Amalgamations]:
§ Lord Skelmersdale moved Amendment No. 203:
Page 139, line 6, after ("date") insert ("("the specified date")").
§ The noble Lord said: I beg to move Amendment No. 203, and I shall speak also, with the Committee's permission, to Amendments Nos. 204, 205, 206 and 225. The substantive amendment in this group is No. 206, which provides for the society resulting from a merger between two authorised societies to be deemed to be authorised from the date of incorporation.
§ The automatic initial authorisation of a society formed as a result of a merger between authorised societies is clearly a sensible provision. It would be wrong if a society formed by the union of two large and perfectly sound societies financially had to go through the authorisation procedures afresh. That is not to say, however, that mergers will automatically produce new societies which are completely sound. That is why the 516 commission is given a role in approving mergers under Clause 93 and in vetting the information sent to members before they vote on the proposal under Schedule 6.
§ If the commission has doubts about the capacity of the combined society to refrain from authorisation, it is clearly material information that the members will need to know in considering the merger proposal. In practice, of course, it is most unlikely that the members will be prepared to approve a merger about which the commission had expressed disquiet. The other amendments in this group are purely drafting and consequential. I beg to move.
§ On Question, amendment agreed to.
§ 6.45 p.m.
§ Lord Skelmersdale moved Amendments Nos. 204 to 206:
Page 139, line 15, leave out from first ("the") to ("all") and insert ("specified date,").
Page 139, line 21, leave out from first ("the") to ("succeeds") in line 22 and insert ("specified date, each of the societies to which the successor").
Page 139, line 25, at end insert—
("(6) If, on the specified date, the societies, whose amalgamation was confirmed by the Commission are all authorised, their successor shall be treated as authorised for the purposes of this Act, whether or not the requirements of section 9(4) would be fulfilled in its case, as from that date.
(7) The central office shall record in the public file of the successor the fact that, by virtue of subsection (6) above, the society is to be treated as authorised for the purposes of this Act.".
§ The noble Lord said: I beg to move Amendments Nos. 204 to 206 en bloc. I have just spoken to these amendments with Amendment No. 203. I beg to move.
§ On Question, amendments agreed to.
§ Clause 91, as amended, agreed to,
§ Clause 92 agreed to.
§ Clause 93 [Mergers: provisions supplementing ss. 91 and 92]:
§ [Amendment No. 207 not moved.]Clause 93 agreed to. Schedule 16 agreed to. Clause 94 agreed to.
§ Clause 95 [Transfer of business to commercial company]:
§ Lord Skelmersdale moved Amendment No. 208:
Page 146, line 33, leave out ("Act (Northern Ireland) 1960") and insert ("(Northern Ireland) Order 1986").
§ The noble Lord said: I spoke to this amendment with Amendment No. 73. I beg to move.
§ On Question, amendment agreed to.
§ On Question, Whether Clause 95, as amended, shall stand part of the Bill?
§ Lord Barnett
We now come to a rather important clause in the Bill on the question as to whether building societies should be allowed to convert to public limited companies. I want to say at the outset of my brief remarks that the Government have done a 517 great deal to put safeguards into the Bill to make it difficult—indeed, some would say extremely difficult—for such a conversion to take place. They are requiring 20 per cent. of qualifying shareholders to vote on any conversion to company status, and, where a society wishes to transfer its engagements to another company, then 50 per cent. of qualifying shareholders, or the holders of 90 per cent. of share capital, will be required to vote in favour. As the Building Societies Association said in its recent brief:These figures are, in practice, almost impossible to attain".In another place when this was debated, one of the Minister's honourable friends pointed out the inconsistency in the Government's position here. For example, if this fundamental change is desirable but it is defended by saying that it has been made extremely difficult to convert, why should the Minister not make it easier? If he is making it so difficult, one is bound to ask: why introduce it at all? I know that it is a little like the old question, "When did you stop beating your wife?" But it is that kind of thing that the Government are seeking to do and it is not my fault; it is what is in the Bill.
The Minister's defence, it seems to me—and the Minister in another place said it—is not that the change itself is desirable but that the option to be able to make the change is desirable. My case is that there is no evidence that the option is desirable. We do not need it. If we are to allow change from the mutual basis which everyone values so much, it seems to me that the case has to be made very strongly by those who are in favour of it.
The only case I have read was in col. 936 of the Official Report of another place for 4th June when it was said:It may be that as financial markets develop, some societies might want to develop more rapidly than the Bill allows.But it is already quite clear that under mutual status building societies have no difficulty in raising all the funds that they are likely to need. Indeed, as we know (and we have discussed it during this Committee stage) they can also go to the wholesale market for funds. There is no difficulty in raising funds. So it seems to me that there is no overwhelming case for this fundamental change.
When we discussed this at Second Reading I think most noble Lords agreed that the status of building societies, with what they have been able to do under the mutual status they have had for so long, has been, to say the least, extremely valuable. It is only when an overwhelming case is made that this should be allowed. That case has not been made.
The dangers of allowing such a change to plc status are substantial. I know that a take-over can take place without conversion; it is sometimes called a merger. But, as we all know, in practice there is no such thing as a merger. Indeed, there was one recent case of a proposed take-over of a smaller building society—it did not happen. I shall not go into the details of that case, but I recognise that take-overs can take place without conversion. But a change to plc status will undoubtedly make it easier and, indeed, very tempting because these large building societies with plc status would have huge funds. It would be very tempting for major multinationals to make such a take-over. I say 518 that without in any way being prejudiced about multinationals, whether they be British or foreign. They very often do an excellent job. But should they be doing the job that we want to see building societies doing in the housing field in this country? I should have thought the answer is, no, we do not want them to do that.
From all our discussions both at Second Reading and throughout this Committee stage the role of the building society movement in the housing field has been recognised as so important that there has to be an extremely powerful case to make it easier to change in such a way as to weaken the building society movement and to divert it from its true purposes. That I know is generally supported by noble Lords. I therefore hope that they will not support the Motion that Clause 95 stand part of the Bill, because in that way they will be able to prevent building societies from moving to plc status on any occasion. I beg to oppose the Motion that the clause stand part of the Bill.
§ Lord Brabazon of Tara
There was a good debate on this subject at Second Reading, and now the noble Lord, Lord Barnett, has given us his views on the subject. This is a new feature of building society legislation and it was the subject of most careful and extensive consultation before it reached this Chamber. The issue was thoroughly aired in the Green Paper of July 1984 which preceded this Bill, but it was also the subject of a detailed consultation paper in December of last year. So the Government have taken great care to canvass views as widely as possible.
The basic proposition is very simple and sensible. It is that the members should have the right to determine the future corporate structure of their society. The present legislation gives them no such right. What the Government are doing is to give them full control over the future direction their society should take. The Government have no particular view on whether building societies should convert. This is a matter for the members. In practice we doubt whether many will wish to do so, at least in the early years, but we think it would be wrong to continue to deny members that option.
The noble Lord, Lord Barnett, suggested that the hurdles we had set were in any case too high for them to turn themselves into plcs. I agree that the thresholds are difficult. We make no apology for that. Conversion to company status is a fundamental step and it should require evidence of widespread membership approval. It is not only because such a step should not be taken lightly; it also serves a prudential purpose in that if a stubstantial proportion of members have indicated their approval, the society can feel more confident that it will retain its deposit base after conversion.
I do not believe that the hurdles are impossibly high. If in the event they turn out to be unreasonably difficult, there exists provision in the Bill to adjust them. As I have said on previous occasions, this is a fundamental step for building societies to take. At an earlier stage my noble friend Lord Campbell of Croy suggested that it would be very difficult to reach the 20 per cent. level. He cited the experience of the building society with which he is associated whose merger proposals had been able to get only a 10 per cent. response from the members. There are reasons why 519 members should wish to respond to a proposal to convert put forward by the building society. The building society will probably be able to offer certain attractions to the members under fairly tightly controlled terms. These could indeed ensure that more people cast their votes.
I say to the noble Lord, Lord Barnett, that we very strongly believe that this is a matter for the members to decide. It is right now that we should go forward and allow them to take their own decision whether they wish to become plcs. As has been said often, the building society movement has served the country extremely well, and will continue to do so, but there is no doubt that certain societies—the larger ones—would like to try to persuade their members to become plcs. We believe the time has come to give them that opportunity.
§ Lord Houghton of Sowerby
I went over this ground at great length earlier in the Committee stage and I do not propose to repeat that. What my noble friend has done is to expose the difference of opinion on this matter which engaged quite a lot of time in another place where some were uneasy about the option to be given to convert into a public company and others thought that the hurdle was too high. I proposed earlier on that the hurdle should be lowered and that one part of it should be removed all together, but I did not get very much support from my noble friends on the Front Bench. Now my noble friend is suggesting that we ought to object to any option at all. I cannot support him on that.
I understand that, with some reluctance in some quarters, building societies are reconciled to the option being as difficult as it is. They get comfort from the fact that the commission would have power to vary the conditions of the hurdle in certain circumstances, though what those circumstances might be I shall not dwell upon. Whether the commission would wish to do it before anybody was toppled over the hurdle or whether it would wait for somebody to come a cropper and do it afterwards, I do not think we need discuss because the commission has the power to do it. I believe that the option should be there. I believe that some of the societies—and we know which they are—are now so large and so powerful that they would probably feel more at home under company law than under the intricate restrictions and prohibitions which are included in the Bill to safeguard the principle of building societies of more moderate size. That is how it has to be.
I am awfully sorry that I have to differ from my noble friend. We have been in very close partnership for so long in different places, but we just happen not to be of the same opinion on this matter.
Lord Campbell of Croy
As my noble friend has referred to my remarks on Second Reading, perhaps I may add a word or two. I understand what the Government are aiming for in this Bill. However, the experience I had recently, in the autumn of last year, of proxy voting by post by about 2 million people, 520 which I think is the first time anything like that has ever happened in a company, building society, or any other body, indicated that a 20 per cent. threshold is a fairly high threshold. I understand what the Government are aiming to do, and also that there is a provision for changing the thresholds later. I know what the noble Lord, Lord Barnett, is aiming for. I know that there has been suspicion and that there are many who believe, in contrast to the noble Lord, Lord Houghton, that building societies should remain mutual institutions.
I must add one point. The noble Lord said that all mergers were takeovers, but the merger in which I was involved was not. It was a union between two societies of about the same size that did not involve the transfer of assets from one to the other. So far, it has been going very happily.
§ Lord Brabazon of Tara
Before the noble Lord, Lord Barnett, decides what to do, I may say that I am grateful to the noble Lord, Lord Houghton, and to my noble friend Lord Campbell of Croy. I will respond to the point raised by my noble friend Lord Morris, which was in one respect answered by the noble Lord, Lord Houghton, when he stated that building societies might be happier under company law than under the proposals in the Bill.
There are all kinds of things that the building societies might want to do and reasons why they might want to become a plc. They might want to do more unsecured lending than they are allowed to do under the provisions of the Bill. They might want to do more Class 2 lending than they are now allowed under the Bill, and perhaps provide other services. Those are only some of the reasons.
§ 7.2 p.m.,
§ On Question, Whether Clause 95, as amended, shall stand part of the Bill?
§ Their Lordships divided: Contents, 75; Not-Contents, 37.521
|Airey of Abingdon, B.||Elton, L.|
|Alexander of Tunis, E.||Enniskillen, E.|
|Ashbourne, L.||Feversham, L.|
|Beloff, L.||Glanusk, L.|
|Belstead, L.||Gray, L.|
|Boyd-Carpenter, L.||Hailsham of Saint|
|Brabazon of Tara, L.||Marylebone, L.|
|Brougham and Vaux, L.||Hardinge of Penshurst, L.|
|Broxbourne, L.||Hayter, L.|
|Caithness, E.||Henderson of Brompton, L.|
|Campbell of Alloway, L.||Hives, L.|
|Campbell of Croy, L.||Hooper, B.|
|Carnock, L.||Kimball, L.|
|Coleraine, L.||Lane-Fox, B.|
|Colville of Culross, V.||Lauderdale, E.|
|Craigavon, V.||Lawrence, L.|
|Craigmyle, L.||Layton, L.|
|Davidson, V.||Lindsey and Abingdon, E.|
|Denham, L. [Teller.]||Long, V.|
|Dilhorne, V.||Lucas of Chilworth, L.|
|Elliot of Harwood, B.||Lyell, L.|
|Elliott of Morpeth, L.||Mancroft, L.|
|Massereene and Ferrard, V.||Russell of Liverpool, L.|
|Maude of Stratford-upon-||St. Aldwyn, E.|
|Avon, L.||Selkirk, E.|
|Mersey, V.||Shannon, E.|
|Morris, L.||Skelmersdale, L.|
|Mottistone, L.||Swinfen, L.|
|Mountevans, L.||Swinton, E. [Teller.]|
|Mowbray and Stourton, L.||Thomas of Swynnerton, L.|
|Munster, E.||Thorneycroft, L.|
|Murton of Lindisfarne, L.||Trefgarne, L.|
|Pender, L.||Trumpington, B.|
|Plummer of St. Marylebone,||Ullswater, V.|
|L.||Vaux of Harrowden, L.|
|Portland, D.||Vickers, B.|
|Renton, L.||Vivian, L.|
|Renwick, L.||Wise. L.|
|Rodney, L.||Wynford, L.|
|Barnett, L.||Kilbracken, L.|
|Birk, B.||Llewelyn-Davies of Hastoe, B.|
|Boston of Faversham, L.||McGregor of Durris, L.|
|Bottomley, L.||McIntosh of Haringey, L.|
|Briginshaw, L.||Morton of Shuna, L.|
|Brockway, L.||Nicol, B.|
|Caradon, L.||Oram, L.|
|Carmichael of Kelvingrove, L.||Pitt of Hampstead, L.|
|Cledwyn of Penrhos, L.||Ponsonby of Shulbrede, L.|
|Dean of Beswick, L.||[Teller.]|
|Ennals, L.||Serota, B.|
|Gallacher, L.||Shepherd, L.|
|Graham of Edmonton, L.||Stoddart of Swindon, L.|
|Hatch of Lusby, L.||[Teller.]|
|Howie of Troon, L.||Strabolgi, L.|
|Irving of Dartford, L.||Underhill, L.|
|Jacques, L.||Wells-Pestell, L.|
|Jeger, B.||White, B.|
|Jenkins of Putney, L.||Williams of Elvel, L.|
Moved accordingly, and, on Question, Motion agreed to.
§ Resolved in the affirmative, and Clause 95, as amended, agreed to accordingly.
§ 7.10 p.m.
§ Clause 96 agreed to. Schedule 17 agreed to. Clause 97 agreed to.
§ Lord Skelmersdale
In begging to move that the House do now resume I suggest that we do not return to this business until ten minutes past eight o'clock.
§ House resumed.