§ Mr. Squireasked the Chancellor of the Exchequer what is the role of the Chief Registrar of Friendly Societies in scrutinising proposals for building society mergers; and whether the registrar has carried out any post facto analysis of mergers, with special reference to the benefits or disbenefits to building society members.
§ Mr. Bruce-GardyneThe Chief Registrar has two roles in relation to building society mergers.
The first role is the group of statutory functions laid upon him by sections 19 and 20 of the Building Societies Act 1962 essentially directed to the requirement in those sections for endorsement by the members of a society of any proposed merger which may significantly affect their interest.
To this end:
- (i) he has to approve the factual statement, containing specified particulars, which generally has to be sent to the members of the societies concerned;
- (ii) he has discretion to waive the requirements that such a statement should be circulated; and that the proposal be endorsed by a special resolution, requiring a majority of three quarters of the members voting: I understand that this waiver has usually been given in the case of the larger society, if the other society is sufficiently small for lie merger to have no significant effect on the larger society's financial position;
- (iii) he has discretion to waive the requirement that the society should obtain the written consent of two-thirds of its members, after hearing any representations for and against him doing so. I understand that this waiver has only been withheld in recent years in exceptional circumstances.
The second role is part of his general prudential responsibility of the oversight of societies in the interests of investors. For example, the former Chief Registrar explicitly told the boards of the smaller societies that if any of them thought that their society had insufficient resources to have an adequate system of financial control and inspection, then the board ought, in the interests of the members, to seek a merger with a society which had the resources for such a system.
The registry has monitored the progress of the societies following mergers. It is impossible to generalise about the results, or in many cases to distinguish the effect of the merger from that of other factors.
The Chief Registrar is now discussing with the Building Societies Association his proposals for widening the scope of the factual statement to members, and the desirability of the boards of societies which are proposing to merge, giving to their members more information about the likely effect of the merger than has always been the case in the past. He has also told the societies that, on prudential grounds, he would be requiring more information about the possible effect of a merger on the capital and revenue position of the societies.
§ Mr. Squireasked the Chancellor of the Exchequer whether the Registry of Friendly Societies monitors the content of building society annual reports to identify any 97W cases of false or misleading information or statements; and what steps are open to the registrar when reports contain false or misleading information and statements.
§ Mr. Bruce-GardyneThe registry's monitoring of societies focuses primarily on their annual accounts, annual returns and on certain confidential monthly returns made by most societies. The directors' annual reports are intended for members, rather than the registry.
However, if the Chief Registrar became aware of any false or misleading statement in such a report, he would take it up with the society. If he were of the view that a false statement had been wilfully made, he would have the power of prosecution under section 112 of the Building Societies Act 1962. As I said in my reply to my hon. Friend on 19 March 1982—Vol. 20, c. 222–23—a seriously misleading statement by a society about its financial position might be a ground for the Chief Registrar imposing an order or direction on the society under his powers in the Building Societies Act 1962.
If my hon. Friend has a particular case in mind, perhaps he would send me details.