Building Societies

HC Deb 05 July 1988 vol 136 cc519-20W

Mr. Yeo

To ask the Chancellor of the Exchequer when regulations will be made to allow building societies to convert to public limited companies; and if he will make a statement.

Mr. Lilley

The Building Societies Commission made the Building Societies (Transfer of Business) Regulations 1988 on 4 July and they were laid before Parliament today.

The regulations complete the legislative framework under which building societies and their members can consider conversion of the society to a plc. The general provisions of conversion are contained in the 1986 Act; the regulations fill out the details on a number of points.

They provide, firstly, for the continuity of agreements, documents, rights and liabilities from the society to its successor company. This will ensure, for example, that mortgage contracts are unaffected by the conversion

They also deal in some detail with the priority liquidation right of former members of societies which convert. The calculation of this right and the means of securing it are set out in the regulations.

Finally, the regulations set out the information which a society must include in a transfer statement which it is obliged to send to members when they are invited to vote for conversion. This information includes particulars of: The consequences of the transfer for investing and borrowing members and for employees. The financial position of the society, including the amount of its reserves. A forecast of the future financial prospects of the successor company. The interest of the directors of the society in the transfer and the resulting benefits and any compensation to them and other officers. Any distribution of funds to be made to members of the society. Any shares, or rights in relation to shares, to be offered in connection with the transfer. Any priority share rights to be conferred on members, officers or employees of the society. The terms on which the investments in the society will be held as deposits in the successor company. Any difference in the statutory protection scheme that will apply. The directors and auditors of the successor company. Whether the Bank of England has indicated that it would be prepared to authorise this successor company under the Banking Act 1987.

In the case of a proposed transfer to an existing company, information has to be given on the activities and structure of the successor company, together with details of any significant shareholders.

The regulations also require that if a written takeover proposal has been made to the society during the previous year, the fact is disclosed to members together with non-confidential details of the proposal.