§ Mr. Heddleasked the Chancellor of the Exchequer. pursuant to the answer of 6 December, Official Report, 143W column 355, if he will outline if any steps will be taken to protect building societies which opt for company status from being taken over by foreign institutions or companies; and if he will make a statement.
§ Mr. Ian StewartThe consultative paper proposed that all individual or related shareholdings in a building society which converted to a company should, in normal circumstances, be less than 15 per cent. for the first five years of the new company's life. No special proposals are made for restricting the nationality or place of incorporation of shareholders in former building societies. Foreign ownership would not necessarily raise issues of public interest but if an acquisition did appear to give rise to public concern, it could be examined under the normal merger control provisions of the Fair Trading Act.
§ Mr. Portilloasked the Chancellor of the Exchequer how he intends to seek to deter societies from anticipating the wider powers proposed for them in the Building Societies Bill.
§ Mr. Ian StewartIt would be irresponsible and ultra vires for a building society to seek to steal a march on its competitors by anticipating Parliament passing the Bill and the latter coming into effect. The Government would take a serious view of jumping the gun in this way and I would hope that all societies would resist the temptation to do so. But in order to reassure societies that they will not be disadvantaged in relation to others by behaving responsibily, the Bill includes provisions which would penalise a society if it were to anticipate the powers being properly available to it.
Before a society can legitimately exercise any of the wider powers, it will have to pass the necessary special resolution in general meeting and register a memorandum adopting those powers. The society will have to support the application for registration of the memorandum with a statement by the chairman and chief executive, on behalf of the society, that in the previous 12 months it had not performed any functions which would be covered by the powers to be conferred by the mormorandum but which were not within the society's existing powers. Thus a society which anticipated one or more of the wider powers to be made available under the new legislation would then find that it could not properly adopt them until it ceased exceeding its powers, and allowed a year to pass in which it did not exceed them.
This provision will be supported by a provision for the Registry of Friendly Societies to challenge a memorandum sumbitted to it for registration, if it considers that there may have been anticipation of any new power, notwithstanding the certificate to the contrary, and by provisions for the Building Societies Commission to require a society to desist from an activity which is outside the powers which it has legally adopted.