Building Societies Act 1997 (c. 32)

(The document as of February, 2008)

-- Back --

Page 5

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9

(2) After sub-paragraph (6) of that paragraph there shall be inserted the following sub-paragraphs--

" (7) No information obtained under sub-paragraph (1) or (2) above or this sub-paragraph and relating to a member of the society may be disclosed except--

(a) with the consent of that member; or

(b) in the case of information obtained under sub-paragraph (1) or (2) above, for purposes connected with the purpose mentioned in that paragraph.

(8) Any person who discloses information in contravention of sub-paragraph (7) above shall be liable--

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or both; and

(b) on summary conviction, to a fine not exceeding the statutory maximum.

(9) The Treasury may, by regulations, prescribe the amount of any fees payable under sub-paragraph (2) above; and regulations under this sub-paragraph may include--

(a) provision for any fees so payable to be reduced or for payment of any fees to be waived by the Commission in circumstances determined by or under the regulations; and

(b) such incidental, supplementary and transitional provision as appears to the Treasury to be necessary or expedient.

(10) The power to make regulations under sub-paragraph (9) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(11) The amounts received by the Commission under sub-paragraph (2) above shall be applied as an appropriation in aid of money provided by Parliament for the expenses of the Commission under this Act, and in so far as not so applied, shall be paid into the Consolidated Fund. "

38 Transactions with directors and persons connected with them

After section 66 of the 1986 Act there shall be inserted the following section--

" 66A Transactions with directors and persons connected with them

(1) This section applies where a building society enters into a transaction the parties to which include--

(a) a director of the society; or

(b) a person connected with such a director,

and the board of directors, in connection with the transaction, exceed any limitation on their powers by reason of anything included in the society's constitution, that is to say, its memorandum and rules.

(2) The transaction is voidable at the instance of the society.

(3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (1)(a) or (b) above, and any director of the society who authorised the transaction, is liable--

(a) to account to the society for any gain which he has made directly or indirectly by the transaction, and

(b) to indemnify the society for any loss or damage resulting from the transaction.

(4) Nothing in the above provisions shall be construed as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the society may arise.

(5) The transaction ceases to be voidable if--

(a) restitution of any money or other asset which was the subject-matter of the transaction is no longer possible, or

(b) the society is indemnified for any loss or damage resulting from the transaction, or

(c) rights acquired bona fide for value and without actual notice of the directors' exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or

(d) the transaction is ratified by the society in general meeting, by ordinary or special resolution or otherwise as the case may require.

(6) A person other than a director of the society is not liable under subsection (3) above if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.

(7) This section does not affect the operation of sub-paragraph (1) of paragraph 17 of Schedule 2 in relation to any party to the transaction not within subsection (1)(a) or (b) above.

But where a transaction is voidable by virtue of this section and valid by virtue of that sub-paragraph in favour of such a person, the court may, on the application of that person or of the society, make such order affirming, severing or setting aside the transaction, on such terms, as appear to the court to be just.

(8) In this section "transaction" includes any act; and the reference in subsection (1) above to limitations under the society's constitution includes limitations deriving--

(a) from a resolution of the society passed at a general or special meeting or on a postal ballot; or

(b) from any agreement between the members of the society. "

39 Application of certain insolvency legislation

(1) After section 90 of the 1986 Act there shall be inserted the following section--

" 90A Application of other companies insolvency legislation to building societies

For the purpose of--

(a) enabling voluntary arrangements to be approved in relation to building societies,

(b) enabling administration orders to be made in relation to building societies, and

(c) making provision with respect to persons appointed in England and Wales or Northern Ireland as receivers and managers of building societies' property,

the enactments specified in paragraph 1(2) of Schedule 15A to this Act shall apply in relation to building societies with the modifications specified in that Schedule. "

(2) After Schedule 15 to the 1986 Act there shall be inserted, as Schedule 15A, the provisions set out in Schedule 6 to this Act (application of other companies insolvency legislation to building societies).

40 Abolition of priority liquidation distribution rights

In section 100 of the 1986 Act (distribution and share rights), the following provisions (which confer rights to priority liquidation distributions) shall cease to have effect, namely--

(a) in subsection (2), paragraph (c) and the word "and" immediately before that paragraph; and

(b) subsections (5) and (6).

41 Protective provisions for specially formed successors

For section 101 of the 1986 Act there shall be substituted the following section--

" 101 Protective provisions for specially formed successors

(1) No company specially formed by a building society to be its successor shall, at any time during the protective period--

(a) offer for sale or invite subscription for any shares in the company or allot or agree to allot any such shares with a view to their being offered for sale, or

(b) allot or agree to allot any share in the company, or

if the effect of the offer, the invitation, the allotment or the registration of the transfer would be that more shares than the permitted proportion would be held by any one person (other than the society), or by any two or more persons who are parties to a concert party agreement which relates to shares in the company.

(2) The articles of association of the company shall include provision such as will secure that the company does not offer, invite subscription for, allot or register transfers of, shares in contravention of subsection (1) above and no alteration in those provisions may be made by the company during the protective period.

(3) Any provision (including any altered provision) of the company's articles of association which is to any extent inconsistent with subsection (1) above shall, to that extent, be void; and any allotment or registration of a transfer of shares in contravention of that subsection shall be void.

(4) This section shall cease to apply to a company if--

(a) a financial institution becomes a subsidiary undertaking of the company, or the company or such an undertaking acquires the whole, or substantially the whole, of the business of such an institution;

(b) a special resolution to that effect is passed by the requisite majority of the members of the company; or

and the Bank shall not give such a direction unless it considers it desirable to do so in the interests of the depositors and potential depositors of the company.

(5) If this section ceases to apply to a company, any provision included by virtue of subsection (2) above in its articles of association shall cease to have effect.

(6) In this section--

"the Bank" means the Bank of England;
"concert party agreement" means an agreement to which section 204 of the [1985 c. 6.] Companies Act 1985 or Article 212 of the [S.I. 1986/1032 (N.I.6).] Companies (Northern Ireland) Order 1986 applies;
"EEA country or territory" has the same meaning as in sections 6A and 6B;
"financial institution" means any of the following, namely--
(a)
a building society authorised under this Act;
(b)
an institution authorised under section 3 or 4 of the [1982 c. 50.] Insurance Companies Act 1982 to carry on business of a class specified in Schedule 1 or 2 to that Act;
(c)
a person authorised under Chapter III of Part I of the [1986 c. 60.] Financial Services Act 1986 or included in the list maintained by the Bank under section 43 of that Act;
(d)
an institution authorised under section 9 of the [1987 c. 22.] Banking Act 1987;
(e)
a friendly society authorised under section 32(9) of the [1992 c. 40.] Friendly Societies Act 1992;
(f)
any body formed in or incorporated under the law of an EEA country or territory outside the United Kingdom and carrying on in the United Kingdom business of a kind which, if it were formed in or incorporated under the law of any part of the United Kingdom, it would be precluded from carrying on there without being authorised as mentioned in the preceding paragraphs;
"the permitted proportion", in relation to shares in the company, is 15 per cent. of the company's issued share capital;
"the protective period" is the period beginning with the date of the company's incorporation and ending five years after the vesting date or, if this section ceases to apply to the company, ending on the date on which it so ceases;
"the requisite majority" means a majority of the members having the right to attend and vote at a general meeting of the company, being a majority together holding not less than 75 per cent in nominal value of the shares giving that right;
"transfer", in relation to shares, does not include a transfer to a person to whom the right to any shares has been transmitted by operation of law;

and any expression used in this section and in the [1985 c. 6.] Companies Act 1985 or, as regards Northern Ireland, the [S.I. 1986/1032 (N.I.6).] Companies (Northern Ireland) Order 1986 has the same meaning in this section as in that Act or that Order.

(7) For the purposes of this section--

(a) shares held by a person in a fiduciary capacity shall be treated as not held by him;

(b) shares held by a person as nominee for another shall be treated as held by the other; and

(c) shares shall be regarded as held as nominee for another if any voting rights attaching to them are exercisable only on his instructions or with his consent or concurrence.

(8) Any reference in this section to shares includes a reference--

(a) to any warrant or other instrument entitling the holder to subscribe for shares; and

(b) to any certificate or other instrument issued by or on behalf of the company and conferring a right to acquire shares otherwise than by subscription;

and for the purposes of subsection (1) above any shares to which any such instrument relates shall be deemed to be held by the holder of the instrument. "

42 Registration of charges by building societies

After section 104 of the 1986 Act there shall be inserted the following section--

" 104A Registration of charges: application of company law

(1) For the purpose of securing the registration of charges created by building societies, the Secretary of State may, by order made with the concurrence of the Treasury and after consultation with the Commission, provide that such of the provisions of--

(a) Part XII of the [1985 c. 6.] Companies Act 1985 (registration of charges); and

(b) Part XIII of the [S.I. 1986/1032 (N.I.6).] Companies (Northern Ireland) Order 1986,

as may be specified in the order shall apply in relation to building societies, and charges created by building societies, with such modifications as may be so specified.

(2) An order under this section may make different provision for different cases or different areas and may contain such incidental, supplemental and transitional provisions as may appear to the Secretary of State to be necessary or expedient.

(3) The power to make an order under this section is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament. "

43 Other amendments of 1986 Act

Schedule 7 to this Act (which contains other amendments of the 1986 Act including some that are minor amendments or amendments consequential on the foregoing provisions of this Act) shall have effect.

Supplemental

44 Financial provisions

There shall be paid out of money provided by Parliament any increase attributable to this Act in the sums payable out of money so provided under the 1986 Act.

45 Minor and consequential amendments

(1) In section 10 of the [1879 c. 11.] Bankers' Books Evidence Act 1879 (interpretation of "legal proceeding" etc.), in the definition of "legal proceeding" for the words from "an arbitration" to the end there shall be substituted the following paragraphs--

" (a) an arbitration;

(b) an application to, or an inquiry or other proceeding before, the Solicitors Disciplinary Tribunal or any body exercising functions in relation to solicitors in Scotland or Northern Ireland corresponding to the functions of that Tribunal; and

(c) an investigation of a complaint by the adjudicator of a recognised scheme for the purposes of section 83 of the [1986 c. 53.] Building Societies Act 1986. "

(2) In paragraph 2(3) of Schedule 12 to the [1988 c. 39.] Finance Act 1988 (meaning of "financial stock" in relation to a building society), for the words "by virtue of regulations under section 21(7) of the Building Societies Act 1986 (liquid assets etc.)" there shall be substituted the words "in liquid form (within the meaning given by section 45(7) of the Building Societies Act 1986)".

46 Transitional provisions, savings and repeals etc

(1) The transitional provisions and savings contained in Schedule 8 to this Act shall have effect; but those provisions and savings are without prejudice to sections 16 and 17 of the [1978 c. 30.] Interpretation Act 1978 (effect of repeals).

(2) The enactments and instruments specified in Schedule 9 to this Act are hereby repealed or revoked to the extent specified in the third column of that Schedule.

47 Short title, interpretation, commencement and extent

(1) This Act may be cited as the Building Societies Act 1997.

(2) In this Act "the 1986 Act" means the Building Societies Act 1986 and expressions which are also used in that Act have the same meanings as in that Act.

(3) This Act, except--

(a) sections 40 and 41 above;

(b) paragraphs 9 and 10 of Schedule 8 to this Act and section 46(1) above so far as relating to those paragraphs; and

(c) section 46(2) above and Schedule 9 to this Act so far as relating to the repeals in section 100 of the 1986 Act and the revocations in the [S.I. 1988/1153.] Building Societies (Transfer of Business) Regulations 1988,

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 or for building societies of different descriptions.

(4) Where any enactment amended or repealed by this Act extends to any part of the United Kingdom, the amendment or repeal extends to that part.

(5) Subject to subsection (4) above, this Act extends to Northern Ireland.

SCHEDULES

Section 3(2).

SCHEDULE 1 [Part II of Schedule 2 to 1986 Act]

Capacity of society and power of directors to bind it

Capacity of society not limited by its memorandum

16 (1) The validity of an act done by a building society shall not be called into question on the ground of lack of capacity by reason of anything included in the society's memorandum.

(2) A member of a building society may bring proceedings to restrain the doing of an act which but for sub-paragraph (1) above would be beyond the society's capacity; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.

(3) It remains the duty of the directors of a building society to observe any limitations on their powers flowing from the society's memorandum; and action by the directors which but for sub-paragraph (1) above would be beyond the society's capacity may only be ratified by the society by special resolution.

(4) A resolution ratifying such action shall not affect any liability incurred by the directors or any other person; relief from any such liability must be agreed to separately by special resolution.

Power of directors to bind society

17 (1) In favour of a person dealing with a building society in good faith, the power of the board of directors to bind the society, or authorise others to do so, shall not be limited by reason of anything included in the society's constitution, that is to say, its memorandum and rules.

(2) For this purpose--

(a) a person deals with a building society if he is a party to any transaction or other act to which the society is a party;

(b) a person shall not be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the society's constitution; and

(3) The references above to limitations on the directors' powers under the society's constitution include limitations deriving from a resolution of the society passed at a general meeting or special meeting or on a postal ballot, or from any agreement between the members of the society.

(4) Notwithstanding anything in paragraph 3(2) above, sub-paragraph (1) above applies in relation to members of the society, and to persons claiming on account of members or under the rules of the society, as it applies in relation to other persons.

(5) Sub-paragraph (1) above does not affect any right of a member of the society to bring proceedings to restrain the doing of an act which is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the society.

(6) Nor does that sub-paragraph affect any liability incurred by the directors, or any other person, by reason of the directors' exceeding their powers.

No duty to enquire as to capacity of society etc.

18 (1) A party to a transaction with a building society is not bound to enquire as to whether it is permitted by the society's constitution or as to any limitation on the powers of the board of directors to bind the society or authorise others to do so.

(2) Notwithstanding anything in paragraph 3(2) above, sub-paragraph (1) above applies in relation to members of the society as it applies in relation to other persons.

Section 7(2).

SCHEDULE 2 [Schedule 2a to 1986 Act]

Discharge of mortgages: supplementary provisions

Main provisions

1 (1) When all money intended to be secured by a mortgage given to a building society has been fully paid or discharged, the society may endorse on or annex to the mortgage one or other of the following--

(a) a receipt in the prescribed form signed by any person acting under the authority of the board of directors;

(b) a reconveyance of the mortgaged property to the mortgagor;

(c) a reconveyance of the mortgaged property to such person of full age, and on such trusts (if any), as the mortgagor may direct.

(2) Where in pursuance of sub-paragraph (1) above a receipt is endorsed on or annexed to a mortgage, not being a charge or incumbrance registered under the [1925 c. 21.] Land Registration Act 1925, the receipt shall operate in accordance with section 115(1), (3), (6) and (8) of the [1925 c. 20.] Law of Property Act 1925 (discharge of mortgages by receipt) in the like manner as a receipt which fulfils all the requirements of subsection (1) of that section.

(3) Section 115(9) of the Law of Property Act 1925 shall not apply to a receipt in the prescribed form endorsed or annexed by a building society in pursuance of sub-paragraph (1) above; and in the application of that subsection to a receipt so endorsed or annexed which is not in that form, the receipt shall be taken to be executed in the manner required by the statute relating to the society if it is signed as mentioned in sub-paragraph (1)(a) above.

(4) The foregoing sub-paragraphs shall, in the case of a mortgage of registered land, have effect without prejudice to the operation of the Land Registration Act 1925 or any rules in force under it.

(5) In this paragraph--

"mortgage" includes a further charge;
"the mortgagor", in relation to a mortgage, means the person for the time being entitled to the equity of redemption; and
"registered land" has the same meaning as in the Land Registration Act 1925.

(6) This paragraph does not extend to Scotland.

Application of paragraph 1 to Northern Ireland

2 (1) In its application to Northern Ireland, paragraph 1 above shall have effect with the following modifications.

(2) In sub-paragraph (1) after the words "on such trusts" there shall be inserted the words "or uses".

(3) In sub-paragraph (2)--

(a) for the words from "charge" to "Property Act 1925" there shall be substituted the words "charge on registered land, the receipt shall operate in accordance with Article 3(1), (7) and (9) of the [S.I. 1983/766 (N.I.9).] Property (Discharge of Mortgage by Receipt) (Northern Ireland) Order 1983"; and

(b) for the words "subsection (1) of that section" there shall be substituted the words "paragraph (1) of that Article".

(4) For sub-paragraphs (3) and (4) there shall be substituted the following sub-paragraphs--

" (3) If the mortgage is registered in accordance with the [1970 c. 25 (N.I.).] Registration of Deeds Act (Northern Ireland) 1970, the registrar under that Act shall--

(a) on production of the receipt mentioned in sub-paragraph (1) above make a note in the Abstract Book against the entry relating to the mortgage that the mortgage is satisfied; and

(b) grant a certificate, either on the mortgage or separately, that the mortgage is satisfied.

(4) The certificate granted under sub-paragraph (3)(b) above shall--

(a) be received in all courts and proceedings without further proof; and

(b) have the effect of clearing the register of the mortgage. "

(5) In sub-paragraph (5) for the definition of "registered land" there shall be substituted the following definition--

" "registered land" means land the title to which is registered under Part III of the [1970 c. 18 (N.I.).] Land Registration Act (Northern Ireland) 1970. "

Power to prescribe form of documents

3 (1) The Chief Registrar may make rules for prescribing anything authorised or required by paragraph 1 above to be prescribed; and in this Schedule "prescribed" means prescribed by rules made under this paragraph.

(2) The power to make rules under this paragraph shall be exercisable by statutory instrument.

Section 13(2).

SCHEDULE 3 [Schedule 7a to 1986 Act]

Directions: supplementary provisions

Preliminary

1 In this Schedule "direction" means a direction under section 36(3), (5), (6), (7) or (10).

Procedure for giving proposed direction

2 (1) If the Commission proposes to give a direction, it shall serve on the society and, subject to paragraph 5 below, on every director of the society and its chief executive a notice stating--

(a) that the Commission proposes to give the direction;

(b) what the direction will be;

(d) that the society may make representations with respect to the proposed direction within such period of not less than 14 days as may be specified in the notice and that, if the society so requests, the Commission will afford to it an opportunity of being heard by the Commission within that period.

(2) If a direction proposed to be given to the society includes a requirement for the removal from office of any officer of the society, the Commission shall also serve the notice specified in sub-paragraph (1) above on the officer whose removal is proposed giving him the like right to make representations and to be heard with respect to his proposed removal from office.

(3) The Commission shall--

(a) before deciding whether to give a direction and, if so, what direction, consider any representations made in accordance with sub-paragraph (1) or (2) above; and

(b) except where paragraph 3 below applies, serve on the society and, subject to paragraph 5 below, on every director of and the chief executive of the society and every other person on whom a notice was served under sub-paragraph (2) above, a notice stating its decision.

(4) If the Commission decides to give a direction, the notice under sub-paragraph (3) above shall--

(a) specify the direction, and

(b) state the grounds for the decision to give it.

(5) The Commission may not give a direction on grounds other than those stated, or grounds included in those stated, in the notice served by it under sub-paragraph (1) above.

Procedure for giving different direction

3 (1) This paragraph applies where the Commission has decided to give a direction but proposes to give a direction different from and more onerous than that stated in the notice served by the Commission under paragraph 2(1) above.

(2) The Commission shall serve on the society and, subject to paragraph 5 below, on every director of the society and its chief executive, a notice stating--

(a) what direction the Commission proposes to give;

(b) the grounds for the giving of that direction instead of the direction stated in the notice under paragraph 2(1) above; and

(c) that the society may make representations with respect to the direction the Commission proposes to give within such period of not less than seven days as may be specified in the notice and that, if the society so requests, the Commission will afford to it an opportunity of being heard by the Commission within that period.

(3) If any direction proposed to be given to the society includes a requirement for the removal from office of any officer of the society, the Commission shall also serve the notice specified in sub-paragraph (2) above on the officer whose removal is proposed giving him the like right to make representations and to be heard with respect to his proposed removal from office.

(4) The Commission shall--

(a) before deciding whether to give a direction different from that stated in the notice served under paragraph 2(1) above and, if so, what direction, consider any representations made in accordance with sub-paragraph (2) or (3) above; and

(b) serve on the society and, subject to paragraph 5 below, on every director of and the chief executive of the society and every other person on whom a notice was served under sub-paragraph (3) above, a notice stating its decision.

(5) If the Commission decides to give a different direction, the notice under sub-paragraph (4) above shall--

(a) specify the direction, and

(b) state the grounds for the decision to give it.

(6) The Commission may not give a direction on grounds other than those stated, or grounds included in those stated, in the notice served by it under sub-paragraph (2) above.

Different directions on appeal

4 (1) The modifications of the provisions of paragraph 2 and 3 above in their application to the giving of a different direction by the Commission in pursuance of a direction of an appeal tribunal under section 47(6) or (7A) are as follows.

(2) The notice under paragraph 2(1) shall be served on the society and the other persons there specified within the period of 14 days beginning with the date on which the Commission received notice of the tribunal's decision under section 47(10); and a copy shall also be sent within that period to the tribunal.

(3) The notice under paragraph 2(1) may specify, as the period within which representations may be made, a period of not less than 7 days.

(4) If the Commission serves a notice under paragraph 3(2) on the society and the other persons there specified it shall send a copy of the notice to the tribunal.

Notice to directors and chief executives

5 Where any provision of this Schedule requires notice of any matter to be served on every director of a building society, that requirement is satisfied by serving notice on each director whose appointment has been officially notified and the non-receipt of a notice of a matter by a director or the chief executive does not affect the validity of any action on the part of the Commission.

Section 17(2).

SCHEDULE 4 [Schedule 8a to 1986 Act] Transfer directions: modifications of Part X

Part I Directions under section 42B(3)

Preliminary

1 This Part of this Schedule applies where a direction is given under section 42B(3) ("the direction").

Compensation for loss of office

2 (1) The consent of the Commission shall be sufficient authority for the provision for any such compensation as is mentioned in section 96(1)(a).

(2) A resolution of the board of directors passed in pursuance of the direction shall be sufficient authority for any such payments as are mentioned in section 96(1)(b).

Statements to members

3 (1) The following provisions of this paragraph shall apply in place of paragraph 1 of Schedule 16.

(2) The society shall send to every member entitled to notice of a meeting of the society, a statement containing--

(a) the particulars required, in relation to prescribed matters, by regulations under section 42B(8); and

(b) particulars of any other matters required by the Commission in the case of the particular transfer of engagements,

with or without other particulars regarding that transfer.

(3) The statement shall be sent--

(a) where the Commission has given the society a direction under section 42B(1)(a), within the period (not being less than 28 days) specified in the notice of confirmation under section 42C(2)(b);

(b) where the Commission has not given the society such a direction, within 14 days of the board of directors passing a resolution in pursuance of the direction.

(4) No statement shall be sent unless its contents, so far as they concern the prescribed matters or any matter of which particulars are required to be given under sub-paragraph (2)(b) above, have been approved by the Commission.

(5) A failure to comply with a requirement of this paragraph shall not invalidate the transfer of engagements; but, if the society fails without reasonable excuse to comply with such a requirement the society shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale and so shall any officer who is also guilty of the offence.

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9

-- Back --

Stat