Building Societies Act 1997 (c. 32)

(The document as of February, 2008)

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(a) paragraph (1) is omitted; and

(b) for paragraphs (3) and (4) there is substituted the following paragraph--

" (3) Paragraph (2) applies to any security other than one which, as created, was a floating charge. "

41 (1) Article 29 of the Order (general duties of administrator) has effect as if, instead of the requirement imposed by paragraph (3), it required the administrator of a building society to summon a meeting of the society's creditors if--

(a) he is requested, in accordance with the rules, to do so by 500 of the society's creditors, or by one-tenth, in number or value, of those creditors, or

(b) he is directed to do so by the High Court.

(2) That Article also has effect as if it required the administrator of a building society to summon a meeting of the society's shareholding members if--

(a) he is requested, in accordance with the rules, to do so by 500 of the society's shareholding members, or by one-tenth, in number, of those members, or

(b) he is directed to do so by the High Court.

42 In paragraph (4) of Article 31 of the Order (vacation of office) as applied to a building society, the words "in priority to any security to which Article 28(1) then applies" are omitted.

43 (1) Paragraph (1) of Article 35 of the Order (statement of proposals) as applied to a building society has effect as if--

(a) the reference to the central office included a reference to the Commission and the Investor Protection Board;

(b) the reference to all creditors included a reference to all holders of shares in the society; and

(c) the reference to a meeting of the society's creditors included a reference to a meeting of holders of shares in the society.

(2) In paragraph (2) of that Article as so applied, references to members of the society do not include references to holders of shares in the society.

44 Article 36 of the Order (consideration of proposals by creditors' meeting) as applied to a building society has effect as if any reference to a meeting of creditors included a reference to a meeting of holders of shares in the society.

45 (1) Article 37 of the Order (approval of substantial revisions) as applied to a building society has effect as if--

(a) paragraph (2) required the administrator to send a statement in the prescribed form of his proposed revisions to the Commission and to the Investor Protection Board; and

(b) the reference in that paragraph to a meeting of creditors included a reference to a meeting of holders of shares in the society.

(2) In paragraph (3) of that Article as so applied, references to members of the society do not include references to holders of shares in the society.

46 Paragraph (1) of Article 39 of the Order (protection of interests of creditors and members) has effect--

(a) as if it enabled the Commission or Investor Protection Board to apply to the High Court by petition for an order under that section; and

(b) in relation to an application by the Commission or that Board, as if the words "(including at least himself)" were omitted.

Receivers and managers

47 In Article 48 of the Order (receivership accounts), "prescribed" means prescribed by regulations made by statutory instrument by the Commission.

48 In paragraph (1) of Article 49 of the Order (notification that receiver or manager appointed), the reference to every invoice, order for goods or business letter is a reference to every statement of account, order for goods or services, business letter or advertisement.

49 Article 50 (payment of debts out of assets subject to floating charge) and Articles 52 to 59 (administrative receivers) of the Order are omitted.

Section 43.

SCHEDULE 7 Other amendments of 1986 Act

The Building Societies Commission

1 In subsection (4) of section 1 of the 1986 Act (the Building Societies Commission), for paragraph (c) there shall be substituted the following paragraph--

" (c) to secure that the principal purpose of building societies remains that of making loans which are secured on residential property and are funded substantially by their members; " .

Annual and other reports

2 In section 4 of the 1986 Act (annual and other reports), subsection (2) shall cease to have effect.

Authorisation to raise funds and borrow money

3 (1) In subsection (3) of section 9 of the 1986 Act (authorisation to raise funds and borrow money), paragraph (d) and the word "or" immediately preceding that paragraph shall cease to have effect.

(2) In subsection (7), for the words "subsidiary or associated body" there shall be substituted the words "connected undertaking".

(3) In subsection (13) of that section, for the definition of "qualifying deferred shares" there shall be substituted the following definition--

" "qualifying deferred shares" means deferred shares which constitute own funds of the society, " .

(4) After that subsection there shall be inserted the following subsection--

" (13A) In determining for the purposes of subsection (4)(b) above whether a person is a fit and proper person to hold any particular office, regard shall be had, in particular--

(a) to his probity;

(b) to his competence and soundness of judgement for fulfilling the responsibilities of that office;

(d) to whether the interests of shareholders or depositors of the society are, or are likely to be, in any way threatened by his holding that office. "

The Building Societies Investor Protection Board

4 In subsection (4) of section 24 of the 1986 Act (the Building Societies Investor Protection Board ), after the definition of the "1995 Regulations" there shall be inserted the following definition--

" "administrator", in relation to a participating institution, means an administrator of the institution under Part II of the [1986 c. 45.] Insolvency Act 1986 or Part III of the [S.I. 1989/2405 (N.I.19).] Insolvency (Northern Ireland) Order 1989; " .

The Investor Protection Fund

5 (1) In subsection (5) of section 25 of the 1986 Act (the Investor Protection Fund), in the definition of "the expenses attributable to the insolvency" for the words "paragraphs (a) to (d)" there shall be substituted the words "paragraphs (a) to (c)".

(2) In subsection (7) of that section, after the word "authorises" there shall be inserted the words "the Bank of England or".

Meaning of "insolvency" etc.

6 In subsection (2) of section 25A of the 1986 Act (meaning of "insolvency" etc.), for the word "society" there shall be substituted the word "institution".

Payments to investors

7 (1) In subsection (3) of section 27 of the 1986 Act (payments to investors), for the words "such other authorised institution or building society" there shall be substituted the words "such institution (whether the Bank of England, an authorised institution or a building society)".

(2) In subsection (4A) of that section, after the word "liquidator", in each place where it occurs, there shall be inserted the words "or administrator".

(3) In subsection (9) of that section, after the word "liquidator", in both places where it occurs, there shall be inserted the words "or administrator".

(4) In subsection (9A)(a) of that section, after the word "liquidator", in both places where it occurs, there shall be inserted the words "or administrator".

Membership of insolvency committees etc

8 After section 27 of the 1986 Act there shall be inserted the following section--

" 27A Membership of insolvency committees etc

(1) The following provisions of this section have effect notwithstanding that the Board may not yet have made or become liable to make a payment under section 27(1) in relation to a participating institution which has become insolvent.

(2) The Board shall at all times be entitled to receive any notice or other document required to be sent to a creditor of the institution whose debt has been proved.

(3) A duly authorised representative of the Board shall be entitled--

(a) to attend any meeting of creditors of the institution and to make representations as to any matter for decision at that meeting;

(b) to be a member of any committee established under section 301 of the Insolvency Act 1986;

(d) to be a member of a committee established for the purposes of Part IV or V of the [1986 c. 45.] Insolvency Act 1986 under section 101 of that Act or under section 141 or 142 of that Act;

(e) to be a member of any committee established under Article 274 of the [S.I. 1989/2405 (N.I.19).] Insolvency (Northern Ireland) Order 1989; and

(f) to be a member of a committee established for the purposes of Part V or VI of the Insolvency (Northern Ireland) Order 1989 under Article 87 or under Article 120 of that Order.

(4) Where a representative of the Board exercises his right to be a member of such a committee as is mentioned in paragraph (b), (d), (e) or (f) of subsection (3) above, or to be a commissioner by virtue of paragraph (c) of that subsection--

(a) he may not be removed except with the consent of the Board; and

(b) his appointment under that subsection shall be disregarded for the purposes of any provision made by or under any enactment which specifies a minimum or maximum number of members of such a committee or commission. "

Liability of insolvent society in respect of payments made by Board

9 For subsection (6) of section 28 of the 1986 Act (liability of insolvent society in respect of payments made by Board) there shall be substituted the following subsection--

" (6) Where by virtue of paragraph 3 of Schedule 6 to this Act the insolvency payment is or is to be made by the Board to a person other than the person to whom the institution is liable in respect of the protected investment, any reference in the preceding provisions of this section to the liability to the investor shall be construed as a reference to the liability of the institution to the person to whom that payment would fall to be made by the Board apart from that paragraph. "

Power to obtain information

10 In subsection (3) of section 29A of the 1986 Act (power to obtain information), after the word "liquidator" there shall be inserted the words "or administrator".

Voluntary schemes

11 For subsections (1) to (3) of section 31 of the 1986 Act (voluntary schemes) there shall be substituted the following subsections--

" (1) In this section "voluntary arrangements" means arrangements entered into by any two or more building societies for the purpose of making funds available to meet losses incurred by persons who have deposited money with, or who have shares in, an insolvent building society which is a party to the arrangements.

(2) A building society shall not enter into any voluntary arrangements until the arrangements have been approved by the Commission and authorised by a resolution passed, at a general meeting of the society or on a postal ballot, as a special resolution.

(3) The Commission shall not approve any voluntary arrangements unless it is satisfied that the arrangements comply with the Deposit Guarantee Schemes Directive (94/19/EC). "

Power to direct application to renew authorisation

12 (1) Section 41 of the 1986 Act (power to direct application to renew authorisation) shall become permanent; and accordingly subsections (14) to (16) of that section shall cease to have effect.

(2) In subsection (6) of that section, for paragraph (b) there shall be substituted the following paragraph--

" (b) the society has adequate reserves and other capital resources; " .

(3) In subsection (7) of that section, for paragraphs (a) and (b) there shall be substituted the following paragraphs--

" (a) if those matters include the matter specified in paragraph (a) of that subsection, refuse to grant authorisation; or

(b) in any other case--

(i) if it is satisfied that the imposition of conditions would secure the protection of the investments of shareholders and depositors, grant authorisation subject to such conditions to be complied with by the society (whether or not they correspond to any conditions in force as respects the current authorisation) as the Commission thinks fit to impose to secure that purpose; or

(ii) if not so satisfied, refuse to grant the authorisation; " .

(4) For subsection (13) of that section there shall be substituted the following subsection--

" (13) Any expression used in this section to which a meaning is given by subsection (13) of section 9 has that meaning in this section; and for the purposes of this section subsection (13A) of that section shall apply as if the reference to subsection (4)(b) of that section were a reference to subsection (6)(c) of this section. "

(5) For subsection (17) of that section there shall be substituted the following subsection--

" (17) In this section "adequate" means adequate having regard to the range and scale of the society's business; and in this subsection--

(a) "business" includes business the society proposes to carry on; and

(b) the reference to the society's business includes, where it has connected undertakings, a reference to the business of those undertakings. "

Imposition of conditions on current authorisation

13 (1) In subsection (5)(b) of section 42 of the 1986 Act (imposition of conditions on current authorisation), for the words "subsidiary or other associated body" there shall be substituted the words "connected undertaking".

(2) At the beginning of subsection (7) of that section there shall be inserted the words "Subject to section 42A".

Revocation of authorisation

14 (1) In subsection (1) of section 43 of the 1986 Act (revocation of authorisation), for the word "or" immediately following paragraph (c) there shall be substituted the following paragraphs--

" (cc) the Commission is satisfied that a direction under section 42B(1) has not been complied with by the society;

(cd) it appears to the Commission that--

(i) a composition or arrangement with creditors has been made in respect of the society;

(ii) a receiver or manager of the society's undertaking has been appointed;

(iii) possession has been taken, by or on behalf of the holders of any debenture secured by a charge, of any property of the society; or

(iv) an administration order has been made in relation to the society under section 8 of the [1986 c. 45.] Insolvency Act 1986; or " .

(2) For subsection (7) of that section there shall be substituted the following subsections--

" (7) If, when a society's authorisation is revoked, a member is under an obligation to make payments to the society--

(a) which represent instalments of the amount due in respect of a share in the society; and

(b) which, by virtue of section 9(1), the society is prohibited from accepting,

the obligation shall (subject to anything in the rules of the society or any agreement between the society and the member) be suspended in respect of each instalment for the period during which no authorisation is in force.

(7A) If, in a case falling within subsection (7) above, reauthorisation is granted--

(a) the first suspended instalment shall be payable on the first payment day after reauthorisation is granted; and

(b) a subsequent instalment shall be payable on each payment day after that until the amount due in respect of the share is paid in full. "

Reauthorisation

15 (1) In subsection (4) of section 44 of the 1986 Act (reauthorisation), for paragraph (b) there shall be substituted the following paragraph--

" (b) the society has adequate reserves and other capital resources; " .

(2) In subsection (5) of that section, in paragraph (a), for the words "are or include" there shall be substituted the words "include either of".

(3) For subsection (9A) of that section there shall be substituted the following subsection--

" (9A) Any expression used in this section to which a meaning is given by subsection (13) of section 9 has that meaning in this section; and for the purposes of this section subsection (13A) of that section shall apply as if the reference to subsection (4)(b) of that section were a reference to subsection (4)(c) of this section. "

(4) For subsection (10) of that section there shall be substituted the following subsection--

" (10) In this section "adequate" means adequate having regard to the range and scale of the society's business; and in this subsection--

(a) "business" includes business the society proposes to carry on; and

(b) the reference to the society's business includes, where it has connected undertakings, a reference to the business of those undertakings. "

Powers to avoid apparent association with other bodies

16 Section 51 of the 1986 Act (powers to avoid apparent association with other bodies) shall cease to have effect.

Powers to obtain information and documents etc.

17 (1) In subsection (1)(a) of section 52 of the 1986 Act (powers to obtain information and documents etc.), after the words "section 9," there shall be inserted the words "Part IV,".

(2) In subsection (2) of that section--

(a) for the words "subsidiaries or other associated bodies" there shall be substituted the words "connected undertakings"; and

(b) for the words "subsidiary or associated body" there shall be substituted the words "connected undertaking".

(3) Subsection (3) of that section shall cease to have effect.

(4) In subsection (4) of that section--

(a) for the words "subsidiary of or other body associated with" there shall be substituted the words "connected undertaking of";

(b) for the words "that body" there shall be substituted the words "that undertaking"; and

(5) In subsection (5) of that section--

(a) for the words "subsidiary or associated body" there shall be substituted the words "or connected undertaking";

(b) for the words "the body", in each place where they occur, there shall be substituted the words "the society or undertaking"; and

(c) in paragraph (d), for the words "accountant approved by the Commission" there shall be substituted the words "approved accountant or other person with relevant professional skill".

(6) For subsection (6) of that section there shall be substituted the following subsections--

" (5A) Subject to subsection (4) above, the Commission may authorise a member, servant or agent of the Commission, on producing evidence of his authority, to require a building society or connected undertaking--

(a) to furnish to him forthwith such specified information as the Commission considers it needs for the purposes of its supervisory functions;

(b) to produce to him forthwith such documents or other material as the Commission considers it needs for those purposes;

(c) to provide to him forthwith such explanations of specified matters as the Commission considers it needs for those purposes.

(6) Where by virtue of subsection (5)(a) to (c) above the Commission has power, or by virtue of subsection (5A) above an authorised person has power, to require the furnishing of any information, the production of any document or material or the provision of any explanation, by a building society or connected undertaking, the Commission or authorised person shall have the like power as regards any person who--

(a) is or has been an officer or employee or agent of the society or undertaking; or

(b) in the case of documents or material, appears to the Commission or authorised person to have the document or material in his possession or under his control. "

(7) For subsection (9) of that section there shall be substituted the following subsection--

" (9) Where, by virtue of subsection (5), (5A) or (6) above, the Commission or an authorised person requires the production by a building society or connected undertaking or any other person of documents or material, the Commission or authorised person may--

(a) if the documents or material are produced, take copies of or extracts from them and require the person who produced them, or any other person who is a present or past director or officer of, or is or was at any time employed by, the building society or connected undertaking concerned, to provide an explanation of the documents or material; and

(b) if the documents or material are not produced, require the person who was required to produce the documents or material to state, to the best of his knowledge and belief, where the documents or material are. "

(8) For subsection (13) of that section there shall be substituted the following subsection--

" (13) In this section--

"agent", in relation to a building society or connected undertaking, includes its bankers, accountants, solicitors and auditors;
"approved", in relation to an accountant or other person with relevant professional skill, means approved by the Commission;
"specified" means specified in a notice or requirement under this section. "

Right of entry to obtain information and documents

18 After section 52 of the 1986 Act there shall be inserted the following section--

" 52A Right of entry to obtain information and documents

(1) Any member, servant or agent of the Commission may, on producing if required evidence of his authority, enter any premises occupied by a person on whom a notice has been served under section 52 for the purpose of--

(a) obtaining there the information, documents or other material or explanations required by that notice; and

(b) facilitating the exercise by the Commission of the powers conferred by subsection (5) of that section.

(2) Subject to subsection (3) below, any member, servant or agent of the Commission may, on producing if required evidence of his authority, enter any premises occupied by any person on whom a notice could be served under section 52 for the purpose of obtaining there such information, documents or other material or explanations as--

(a) are specified in the authority; and

(b) are information, documents or other material or explanations that could have been required by such a notice.

(3) The Commission shall not authorise any person to act under subsection (2) above unless it has reasonable cause to believe that if a notice under section 52 were served it would not be complied with or that any documents or other material to which it would relate would be removed, tampered with or destroyed.

(4) Any person who intentionally obstructs a person exercising rights conferred by this section shall be liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale or both. "

Confidentiality of information obtained by Commission

19 (1) In subsection (2) of section 53 of the 1986 Act (confidentiality of information obtained by Commission)--

(a) for paragraph (b) there shall be substituted the following paragraph--

" (b) with a view to the institution of, or otherwise for the purposes of--

(i) any civil proceedings by or at the relation of or against the Commission or by the Investor Protection Board arising out of the discharge of their respective functions under this Act; or

(ii) any civil proceedings in which the Commission will have or has a right to be heard; " ; and

(b) after the word "enable", in each place where it occurs, there shall be inserted the words "or assist".

(2) In subsection (3) of that section, after the word "enable" there shall be inserted the words "or assist".

(3) In subsection (11) of that section, for the words "subsidiary or associated body" there shall be substituted the words "connected undertaking".

(4) In subsection (14) of that section, for the word "subsidiaries" there shall be substituted the words "subsidiary undertakings".

Information disclosed to Commission from other sources

20 In subsection (3A) of section 54 of the 1986 Act (information disclosed to Commission from other sources), after the word "enabling", in both places where it occurs, there shall be inserted the words "or assisting".

Investigations on behalf of Commission

21 In subsection (2) of section 55 of the 1986 Act (investigations on behalf of Commission), for paragraphs (a) and (b) there shall be substituted the words "a connected undertaking of the building society under investigation".

Inspections and special meetings: general

22 (1) In subsection (1) of section 56 of the 1986 Act (inspections and special meetings: general), for the words "subsidiary of or body associated with" there shall be substituted the words "connected undertaking of".

(2) In subsections (3) and (4) of that section--

(a) for the words "subsidiary of or body associated with" there shall be substituted the words "connected undertaking of"; and

(b) for the words "subsidiary or associated body" there shall be substituted the words "connected undertaking".

(3) In subsections (6) and (8) of that section, for the words "subsidiary or associated body" there shall be substituted the words "connected undertaking".

Inspections: supplementary provisions

23 In subsection (1) of section 57 of the 1986 Act (inspections: supplementary provisions), for the words "subsidiary of or body associated with", in both places where they occur, there shall be substituted the words "connected undertaking of".

Restrictions on loans etc. to directors

24 (1) In subsection (1) of section 65 of the 1986 Act (restrictions on loans etc. to directors)--

(a) in paragraph (a), for the words "an advance or other loan" there shall be substituted the words "a loan"; and

(b) in paragraph (c), for the words "any services for the time being specified in Part I of Schedule 8 to this Act" there shall be substituted the words "any service of a kind which is provided by building societies for individuals in the ordinary course of business".

(2) In subsection (10) of that section--

(a) the word "and" immediately following the definition of "provision of funds" shall cease to have effect; and

(b) after the definition of "relevant" there shall be inserted the following definition--

" "subsidiary" has the meaning given by section 736 of the [1985 c. 6.] Companies Act 1985. "

Directors etc. not to accept commissions in connection with loans

25 (1) In subsection (1) of section 67 of the 1986 Act (directors etc. not to accept commissions in connection with loans), for the word "advances" there shall be substituted the word "loans".

(2) In subsection (5) of that section, for the words "an additional advance", "an advance" and "the advance" there shall be substituted the words "an additional loan", "a loan" and "the loan" respectively.

(3) In subsection (7) of that section, for the words "an advance" there shall be substituted the words "a loan".

Records of loans etc. for directors

26 In subsection (6) of section 68 of the 1986 Act (records of loans etc. for directors), for the words "the prescribed fee" there shall be substituted the words "such fee (not exceeding £5) as the society may from time to time determine".

Records of income of related businesses

27 (1) In subsection (2) of section 69 of the 1986 Act (records of income of related businesses)--

(a) in paragraph (b), for the word "advances" there shall be substituted the word "loans"; and

(b) for paragraph (c) there shall be substituted the following paragraph--

" (c) is not a connected undertaking of the society; " .

(2) In subsections (7)(b) and (8) of that section, after the words "its directors" there shall be inserted the words "and other officers".

(3) In subsection (15) of that section, for the words "the prescribed fee" there shall be substituted the words "such fee (not exceeding £5) as the society may from time to time determine".

Interpretation of Part VII

28 In subsection (3)(a) of section 70 of the 1986 Act (interpretation of Part VII), after the words "of his" there shall be inserted the words "but does not include any person who has attained the age of 18".

Accounting records and systems of business control etc.

29 (1) In subsection (3)(c) of section 71 of the 1986 Act (accounting records and systems of business control etc.), for the words "any provision of Part II or Part III" there shall be substituted the words "section 6 or 7".

(2) In subsection (6) of that section, for the words "statement in writing" there shall be substituted the word "record".

(3) In subsection (10) of that section, for the following, namely--

(a) the words "subsidiary undertakings or other associated bodies linked by resolution";

(b) the words "subsidiary undertakings or other associated bodies"; and

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