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Building Societies

Volume 13: debated on Thursday 26 November 1981

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asked the Chancellor of the Exchequer whether he will take steps to require that in section A of form AR 11 (annual return), a return made under part VIII of the Building Societies Act 1962, the trading name of the company to which a special advance has been made shall be shown in addition to the register number of the company.

The annual return form AR 11, which is required to be sent to the Chief Registrar of Friendly Societies, is primarily a control document to assist him in carrying out his duties of prudential supervision of building societies. The chief registrar does not regard the inclusion of a company's trading name as well as its register number to be necessary to enable him to carry out his duties in this regard. Thus, in common with the regulations they supersede, the Building Societies (Accounts and Annual Return) Regulations 1981, which were laid before Parliament on 4 November last and come into operation on 31 December 1981, do not require that information to be given.

asked the Chancellor of the Exchequer whether steps are taken by the Registrar of Friendly Societies to ensure that building society returns show the extent to which advances are made to companies or other bodies corporate when a building society director held, either directly or through a nominee, shares in the company or other body corporate concerned or where the building society director of a company or other body corporate was a director.

Section 89 of the Building Societies Act 1962 requires that the annual return of a building society shall show, inter alia: the amount of any advances made by the society to a company or other body corporate in which a director of the society holds—either directly or through a nominee—shares the nominal value of which exceeds 2½ per cent. of the total paid-up share capital of the company or other body corporate; and also the amount of any advances made by the society to a company or other body corporate of which a director of the society is a director. In the new Building Societies (Accounts and Annual Return) Regulations 1981 (SI 1981 No. 1497), due to come into operation on 31 December this year, these requirements are contained in section B of part 9 of the annual return form. While these provisions require disclosure of such advances in the year in which they were made, section C of part 9 further requires disclosure of the amounts outstanding on such advances in subsequent years.

asked the Chancellor of the Exchequer what steps are taken to ensure that directors of building societies declare an interest at board meetings which discuss the question of advances to companies in which they have an interest directly or indirectly.

This matter is governed by two provisions of the Building Societies Act 1962. In the first place, section 73 puts a general duty on a director of a building society who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the society to declare the nature of his interest to the board. In the second place, pursuant to the society's obligation of disclosure in the annual return referred to in my reply to the hon. Member's preceding question, a director of the society has a specific duty, under section 89(2) of the Act, to give notice in writing to the society of such matters relating to his employment by, or other interest in, any company or other body corporate as may be necessary for the purpose of the society's obligation of disclosure. Failure by a director to comply with either of the duties mentioned is an offence.

asked the Chancellor of the Exchequer whether, as part of normal inspection and monitoring procedures, officials of the registry examine minutes of building society boards of directors.

Yes. As part of the continuing prudential supervision of building societies, officials of the Registry of Friendly Societies make regular visits to societies during which, as a matter of regular practice, board minutes are examined.

asked the Chancellor of the Exchequer whether the particulars required under part 8, section B of form AR11 (annual return) under the Building Societies Act 1962 extend to information concerning professional partnerships.

In the new Building Societies (Accounts and Annual Return) Regulations 1981, S.I. 1981 No. 1497, the particulars which I understand the hon. Member has in mind—advances to directors, and so on—are required to be stated in section B of Part 9 of the annual return form. In accordance with section 89 of the Building Societies Act 1962, this requires disclosure of, inter alia, advances made by the society to any director or the manager or secretary of the society. Any advance to a partnership in which such person is a partner would be treated, for the purpose of this requirement, as an advance to the director or manager or secretary personally.