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Regulated Terms Etc: Distributions And Share Rights

Volume 98: debated on Wednesday 4 June 1986

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'(1) Subject to subsections (2) to (8) below, the terms of a transfer of business by a building society to the company which is to be its successor may include provision for part of the funds of the society or its successor to be distributed among, or other rights in relation to shares in the successor conferred on, members of the society, in consideration of the transfer.

(2) The terms of a transfer of a society's business must—

  • (a) require its successor to assume as from the vesting date a liability to every qualifying member of the society as in respect of a deposit made with the successor corresponding in amount to the value of the qualifying shares held by him in the society; and
  • (b) confer a right, subject to subsection (7) below, to a distribution of funds, whether of the society or its successor, by way of bonus on every qualifying member of the society equal to the relevant proportion of the value of the qualifying shares held by him in the society; and
  • (c) in a case where the successor is a specially formed company, confer a right on every qualifying member of the society to a priority liquidation distribution by its successor calculated in the prescribed manner so as to represent the extent of his deposit under paragraph (a) above and secured on the property or undertaking of the successor.
  • (3) For the purposes of the liabilities assumed under subsection (2) (a) above by the society's successor, a member is a qualifying member if he held shares in the society on the day immediately preceding the vesting date and his qualifying shares are those held by him on that day.

    (4) For the purposes of the rights conferred under subsection (2) (b) above on members of the society, a member is a qualifying member if he held shares in the society on the qualifying day and was not eligible to vote on the requisite transfer resolution, his qualifying shares are those held by him on that day and the relevant proportion is the proportion which (as shown in the latest balance sheet of the society) the society's total liability to its members in respect of shares bears to its reserves.

    (5) For the purposes of the rights conferred under subsection (2) (c) above on former members of the society, a member is a qualifying member if he held shares in the society on the qualifying day, was eligible to vote on the requisite resolution and is a depositor with its successor.

    (6) For the purposes of subsection (2) (c) above,—

  • (a) a right to a liquidation distribution by a society's successor is a right to a distribution of its assets in the event of its being wound up;
  • (b) the right shall confer priority in the distribution of the assets over all other creditors and members of the company other than those creditors the debts to whom are preferential debts for the purposes of the Insolvency Act 1985; and
  • (c) "prescribed" means prescribed by transfer regulations.
  • (7) The Commission may, where it confirms a transfer of a society's business to an existing company, as it thinks fit having regard to what is equitable between the members of the society, direct that no bonus distribution of funds in pursuance of subsection (2) (b) above shall be made or that the amount distributed shall he such lesser amount as it provides for in the direction; and where the Commission gives a direction under this subsection no liability to make such a distribution shall arise or, as the case may be, that liability shall be discharged by payment of the lesser amount.

    (8) The following restrictions apply to any distribution of funds, or any conferring of rights in relation to shares, in connection with the transfer of its business from the society to its successor where the successor is a company specially formed by the society, that is to say—

  • (a) no distribution shall be made except that required by subsection (2)(b) above;
  • (b) where a distribution of funds is made to members of the society or rights are conferred on them to acquire shares in priority to other subscribers, the distribution shall be made to, or the right conferred on, those members who held shares in the society throughout the period of two years which expired with the qualifying day, and no others; and
  • (c) where negotiable instruments acknowledging rights to shares are issued by the successor within the period of two years beginning with the vesting date, no such instruments shall be issued to former members of the society unless they are also issued, and on the same terms, to all other members of the company;
  • and it is unlawful for any distribution of funds to be made or right in relation to shares conferred in contravention of the provisions of this subsection.

    (9) Where the successor is a specially formed company, the terms of the transfer must include provision to secure that the society ceases to hold any shares in the successor by the date on which the society is to dissolve.

    (10) Any terms of a transfer of business to which subsection (2), (8) or (9) above apply are regulated terms for the purposes of section (Transfer of business to commercial company).

    (11) In subsections (4), (5) and (8) above, "qualifying day" means the day specified in the transfer agreement as the qualifying day for the purposes of this subsection.'.— [Mr. Ian Stewart.]

    Brought up, read the First and Second time, and added to the Bill.