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Mergers: Provisions Supplementing Ss 82 And 83

Volume 98: debated on Wednesday 4 June 1986

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I beg to move amendment No. 227, in page 112, line 22, leave out lines 22 to 26 and insert

`imposing requirements for notification by a building society, to its members and to the central office, of the receipt by the society of proposals for a transfer of engagements or an amalgamation'.

'Kith this it will be convenient to take Government amendments Nos. 345 to 354.

These amendments deal with the much debated subject of what has been described as obstructive mergers. This is where a merger approach is made to a society but is not put to the members of the society that receives the approach. During the debates on the Bill in the House and in Committee and outside, a great deal of anxiety has been expressed about the proposed provisions. In response to those anxieties, I have decided that the whole process should be greatly simplified in a way that removes all the anxieties that have been expressed by hon. Members and the BSA.

In future, if these proposals are accepted, there will be only the need for notification. There will be no special voting procedures and it will be open to members to use the general provisions of the constitution of the building society once the basic information is available to them. The paper circulated by the BSA says:
"The government has now greatly modified and simplified its proposals which are now acceptable to the Association."
I hope that they will also be acceptable to the House.

I have received a letter from a small building society which continues to express anxieties. I know that the Economic Secretary has made plain the purpose of the amendments, but he may wish to add one or two points. The letter recognises that the Economic Secretary has considerably watered down the original provisions on proposals for mergers direct to members. The building society that wrote to me still feels that the revised provisions could prove embarrassing for small societies in particular and could be open to abuse. It says:

"For example there would be nothing to stop a predator society making a merger approach to a significant number of small societies, all of whom would be bound to report in the Notice of Annual General Meeting a statement of any merger approach received"—
unless that has specifically been requested to be kept confidential. The building society still feels that it would be preferable if the contested merger provisions could be removed from the Bill. It feels that unless this is done, the provisions will continue to place unreasonable pressure on small societies. As the Minister knows, these societies often provide for specialised or local needs.

The letter is couched in fairly general terms, but it would be useful if the Economic Secretary could respond. If any points need further reassurance, perhaps he would make them plain.

I declare an interest as a director of a small building society.

My remarks are directed to amendment No. 3520. As the hon. Member for Thurrock (Dr. McDonald) has said, schedule 13, as originally drafted, could have sounded the death knell of the small local building societies, which would have been at the mercy of the large predator societies. This point was put forcibly by hon. Members on both sides in Committee. We were pleased by the way in which my hon. Friend the Economic Secretary took our point and undertook to bring back proposals on Report. He said:
"I think that the consequences will be the opposite. But I am certainly willing to build in a further provision … which would restrict the obstructive mergers procedures only to cases that were not disproportionate in size. That would rule out the aggressive approaches by large societies to smaller ones."—[Official Report, Standing Committee A,18 February 1986; c. 399.]
That was helpful. I am delighted that the new proposals go further and that all that the societies are now required to do is to make a statement that they have received an approach and give the name of the building society.

As the hon. Member for Thurrock said, one or two small societies are still worried, because they feel that some large societies will make an approach to 10 or 15 small societies not just once but every year so that every year, at every annual general meeting, notices will go out with the merger statement saying that the Halifax building society or the Abbey National has made an approach. Some of the small societies feel that this might lead to a war of attrition. I have some sympathy for that point of view, but I feel that they are exaggerating. My hon. Friend the Economic Secretary to the Treasury has moved far towards the point of view that we put in Committee. The new provisions will allow small local building societies that offer important services in many of the regions to survive, provided that they are efficient. Therefore, I thank my——

It being Ten o'clock, the debate stood adjourned.