The Building Societies (Financial Assistance) Order 2010

• Citation: S.I. 2010/1188
• Sections: 12

Section 1 Citation and commencement

(1) This Order may be cited as the Building Societies (Financial Assistance) Order 2010.

(2) It comes into force on the day after the day on which it is made.

Section 2 Interpretation

(1) In this Order—

“the 1986 Act ” means the Building Societies Act 1986 ;

“ the Authority ” means the Financial Services Authority ;

“qualifying institution” means the Treasury, the Bank of England, another central bank of a Member State of the European Economic Area or the European Central Bank;

“relevant building society” means any building society which—

receives financial assistance from a qualifying institution,

has entered into an agreement with a qualifying institution under which it may receive financial assistance from that institution, or

has received an offer of such an agreement, or of financial assistance, from a qualifying institution;

“section 1(1)(a) function” means the function of the Authority set out in section 1(1)(a) of the 1986 Act (functions of the Authority) .

(2) References in this Order to a qualifying institution include—

(a) any person acting for or on behalf of that qualifying institution;

(b) any person providing, offering, or entering into an agreement for the provision of, financial assistance to a building society, who does so on the basis of financial assistance that person receives from the qualifying institution in question for that purpose.

Section 3 Purpose or principal purpose of building societies

(1) Section 5 of the 1986 Act (establishment, constitution and powers) applies in relation to a relevant building society with the following modification.

(2) No relevant building society shall be regarded as failing to comply with section 5(1)(a) (purpose or principal purpose) by virtue of any financial assistance it receives from a qualifying institution.

(3) The powers conferred on the Authority by sections 36 and 37 of the 1986 Act (power to direct restructuring of business etc and powers to petition for winding up etc) shall not become exercisable in relation to a building society which receives financial assistance if, but for the financial assistance, they would not have become exercisable.

(4) Sections 5(4A), 36(1) and 37(1) shall be construed accordingly.

(5) The Authority shall disregard, for the purposes of its section 1(1)(a) function, a building society to which paragraph (3) applies.

Section 4 The lending limit

(1) Section 6(1) of the 1986 Act (the lending limit) shall not apply in relation to a relevant building society for the relevant period where—

(a) the society receives financial assistance from a qualifying institution,

(b) as a consequence of the financial assistance, the society transfers, assigns or otherwise disposes of any of its assets, and

(c) that transfer, assignment or other disposal would, apart from this article, put the society in breach of section 6(1).

(2) No building society within paragraph (1) shall be regarded as failing to comply with section 5(1)(a) of the 1986 Act in the relevant period by virtue of the matters referred to in paragraph (1).

(3) The powers conferred on the Authority by sections 36 and 37 of the 1986 Act shall not become exercisable in relation to a building society within paragraph (1) in respect of the relevant period.

(4) Sections 5(4A), 36(1) and 37(1) shall be construed accordingly.

(5) In the relevant period the Authority shall disregard, for the purposes of its section 1(1)(a) function, a building society within paragraph (1).

(6) In this article “the relevant period” is the period commencing on the date on which paragraph (1) is first satisfied in relation to the society and ending—

(a) one year after that date, or

(b) if later, on the date on which the financial assistance referred to in paragraph (1) is no longer provided.

Section 5 The funding limit

(1) Section 7 of the 1986 Act (the funding limit) applies to a relevant building society with the following modification.

(2) There shall be disregarded for the purposes of section 7(2) any financial assistance the society receives from a qualifying institution.

Section 6 Raising funds and borrowing

Section 8(1)(c) of the 1986 Act (raising funds and borrowing) shall not apply to a relevant building society in relation to any financial assistance the society receives from, or is offered by, a qualifying institution.

Section 7 Floating charges

(1) Section 9B(1) of the 1986 Act (restriction on creation of floating charges) shall not apply to a relevant building society in relation to any relevant floating charge.

(2) Section 9B(2) shall not apply to any relevant floating charge.

(3) In this article a “relevant floating charge” is a floating charge created by a relevant building society in favour of a qualifying institution in connection with any financial assistance the society receives from that qualifying institution.

Section 8 Memorandum and rules

(1) Schedule 2 to the 1986 Act (establishment, incorporation and constitution of building societies) applies in relation to a relevant building society with the following modifications.

(2) Paragraph 2 (the memorandum) shall have effect as if, after sub-paragraph (4), there were inserted—

(4A) However, no provision of the memorandum of a building society shall be binding on any member or officer of the society, or on any person claiming on account of a member or under the rules, to the extent that it would prevent the society (whether acting through its officers or otherwise) from—

(a) receiving any financial assistance from a qualifying institution, or

(b) entering into any transaction connected with the receipt of such financial assistance,

and sub-paragraph (4) shall be construed accordingly.

(4B) In sub-paragraph (4A)—

(a) “financial assistance” has the same meaning as in section 251 of the Banking Act 2009 and “qualifying institution” means the Treasury, the Bank of England, another central bank of a Member State of the European Economic Area or the European Central Bank; and

(b) references to a qualifying institution include—

(i) any person acting for or on behalf of that institution, and

(ii) any person providing, offering, or entering into an agreement for the provision of, financial assistance to a building society, who does so on the basis of financial assistance that person receives from the qualifying institution for that purpose.

(3) Paragraph 3 (the rules) shall have effect as if, after sub-paragraph (2), there were inserted—

(2A) However, nothing in the rules of a building society shall be binding on any member or officer of the society, or on any person claiming on account of a member or under the rules, to the extent that it would prevent the society (whether acting through its officers or otherwise) from—

(a) receiving any financial assistance from a qualifying institution, or

(b) entering into any transaction connected with the receipt of such financial assistance,

and sub-paragraph (2) shall be construed accordingly.

(2B) In sub-paragraph (2A)—

(a) “financial assistance” and “qualifying institution” have the same meanings as in paragraph 2(4A) (see paragraph 2(4B)); and

(b) references to a qualifying institution include—

(i) any person acting for or on behalf of that institution, and

(ii) any person providing, offering, or entering into an agreement for the provision of, financial assistance to a building society, who does so on the basis of financial assistance that person receives from the qualifying institution for that purpose.

(4) No member of a building society may bring proceedings under paragraph 16(2) (capacity of society not limited by its memorandum) to restrain the doing of any act by a building society for or in connection with the receipt of financial assistance from a qualifying institution.

(5) Paragraph 16(3) shall not operate so as to—

(a) require the directors to observe any limitations on their powers flowing from the society’s memorandum which would, apart from this article, prevent them entering into any transaction for or in connection with the receipt of financial assistance by the society from a qualifying institution, or

(b) require any such action by the directors which, but for paragraph 16(1), would be beyond the society’s capacity, to be ratified by the society by special resolution.

Section 9 Application of companies winding up legislation to building societies

(1) Schedule 15 to the 1986 Act (application of companies winding up legislation to building societies) applies in relation to a relevant building society with the following modifications.

(2) In paragraph 3(2) , omit paragraph (b).

(3) In paragraph 33, for “subsections (2) and (4) to (6)” substitute “subsections (2), (5) and (6)”.

(4) In paragraph 55E , for “paragraphs (2) and (4) to (6)” substitute “paragraphs (2), (5) and (6)”.

Section 10 Application of other companies insolvency legislation to building societies

Section 90A of the 1986 Act (application of other companies insolvency legislation to building societies) applies in relation to a relevant building society as if—

(a) after “England and Wales” in paragraph (c) there were inserted “, Scotland”;

(b) after “receivers and managers” in that paragraph there were inserted “, receivers or administrative receivers”.

Section 11 Application of other companies insolvency legislation to building societies

(1) Schedule 15A to the 1986 Act (application of other companies insolvency legislation to building societies) applies in relation to a relevant building society with the following modifications.

(2) In paragraph 1(2)(a) , for “Chapter I of Part III” substitute “Chapters I, II and III of Part III”.

(3) In paragraph 2(2), omit paragraph (b).

(4) In paragraph 11 —

(a) in sub-paragraph (2), for “is a reference to the Authority” substitute “includes a reference to the Authority”;

(b) omit sub-paragraph (3).

(5) Omit paragraphs 12, 13, 18 and 20.

(6) For paragraph 27, substitute—

(27)

(1) Subsection (3) of section 40 of the Act (payment of debts out of assets subject to floating charge) as applied to a building society has effect as if the reference to general creditors included a reference to holders of shares in the society.

(2) Subsection (3) of section 59 of the Act (priority of debts) as applied to a building society has effect as if the reference to ordinary creditors included a reference to holders of shares in the society.

(27A) Subsection (1) of section 46 of the Act (information to be given by administrative receiver) or subsection (1) of 65 of the Act (information to be given by receiver) as applied to a building society has effect as if the reference to all the creditors of the society included a reference to all the holders of shares in the society.

(27B) Subsection (2) of section 47 of the Act (statement of affairs to be submitted) or subsection (2) of section 66 of the Act (building society’s statement of affairs) as applied to a building society has effect as if the reference to its creditors included a reference to all holders of shares in the society.

(27C) Section 48 of the Act (report by administrative receiver) or section 67 of the Act (report by receiver) as applied to a building society has effect as if—

(a) the reference in subsection (1) to the Authority included a reference to the scheme manager;

(b) the reference in subsection (1)(d) to other creditors included a reference to holders of shares in the society;

(c) the references in paragraphs (a) and (b) of subsection (2) to unsecured creditors of the society included references to holders of shares in the society; and

(d) the reference in subsection (2) to a meeting of the society’s unsecured creditors included a reference to a meeting of holders of shares in the society.

(27D) Subsection (1) of section 49 or 68 of the Act (committee of creditors) as applied to a building society has effect as if the reference to a meeting of creditors included a reference to a meeting of holders of shares in the society.

(7) In paragraph 33 —

(a) in sub-paragraph (2), for “is a reference to the Authority” substitute “includes a reference to the Authority”;

(b) omit sub-paragraph (3).

(8) Omit paragraphs 34, 35, 40 and 42.

(9) For paragraph 49, substitute—

(49) Paragraph (3) of Article 50 of the Order (payment of debts out of assets subject to floating charge) as applied to a building society has effect as if the reference to general creditors included a reference to holders of shares in the society.

(49A) Paragraph (1) of Article 56 of the Order (information to be given by administrative receiver) as applied to a building society has effect as if the reference to all the creditors of a society included a reference to all the holders of shares in the society.

(49B) Paragraph (2) of Article 57 of the Order (statement of affairs to be submitted) as applied to a building society has effect as if the reference to its creditors included a reference to all holders of shares in the society.

(49C) Article 58 of the Order (report by administrative receiver) as applied to a building society has effect as if—

(a) the reference in paragraph (1) to the Authority included a reference to the scheme manager;

(b) the reference in paragraph (1)(d) to other creditors included a reference to holders of shares in the society;

(c) the references in sub-paragraphs (a) and (b) of paragraph (2) to unsecured creditors of the society included references to holders of shares in the society; and

(d) the reference in paragraph (2) to a meeting of the society’s unsecured creditors included a reference to a meeting of holders of shares in the society.

(49D) Paragraph (1) of article 59 of the Order (committee of creditors) as applied to a building society has effect as if the reference to a meeting of creditors included a reference to a meeting of holders of shares in the society.

Section 12 Application of other companies insolvency legislation to building societies

The Building Societies (Financial Assistance) Order 2008 is revoked.