This section describes the requirements of the 1986 Act concerning members entitlement to vote, the register of members and the sending of notices of meetings. It also discusses general meeting arrangements, the resolutions and majorities required and the counting of votes. Finally, it gives guidance on the discretion which the Authoritymay exercise in these matters. The directors of each society must satisfy themselves that they observe the general law on meetings, the relevant provisions of the 1986 Act and their own Rules.
The 1986 Act provides that a merger must be approved by the requisite Merger Resolutions (Sections 93(2)(c) and 94(2) and (5)(a)) as follows:
a shareholding members resolution (see definition in paragraph 27A of Schedule 2 to the 1986 Act) passed on a poll by a majority of at least 75% of shareholders qualified to vote and voting; and
a borrowing members resolution passed on a poll by a simple majority of borrowing members qualified to vote and voting (see definition in paragraph 29(1) of Schedule 2 to the 1986 Act);
provided that, in each case, notice has been duly given that the resolution is to be moved as a shareholding members resolution or a borrowing members resolution, as the case may be. A member may vote either in person at the meeting or by appointing a proxy (paragraphs 27A(b) and 29(1) of Schedule 2 to the 1986 Act do not provide that the voting on these may be conducted by postal ballot).
[Note: in the case of a partial transfer of engagements, in addition to the approval of the members as a whole by passage of the shareholding members resolution and borrowing members resolution described above, the society must obtain the approval of an affected shareholders resolution, which must be passed by the majority of the affected shareholders eligible to vote; that is, those shareholders in respect of whose shares it is proposed that the engagements should be transferred (Section 94(3) and (4)) of the 1986 Act. But note that the resolution must be passed by a majority of the affected members eligible to vote, not just a simple majority of those who actually do vote.]
Section 96(1) of the 1986 Act provides that, where a society wishes to pay compensation to directors or other officers for loss of office or diminution of emoluments, such compensation must be approved by a special resolution of the society's members (see also paragraphBSOG 2.2.12 G), separate from the Merger Resolutions. The special resolution must be passed by a majority of at least 75% of those qualified to vote and voting. The Treasury has not made regulations under Section 96(2) of the 1986 Act to set limits below which compensation may be paid without the authority of a special resolution. Therefore, in every case where compensation is proposed, the members must vote on the proposal as a separate issue from whether they approve the merger itself. Other officers include, in addition to the Chief Executive and Secretary, any persons who exercise managerial functions under the immediate authority of a director or the Chief Executive of a society (Section 119 of the 1986 Act defines manager and officer).
The members approval of bonus payments is required as part of the Merger Resolutions (see Section96(4) to (6) of the 1986 Act) and see paragraphBSOG 2.2.11 G for the Authoritysview of what may constitute a bonus). If the total gross cost of the proposed bonus(es) (i.e. without any adjustment for prospective corporation tax recovery) is within the prescribed limit, then approval for it need only be included in each of the Merger Resolutions of the society whose funds are to be distributed. If it exceeds that limit then it must be included in each of the Merger Resolutions of each participating society. The prescribed limit was changed by the Building Societies (Mergers) (Amendment) Regulations SI 1995/1874 amending S1 1987/2005 and now is:
in either a full transfer of engagements or an amalgamation, 5% of the total assets, as stated in the Schedule 16 Statement, of the society to whose members the bonus is to be paid;
in a partial transfer of engagements, 5% of the share liabilities, as given in the Schedule 16 Statement, to be transferred;
or a sum equal to the society's reserves after deducting its fixed assets (apportioned pro rata in respect of 4.4(2)), whichever is the less. The Regulations should be consulted for the full detail of the calculations.
Paragraph 5 of Schedule 2 to the 1986 Act provides that no person may be a member of a building society unless he or she is a shareholding member or a borrowing member. A shareholding member is a person who holds a share in the society (that is, an investment in a share account or PIBS). A borrowing member is a person who is indebted to the society in respect of a loan fully secured on land. However, the Rules may provide that borrowing membership is conferred by a loan substantially secured on land, or shall cease if the loan is foreclosed or the land is taken into possession by the society. A minor (that is a person under 18 years of age) may be a member, but may not vote on any resolution.
The mandatory provisions of Schedule 2 to the 1986 Act concerning a members entitlement to vote on a resolution, which must be reflected in societies Rules, are that the member must be a member on the voting date, must have been a member at the end of the last financial year before the voting date (paragraph 23(1) of Schedule 2) and must have attained the age of 18 years (paragraphs 5(3) and 34(2) of Schedule 2) on or before the date of the meeting. So far as borrowing members are concerned, the member is not entitled to vote in that capacity if his indebtedness to the society at any relevant date is less than 100 (paragraphs 29(2) and 36 of Schedule 2).
However, Schedule 2 specifies the following further provisions, some, none or all of which may be included in a society's Rules with respect to the entitlement of shareholding members to vote on any resolution; a person must (see Schedule 2 paragraphs 23(3) to (5) and 36):
The qualifying shareholding date is either the last day of the financial year preceding the voting date or, if the voting date falls during that part of a financial year which follows the conclusion of the society's Annual General Meeting commenced in that year, the first day of the period beginning 56 days before the date of the meeting. Therefore, if a society's Rules, following the BSA Model Rules (Fifth Edition), include the provisions concerning shareholding and continuity of membership described in paragraphBSOG 2.4.7 G, and if the voting date is later than the AGM in that year, a person to be entitled to vote on a shareholding members resolution must:
have been a shareholding member on the last day of the previous financial year;
have held shares to the value of at least 100 on the day 56 days before the date of the meeting;
have held shares continuously from the 56th day through to the voting date; and
hold shares on the voting date.
But note that there is no requirement for continuity of shareholding between 2.4.8(1) and (2). (In contrast, in the case of an ordinary or special resolution, membership at 2.4.8(1)may be satisfied by either borrowing or shareholding membership provided the shareholding member satisfies the other conditions of 2.4.8(2) to (4)in order to vote in his or her capacity as a shareholder.) Note also that a person cannot meet a requirement for holding shares on a given date, or during a given period, by relying on his holding of a share account with an overdrawn balance; and a person cannot meet a requirement for being a member on a given date (for example, at 2.4.8(a)) by relying on his holding of such a share account.
The mandatory provisions of Schedule 2 to the 1986 Act concerning entitlement to vote on a borrowing members resolution are, as noted above, that the member must have been, and be, indebted to the society for at least 100 (whether on one or more accounts) at the end of the last financial year before the voting date, and on the voting date, in respect of an advance fully secured (or, if the Rules permit, substantially secured) on land (paragraphs 5(2), 23(1), 29(2) and 36 of Schedule 2) and have attained the age of 18 years by the date of the meeting (paragraphs 5(3) and 34(2) of Schedule 2). But note that there is no dispensation in the 1986 Act for the Rules to reduce the qualifying amount below 100, nor to provide for a continuity of membership qualification.
Schedule 2 makes provision in respect of joint shareholders (paragraph 7) and joint borrowers (paragraph 8). The only person entitled to exercise the right to vote on behalf of the joint shareholders or joint borrowers is the one who is named first in the records of the society, described respectively as the representative joint (share)holder or the representative joint borrower.
A member may vote once only on any resolution, irrespective of the number of accounts he or she may hold. The amount of the balance(s) held on an account(s) is not material, except to qualify to vote (see paragraphs 2.4.7 and 2.4.8). Thus, a member with several share accounts and/or several mortgage accounts, whether as sole and/or representative joint shareholder or representative joint borrower, may vote once only on any resolution. When the membership votes as a whole on an ordinary or a special resolution, each member may vote only once, whether he or she is a shareholding or a borrowing member or both. Where shareholding members and borrowing members vote separately, as on the Merger Resolutions, members entitled to vote may vote only once, if a shareholding member, on the shareholding members resolution and once, if a borrowing member, on the borrowing members resolution. A person entitled to vote both as a shareholding member and as a borrowing member may, of course, vote once on each resolution.
The voting date is defined by paragraph 23(6) of Schedule 2 as, for this purpose, either:
for members who appoint a proxy, the last date specified by the society for the receipt of proxy voting forms, which may not be more than 7 days before the date of the meeting (paragraph 24(6) of Schedule 2). A proxy vote remains valid if the member ceases to be a member after the proxy voting date but before the date of the meeting (paragraph 24(2) of Schedule 2); or
for all other members, the date of the meeting.
The guidance given in the foregoing paragraphs of this section is intended to give a general description of the provisions of the 1986 Act and of the Rules suggested by the BSA Model Rules. Societies should satisfy themselves that they observe the specific provisions of the 1986 Act and of their own Rules.
Every society is required to maintain a register of the names and addresses of its members and whether each member is a shareholding member or a borrowing member or both (paragraph 13 of Schedule 2 to the 1986 Act). The register should, so far as possible, be de-duplicated; that is, multiple account holders should be identified and their names recorded once only in the register. A society's systems must also be capable of recognising those members who are eligible to vote by, for example, aggregating share account balances of multiple account holders to check that they have the requisite qualifying shareholding, by checking members continuity of shareholding (if and where applicable), and by identifying minors including (separately) those who will shortly attain their majority (see paragraphsBSOG 2.4.6 G and BSOG 2.4.9 G). Other situations requiring careful consideration are, for example, in relation to powers of attorney, personal representatives, and death of the representative joint holder or borrower. This information is required to ensure that the notice of the meeting is sent to all the members entitled to receive it and so that the scrutineers have adequate systems to validate the votes cast on the Merger Resolutions (see also paragraphBSOG 2.4.20 G).
It will be necessary for the directors of a society contemplating a merger to satisfy themselves, in consultation with their external auditors, that the society's systems are capable of delivering the information described above. The Authoritywill require an assurance on this point when the society applies for approval of the Schedule 16 Statement (see paragraph BSOG 2.3.29G (5)). One of the criteria which the Authorityhas to consider at the confirmation stage is whether some relevant requirement of the 1986 Act or the Rules was not fulfilled (see paragraphsBSOG 2.5.15 G to BSOG 2.5.19 G).
The problem of avoiding duplication in the register of members is significant for most societies of any size. It has been aggravated by the proliferation of types of account over the last decade or so. Societies generally now seek to establish, when new accounts are opened, whether or not the applicant is an existing member and, if so, which accounts are relevant to voting and other membership rights. The task of identifying multiple account holders is complicated by confidentiality requirements. For example, if two accounts are held by a Mr A Smith and a Dr A Smith, both at the same address, the society cannot know (in the absence of other information such as date of birth) whether the two accounts belong to the same person, one opened before and one after he qualified, or by the doctor and his son. A letter of enquiry to one asking about both accounts would risk breaching customer confidentiality. If it is the same person, there is a risk that he will be given the opportunity to vote twice or, if neither account holds more than 100 but they aggregate above that qualifying amount, be denied a vote to which he is entitled.
Where a society identifies a number of accounts which appear to be held by a single member, but it cannot be sure, then it must send separate meeting notices in respect of each account. However, its systems should identify the possible multiple holding so that, if more than one vote is received in respect of that group of accounts, the scrutineers are alerted to the possibility, and can check the proxy forms for evidence of invalid duplicate votes. The voters declaration suggested by the BSA, in conformity with paragraph 34 of Schedule 2 to the 1986 Act, provides some protection against votes being cast by minors, and attempts the same for duplicate votes (see Enclosure 2 to BSA Circular 5177). It is, however, the duty of each society to make sure that its register of members is reliable.
Paragraphs BSOG 2.4.19 G to BSOG 2.4.34 G consider the requirements for sending notices of meetings and Schedule 16 Statements to members, and the conduct of meetings at which Merger Resolutions are to be moved. It is for societies to satisfy themselves that they comply with the relevant requirements of the 1986 Act, their Rules and the general law on meetings.
The statutory requirements concerning notices are in paragraph 22 of Schedule 2 to the 1986 Act. Notice of the meeting must be given to each shareholding and borrowing member of the society who would be eligible to vote at the meeting if the meeting were held on the date of the notice (a single date for all notices irrespective of when they are despatched). In addition, notice must also be given to any person who will attain the age of 18 years after the date of the notice but on or before the date of the meeting, and to every person who becomes a shareholding or borrowing member of the society after the date of the notice but before the final date for receipt of proxy voting forms, and who would, in either case, be eligible to vote at the meeting if he remained a member until then. (In practice, this may mean sending out a notice to every such person, even if they will, in fact, not be entitled to vote). The Schedule 16 Statement must be sent in or with the notices (paragraph 1(2) of Schedule 16 to the 1986 Act). Accidental omission to give notice of a meeting to any person entitled to receive it does not invalidate the proceedings at the meeting. However, accidental omission does not include a systemic failure to send notices (e.g. omitting to send notices to new members, or omission of a group or class of members from the mailing list arising from a fault in a computer programme), nor all cases of error by management see also paragraphBSOG 2.4.39 G.
The 1986 Act also provides, in paragraph 21 of Schedule 2, for the length of notice to be given to members. The period of notice given must be not less than 21 days or such longer period as the society's Rules prescribe. The precise procedures for sending notices, the way in which the days are to be counted, and presumed receipt of notices duly sent, will normally be set out in the Rules. Particular points to note are:
the 21 days notice expires with the closing date for the receipt of proxy voting forms, not the date of the meeting;
if reliance is to be placed on a provision in the Rules that notices can be deemed to be served 24 hours after posting, then first class post or equivalent means of delivery should be used, but it is advisable to allow a margin of at least an extra day or two, or more if second class post is used;
if a society contracts with a commercial mailing firm, it must ensure that the firm is comprehensively instructed about the society's despatch and delivery requirements, and the society should carry out spot checks to satisfy itself that its instructions are being properly carried out. A failure by the contractor may invalidate the meeting, even if the society itself has used its best endeavours to police the operation.
The Schedule 16 Statement is required, by paragraph 1(2) of that Schedule, to be sent in or with the notice of the meeting to every member entitled to that notice. As is suggested in paragraphBSOG 2.3.4 G, it may be expedient to include both in a comprehensive Merger Document.
Notices and Statements need not be sent to any member in whose case the society has reason to believe that communications sent to him at his registered address are unlikely to be received by him (paragraph 14 of Schedule 2 to the 1986 Act). However, a society is required instead to place notices of the meeting prominently in every branch office, or to place advertisements in newspapers circulating in the areas in which the society's members live. Such notices or advertisements must be placed at least 21 days before the date of the meeting, and must state where members can obtain copies of the Schedule 16 Statement, the Merger Resolutions and proxy voting forms (Schedule 2, paragraph 35(4)).
The meeting should be held at a time and place considered by the board to be most convenient for the generality of the society's members. This may well not be the same as the traditional time and place for the annual general meeting. In deciding on this, the board should take account of the geographical location of their members. For example, for a society with a majority of its members living in a compact geographical region there must be a strong presumption in favour of an evening meeting. Consideration should be given to the possibility of a larger attendance than usual at a meeting to consider a merger.
Subject to the society's Rules, its chairman will normally chair the meeting. His function as chairman of the meeting is to ensure that all views are presented and properly discussed. He is unlikely to be able to fulfil that role if he acts also as chief advocate of a merger which is controversial among members. In such cases it might be appropriate to give to another director the initial task of explaining the merger and of responding to questions from members.
Merger Resolutions or the other resolutions mentioned in paragraphsBSOG 2.4.1 G to BSOG 2.4.3 G, cannot be amended at the meeting except in a way which does not change their substance at all. This is because an amendment to such a resolution has to be subject to the same procedure and period of notice to members as the resolution itself. If a board decides, after due notice of such a resolution has been sent to the members, that the resolution should be amended, then it will be necessary to submit the amended resolution, with due notice, to a general meeting at a later date, unless of course there is still time to fulfil the notice requirements.
The conduct of the voting must not only be fair but also be seen to be fair, otherwise the result may be called into question. So it is highly desirable that the votes are counted by independent scrutineers. The board may ask the scrutineers, in advance of the meeting, for a running tally of the number of votes being cast if it thinks it might properly encourage more members to vote if the response is low. However, to ask the scrutineers how the votes are being cast, before the time comes at the meeting to instruct proxies, carries the risk of accusations, however unfounded they may be, and possible challenge at the confirmation stage, that the board suppressed proxy votes against the resolutions, or unduly influenced members to vote in favour. A board which asks the scrutineers for a running tally of votes, and which circulates its members with further exhortations to vote, must be prepared to argue its case in the face of such accusations at the confirmation hearing. Any circular to members sent after the Merger Document must, therefore, be very carefully considered.
Experience has demonstrated the need for societies to take the greatest care to ensure that they comply strictly with the statutory procedural requirements and their own Rules on meetings and resolutions. The chairman of the meeting should ensure that he or she is well briefed and aware of the Rules and the general law relating to procedural resolutions, such as resolutions to adjourn the meeting. The Authoritywill require a confirmatory report from the scrutineers on the validity of the voting procedures when the society applies for confirmation (see paragraphBSOG 2.4.38 G).
The procedures for the conduct of proxy voting will normally be provided for in the society's Rules, in conformity with paragraphs 24 and 34 of Schedule 2 to the 1986 Act which requires that every proxy form sent by a society to its members must enable the member to direct the proxy how to vote (Schedule 2 paragraph 24(4A)). To minimise the risk of the society's proxy voting procedures being misunderstood, the Authorityrecommends that the proxy form should include:
adequate space to insert the name of a proxy other than the chairman of the meeting, and a statement (which must also appear in the notice of the meeting) that the proxy appointed need not be a member of the society (a reminder that the voting members own name should not be inserted might avoid a common problem);
provision to instruct the proxy to vote either in favour of the resolution, or against it;
an explicit statement that if the member does not instruct the proxy to vote for or against the resolution, then the proxy will cast the vote, or abstain, as he or she thinks fit;
the declaration in accordance with paragraph 34 of Schedule 2;
full recital of the text of the shareholding members resolution or borrowing members resolution or, if this is not practicable (e.g. because of space restrictions), a clear indication that the full text may be found in the notice of the meeting;
instructions as to the return of the completed proxy forms, including the last date for receipt by the society or by the scrutineers. A pre-addressed and pre-paid envelope or other sealed means of return should be provided.
The 1986 Act does not require societies to send proxy voting forms to members with notices of meetings (except where directors are to be elected). However, the Authoritybelieves that, on a matter as important as a merger, societies would be well advised to send a proxy voting form to members with the notice of meeting. This will avoid any suggestion that members were discouraged from voting, that obstacles were put in their way, or that the society wished (for whatever reason) to be able to identify those who had requested proxy voting forms. If a society decides, nevertheless, not to send proxy forms to members entitled to vote, then it should make clear to the members that proxy voting forms can be obtained on demand from its branches and/or by application to a central point.
The arrangements for the collection of the proxy forms should be such as to secure confidentiality and to avoid the risk of loss, whether accidental or deliberate. The procedures may provide for return of proxy forms to the scrutineers either directly (if permitted by the society's Rules) or to the society's offices. Where proxy forms are returned to the society's offices, the Authorityrecommends that the procedures should incorporate the following features:
the proxy form should be enveloped or otherwise sealed so that the members voting instructions are concealed;
the envelope provided should be clearly marked so that the society can readily identify and separate it from other mail without the envelope being opened;
staff responsible for receiving and sorting mail should be given specific instructions about the handling of proxy forms and the overriding importance of security;
secure storage of proxy forms should be provided up to the point at which they are handed over to the scrutineers;
equivalent handling and security procedures should be applied to proxy forms handed in at branches.
Paragraph 33 and 33A of Schedule 2 to the 1986 Act specifically exclude shareholding members resolutions and borrowing members resolutions from its permission for the Rules to provide for voting by postal or electronic ballot. This is reinforced in the definition of these resolutions in paragraphs 27A and 29 of Schedule 2. Although other resolutions associated with the merger process might be capable of being approved by ballot, in practice voting on all resolutions related to the merger will be by members voting in person or by proxy at a general meeting.
The scrutineers are responsible for checking the validity of votes cast in person and by proxy. Given the need to ensure that the vote represents the views of the members, the scrutineers should be independent of the society and should not have a direct interest in the result of the voting. It will usually be appropriate to appoint the society's auditors, and it is desirable that they should be appointed not just for the arithmetical count of votes but also to supervise the voting process as a whole so that they are in a position to confirm, after the vote, that all the requirements of the 1986 Act and the society's Rules have been complied with. This would include:
determining and validating member mailing lists for notices of meetings and Schedule 16 Statements;
timing of notices and despatch of documents;
form and content of proxy voting forms;
receipt and custody of completed proxy voting forms;
validation of completed proxy voting forms to establish that members are qualified to vote and that forms are properly completed;
identification and validation of members attending and voting at the general meeting;
voting procedures at the meeting including casting of proxy votes, count of votes cast in person and aggregation of proxy and personal votes.
To fulfil the duties outlined above, it is suggested that the scrutineers would need to:
examine the systems and procedures to be employed by the society, before they are implemented, to ensure that they are satisfactory;
carry out such checks and tests as they consider necessary during the operation of the procedures as will enable them to be satisfied that the specified procedures are being carried out in practice;
provide that where validation functions are carried out by the society's staff this is done under the direction and supervision of the scrutineers;
direct and supervise the count of the votes cast both by proxy and personally at the meeting.
Validation checks during the counting of votes may be expected to include the following:
only proxy forms which comply with the 1986 Act and the society's Rules have been used;
the member is eligible to vote under the 1986 Act and under the society's Rules (a proxy vote may still be valid even though the member ceases to be a member after the closing date for receipt of proxies see paragraphBSOG 2.4.12G (2));
only one proxy form per member eligible to vote is included in the count (separate forms may be sent to and returned by a person eligible to vote on both a shareholding members resolution and a borrowing members resolution);
minors are excluded or that there is an explicit confirmation by each member voting by proxy that he is aged 18 or over;
the proxy form is completed and signed and is otherwise valid (where a proxy voting form lacks a signature but is otherwise valid, it is usual, if time permits, for the scrutineers to return the form to the member for signature and return in a pre-paid envelope).
The scrutineers initial report will be made to the society at the meeting (which may be adjourned for this purpose). The Authoritywill require, in support of a society's application for confirmation under Sections 93(2)(d), 94(7)(a) and 95(3), a report from the scrutineers on the result of the vote (distinguishing between votes cast in person and by proxy), the total number of members eligible to vote (and the proportion of that number that the votes cast represent), and also confirmation that, in the opinion of the scrutineers the arrangements for the conduct of voting were such as to ensure that:
notices of the meeting and Schedule 16 Statements were sent to all those entitled to receive them, in accordance with the 1986 Act and the Rules of the society having regard, among other things, to the matters referred to in this chapter;
the periods of notice given complied with the requirements of the 1986 Act and of the society's Rules, taking into consideration established conventions for the counting of days;
there were satisfactory procedures to ensure confidentiality of proxy voting forms and to minimise the risk of loss or unauthorised access;
there were satisfactory procedures to ensure that the count of votes cast personally at the meeting included only votes cast by members eligible to vote and who had not mandated, or had withdrawn, a proxy vote.
In relation to the notice of the meeting, the scrutineers report may properly have regard to the provision of paragraph 22(3) of Schedule 2 to the 1986 Act that accidental omission to give notice of a meeting to, or non-receipt of notice of a meeting by, any person entitled to receive notice of the meeting shall not invalidate the proceedings at that meeting. It should be noted, however, that there is authority to the effect that accidental and non-receipt would not cover all cases of error on the part of the society, for example an erroneous decision of management not to send notices to particular persons or groups of persons.
The Authority would find it helpful if the scrutineers report would also comment upon any procedural difficulties encountered and give an analysis of the reasons why votes were found to be invalid, if the numbers of invalid votes appear to be significant (see also paragraphBSOG 2.5.14 G).
The Authorityhas power under Section 94(5)(b) of the 1986 Act to exempt the transferee society in a transfer of engagements from the duty to call a meeting and put a Schedule 16 Statement and Merger Resolutions to its members, but to proceed instead by board resolution (see paragraph 1(1) of Schedule 16 to the 1986 Act). Before it exercises this discretion the Authoritywill wish to review the prudential information described in section 2.2 and, in particular, will wish to be satisfied that the merger will not affect the interests of the members of the transferee society to any significant extent. In assessing this last point, the Authoritywill consider, in particular, the reduction, if any, in the capital ratios of the merged society immediately following the merger and any plans to eliminate, or mitigate, this reduction; and any plans to remove products and services, close branches or change interest rates as a result of the merger. The Authoritywill also wish to know whether the merger will mean a change of policy by the society, for example by a significant move into a new geographical area or into a new business activity. Unless it is persuaded otherwise in the circumstances of any particular case, the Authoritywill not normally grant this exemption unless the total assets of the transferee society are substantially larger than the total assets of the transferor society, and a total asset ratio of 5:1 will be used by the Authorityas a broad first measure of relative significance. The general presumption will be that a society, being a mutual institution, should consult its members over an issue as important as a merger unless there are compelling arguments to the contrary.
However, if the transferor society proposes to pay bonuses in excess of the prescribed limit (see paragraph BSOG 2.4.4 G) then, notwithstanding that the Authorityhas granted an exemption, the transferee society must seek the approval of its members of a resolution on the terms of the merger (Section 96(4)(b) of the 1986 Act). Similarly, if the transferee society has to change its Rules to avoid disenfranchising members of the transferor society (see paragraph BSOG 2.3.16 G) it must do so by special resolution. It would be wrong to invite the members to approve a Rule change which was a consequence of a merger without inviting them to approve the merger itself.