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BSOG 3.7 Transfers under Direction

BSOG 3.7.1G

This section describes the Authority'spowers to direct a society to transfer its business to a company, and to proceed by board resolution, and the modified transfer procedure consequently prescribed by the 1986 Act. Section 42B of the 1986 Act provides that, if the Authorityconsiders it expedient to do so to protect the investments of shareholders or depositors, it may direct a society, inter alia, to transfer its business to a company within a specified time (subsection (1)(b)). In such a case, or where the Authoritywould have directed a transfer, but for the fact that negotiations were already under way, the Authoritymay also direct that the approval of the transfer shall be by board resolution rather than the Transfer Resolutions. In these circumstances, because neither a Transfer Statement nor Transfer Resolutions are required, the 1986 Act requires the society instead to send to every member entitled to notice of a meeting a statement (referred to below as a "transfer notification statement") before it applies for confirmation of the transfer (paragraphs 9 and 10 of Schedule 8A to the 1986 Act). Finally, in these circumstances, the first two Confirmation Criteria concerning information made available to, and the views of, the members (see section 6) are replaced by a single criterion:

"the members or a proportion of them would be unreasonably prejudiced by the transfer;"

(paragraph 11 of Schedule 8A to the 1986 Act).

BSOG 3.7.2G

Where a society is proceeding under a Section 42B direction by board resolution, the Transfer Statement is replaced by a transfer notification statement and a general meeting of the society is not required. The contents of the transfer notification statement are prescribed by Schedule 3 to the Transfer Regulations. In brief, the members are to be informed that the statement is issued on the responsibility of the directors of the society and the successor company, and:

  1. (1)

    that the board, acting under direction of the Authority, has resolved to transfer the business;

  2. (2)

    of the confirmation procedure, including the last date for receipt by the Authorityof written representations and notices of intention to make oral representations and the expected date of the hearing of the society's application;

  3. (3)

    of the name, address and nature of the successor company, and the proposed vesting date;

  4. (4)

    of the consequences for the members, including the loss of membership rights in the society, any changes in the terms and conditions of share and mortgage accounts, and deposit protection schemes;

  5. (5)

    the terms of any distribution of funds or shares in the successor company and of the Statutory Cash Bonus; and

  6. (6)

    of the interests of the directors and other officers of the society in the transfer, including any compensation or increase in emoluments to which the Authorityhas given its consent under paragraphs 7 and 8 of Schedule 8A to the 1986 Act.

BSOG 3.7.3G

The transfer notification statement must have been approved by the Authoritybefore it is sent to the members. Applications for approval should, in general, follow the procedure described in paragraphs BSOG 3.4.11 G to BSOG 3.4.17 G, and the final draft of the statement should be accompanied by the relevant documents listed in paragraph BSOG 3.4.15 G, but as appropriate to the particular case and the less extensive information the statement is required to contain.

BSOG 3.7.4G

Section 3.5 (General Meetings and Resolutions) does not apply, except that the directors will need to be satisfied that the society's register of members is correct to enable the society to send transfer notification statements, and notices under Section 102B (Trustee Account Holders) of the 1986 Act, to those to whom they must be sent if the society is to gain the protection of Section 102B(4).

BSOG 3.7.5G

When the board has resolved to transfer the business and transfer notification statements have been sent to its members, the society may apply to the Authorityfor confirmation of the transfer, but using an adaptation agreed with the Authorityof the pro forma in Annex 2B. The procedure described in section 3.6 is to be followed, including the publication of notices in the official Gazettes and newspapers and the form of application. However, the lapse of time between each stage of the procedure may be modified according to the particular circumstances of a case, and having regard to the need to protect the investments of shareholders or depositors. While a scrutineer's report will not be required, the Authoritywill require a report from the society's external auditors on the adequacy of the society's systems to fulfil the requirements of the 1986 Act and the Rules with regard to the sending of transfer notification statements and notices to Trustee Account Holders. This is, of course, relevant to the Authority'sconsideration of the Fourth Confirmation Criterion.

BSOG 3.7.6G

As is noted in paragraph BSOG 3.7.1 G, the First and Second Confirmation Criteria are replaced, in those circumstances, by a single criterion as to whether the members or a proportion of them "would be unreasonably prejudiced by the transfer". Whether this special criterion applies will be a matter of judgement for the Authorityto make in the light of any representations made to it and its own enquiries in respect of the particular case. In making its judgement, the Authoritywill also have regard to the view it then takes as to whether it should exercise its discretion under Section 100(7) of the 1986 Act to direct that no Statutory Cash Bonus, or a reduced bonus, is to be paid "having regard to what is equitable between the members of the society". It follows also that, in considering the Fourth Criterion, the Authoritywill take account of the modified procedure.

BSOG 3.7.7G

The Fees Rules provide that fees are to be paid to the Authority:

  1. (1)

    with an application for approval of a transfer notification statement under paragraph 9(4) of Schedule 8A to the 1986 Act, and a further fee with any subsequent substantial revision;

  2. (2)

    with an application for confirmation under Section 97(4)(d) of, paragraph 6 of Schedule 17 and Schedule 8A to, the 1986 Act; and a further fee if oral representations are to be heard.