BUILDING SOCIETIES ACT 1986 (Edition 2: Amended text as at: 1 April 2013) image © The Stationery Office Wurtzburg & Mills: Building Society Law Wurtzburg & Mills aims to provide the practitioner with a comprehensive treatment of the law relating to building societies. As well as dealing with the constitution and powers of building societies under the Building Societies Act 1986, the book contains a detailed discussion of the regulatory scheme currently in place under the Financial Services and Markets Act 2000 – a discussion which is being, and will continue to be, updated as details emerge of the changed regulatory framework to be put in place under the Financial Services Act 2012, which received Royal Assent in December. Wurtzburg & Mills also contains a full treatment of other areas of law and regulation which affect building societies. These include – • Mortgage law. • Mortgage regulation under MCOB. • The law governing building society shares and deposits. • The various fairness regimes which apply to contracts between building societies and their customers, including the Unfair Terms in Consumer Contracts Regulations 1999, the unfair relationships provisions of the Consumer Credit Act 1974, the FSA’s ‘treating customers fairly’ initiative and the jurisdiction of the Financial Ombudsman Service. • Mergers. • Regimes for dealing with failing and failed societies, including the special resolution regime. Wurtzburg & Mills also contains the updated text of the Building Societies Act 1986 and the delegated legislation made under it. The book is published in a loose leaf format and is kept up to date by the publication of two releases per year. The three joint editors are practising barristers with specialist experience in the law relating to building societies and retail financial services. Further information – www.sweetandmaxwell.co.uk/Catalogue/ProductDetails.aspx?productid=7711&recordid=582 2 INTRODUCTION This document is a supplement to the BSA Guide to Building Society Law, Regulation and Constitutions www.bsa.org.uk/docs/policy/law_constitutions_and_regulation_guide.pdf, which, among other things, provides a detailed commentary on the Building Societies Act 1986. (Also visit www.bsa.org.uk/members/policy/buildsoclegislation/bs_act.htm). The current text of the 1986 Act, as amended, is set out below. The Parts of the 1986 Act are as follows - Part * Description Sections ** I Functions of the FCA and PRA 1 II Constitution of Building Societies 5- 9B IV Protection of Investors 32 VI Powers of Control of the Authorities 36 - 57 VII Management of Building Societies 58 -70 VIII Accounts and Audit 71 – 81B IX Complaints and Disputes 85 X Dissolution, Winding-up, Mergers, Transfer of Business 86 - 103 XI Miscellaneous and Supplementary and Conveyancing Services 104 - 126 * some Parts and individual sections have been repealed, which is why the numbers are incomplete ** the 1986 Act also has a number of Schedules, which especially supplement the Parts of the Act relating to constitution of building societies; powers of control of the authorities; management of building societies; accounts and audit; and dissolution, winding-up, mergers and transfer of business. The 1986 Act has been amended by many other pieces of legislation, most notably the Building Societies Act 1997 and the Financial Services Act 2012. Because of numerous amendments over the years, there are a lot of gaps in the sequence of section and Schedule numbers. For the avoidance of doubt, they are flagged up as follows, eg – [sections 2 – 4 revoked] Deletions, within sections etc, are indicated by three dashes: _ _ _. A list of building society statutory instruments (most, but not all, made under the 1986 Act) is also included below, but it should be remembered that other legislation also amends, or affects, the 1986 Act from time-to-time (eg see the statutory instruments referred to on page 4). There is also a feature called ‘Collated Provisions’, which collects together the sections of, Schedules to, and statutory instruments under, the 1986 Act, putting them into relevant topic categories, for ease of reference. We update this document from time-to-time to incorporate further amendments to the 1986 Act. If you have any queries or comments, please contact Chris Lawrenson, BSA Head of Legal Services, who has complied and updated this document ([email protected] direct line - 020 7520 5915). 3 UPDATING SCHEDULE: No 2 The text below (amended in red) includes the latest amendments, effective from 1 April 2013, made to the 1986 Act since the last edition of this document was published in April 2011. Version and Date Changes Amending Legislation No 2: 1 April 2013 Amendments to section 9B of The Financial Services Act the 1986 Act (in respect of the 2012 1, sections 55 and 56 (in creation of floating charges) force from 1 April 2013). and to section 42B and Schedule 8A (in respect of the Amendments made by the power to direct transfer of a 2012 Act are referred to in building society’s business). footnotes in red type in the text below. (Schedule 10 to the 2012 Act also amends certain secondary legislation). Amendments to numerous The Financial Services Act provisions in the 1986 Act, 2012 (Mutual Societies) relating to the transfer of Order 2013 (SI No 496) 2 (in powers from the FSA to the force from 1 April 2013). Prudential Regulatory Authority and the Financial Conduct All amendments in the text Authority. below referred to in red type are made by this Order (unless made by the 2012 Act, as indicated – see above). 1 - www.legislation.gov.uk/ukpga/2012/21/contents/enacted 2 - www.legislation.gov.uk/uksi/2013/496/contents/made. Please note that new amendments are sometimes subject to transitional or savings provisions (for details see the relevant statutory provision). Also note – • The Dormant Bank and Building Society Accounts (Tax) Regulations 2011 (SI No 22), which did not amend the 1986 Act but made provision for tax on accounts with banks and building societies treated as “dormant accounts” under the Dormant Bank and Building Society Accounts Act 2008 www.legislation.gov.uk/uksi/2011/22/contents/made. • The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (SI No 1265), which did not amend the 1986 Act itself, but made changes to certain subordinate legislation (statutory instruments) under the 1986 Act www.legislation.gov.uk/ukdsi/2011/9780111507865/contents. • The Individual Savings Account (Amendment No. 2) Regulations 2011 (SI No 1780), which did not amend the 1986 Act or subordinate legislation under it, but affect building societies because they amend earlier Regulations to introduce junior ISAs www.legislation.gov.uk/uksi/2011/1780/contents/made. • The Building Societies (Core Capital Deferred Shares) Regulations 2013 (SI No 460), which do not amend the 1986 Act or subordinate legislation under it, but ‘dis-apply’ certain provisions www.legislation.gov.uk/uksi/2013/460/note/made. 4 CONTENTS Description Section Page Functions of the FCA and PRA 1 24 Constitutions: establishment, constitution and powers 5 24 Lending: the lending limit 6 26 loans secured on land 6A 28 loans fully secured on land 6B 29 discharge of mortgages 6C 31 Raising funds and borrowing: the funding limit 7 31 raising funds and borrowing 8 32 Restrictions on powers: restrictions on certain transactions 9A 34 restriction on creation of floating chargers 9B 36 Protection of investors: special provisions as regards investors 32 37 Powers of the control of the appropriate authority: power to direct restructuring of business etc 36 37 power to make prohibition orders 36A 39 powers to petition for winding-up etc 37 41 power to direct transfers of engagements or business 42B 41 variation and revocation of transfer directions 42C 43 notices, hearing and appeals 46A 43 powers to obtain information and documents etc 52 44 entry of premises under warrant under s176 FSMA 52B 46 disclosure of information 53A 46 information disclosed to the FCA or PRA from other sources 54 47 investigations on behalf of the FCA or PRA 55 48 inspections and special meetings: general 56 48 Inspections: supplementary provisions 57 50 Management of building societies: directors and officers: directors: number 58 52 chief executive and secretary 59 52 directors: elections and retirements 60 53 directors: supplementary provisions at to elections etc 61 56 Dealings with directors and other officers: prohibition of tax-free payments to directors 62 59 directors to disclose interests in contracts and other transactions 63 60 substantial property transactions involving directors and 64 60 connected persons restriction on loans etc to directors and connected persons 65 61 sanctions for breach of section 65 66 63 transactions with directors and connected persons 66A 64 directors etc not to accept commissions in connection with loans 67 65 records of loans etc for directors falling within section 65 68 66 disclosure of income of related businesses 69 67 interpretation of this Part 70 70 Accounts and audit: accounting records and systems of business control 71 71 duty to prepare individual accounts 72A 72 Building Societies Act individual accounts 72B 72 form and content of Building Societies Act individual accounts 72C 73 IAS individual accounts 72D 74 duty to prepare group accounts 72E 74 Building Societies Act group accounts 72F 74 Form and contents of Building Societies Act group accounts 72G 75 5 Description Section Page IAS group accounts 72H 75 consistency of accounts 72I