Explanatory note

This Order is made under section 119(1) of the Building Societies Act 1986 which provides that “deferred shares” means shares of a class defined as such by order. Definition of such a class has two primary effects. Before a society is authorised under section 9 of the Act to raise money from members or accept deposits it may nevertheless accept payments by way of subscription for deferred shares up to limits specified insection 9. By virtue of section 27(8) of the Act deferred shares are not to count as protected investments for the purposes of the Investor Protection Fund set up under Part IV of the Act.

The Order defines a class of shares to be deferred shares within the meaning of section 119(1) if they are issued fully paid upon terms to the effect of the key term set out in the Schedule to the Order, and if the fact that the shares are deferred shares and so not protected by the Investor Protection Scheme is prominently stated in a document furnished to every applicant for such shares and in every document evidencing title to such shares (article 3(2)).

The key term prohibits the repayment of the principal of the shares except on a dissolution of the society after all creditors and shareholders (other than holders of deferred shares) have been paid in full, or with the consent of the Commission.

The Building Societies (Deferred Shares) Order 1989, is revoked,with a saving for shares already issued which complied with that Order the provisions of which are more complex.