Explanatory note
(This note is not part of the Regulations)
These Regulations which are made under section 102 of the Building Societies Act 1986 replace regulations 9 and 10 of the Building Societies (Transfer of Business) Regulations 1988 with substituted regulations. Regulations 9 and 10 relate to the rights of members of a building society, the business of which is transferred, under the provisions of section 97 of the Act, to a company specially formed for the purpose, to receive a priority distribution out of the assets of the sucessor company in the event of its being wound up.
Regulation 9 prescribed the manner of calculation of that distribution and regulation 10 prescribed the nature of the security which the successor company must provide for the purpose of securing the priority of that distribution. The initial amount of the entitlement is proportionate to the amount held on deposit as at the transfer date in lieu of a shareholding in the society but it was to abate as withdrawals are made and regulation 9 provided alternative methods of calculation of that abatement. The substituted regulation 9 changes the method of calculation so that deposits in different accounts are treated as giving rise to separate entitlements whereas before they might be aggregated and so that transfers from one account to another while abating the entitlement in respect of one account accrue to the other and do not merely count as a withdrawal. A withdrawal from one account followed immediately by a payment in to another can in some circumstances operate for this purpose in the same way as a transfer.
Regulation 10 prescribed that the security for the priority distribution should be a floating charge on the successor company’s assets, to be vested in a trustee and that the change should restrict disposal of those assets without the consent of the trustee. The substituted regulation 10 sets out circumstances in which the trustee may consent to a disposal to a subsidiary of the successor company provided that the subsidiary creates a similar floating charge on its assets.