OpenLegislation

Credit Unions Act 1979 in Northern Ireland

1979 c. 34 · Enacted 4 April 1979 · Extends to United Kingdom

Up to date with all changes known to legislation.gov.uk, revised to 29 August 2023.

Contents

  1. 1ZASpecified financial activities
  2. 1ZBPower to specify further financial activities
  3. 1ACommon bonds appropriate to a credit union
  4. 1BFurther requirements where common bond relates to locality
  5. 5ACorporate members
  6. 7APower to issue interest-bearing shares
  7. 11ALoans to be treated as secured
  8. 11EConditional sale and hire purchase agreements
  9. 11FAgreements to be treated as secured
  10. 11GInsurance distribution activities
  11. 17ASection 17: recovery of FCA ’s and PRA ’s costs
  12. 22No conversion of credit union into company, etc.
  13. General and miscellaneous
  14. 23APower to make provision corresponding to provision applying to building societies
  15. 24Modifications of requirements as to audit of accounts. Repealed
  16. 25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repealed
  17. 31ASection 31A
  18. 32Northern Ireland.
  19. Schedule 1: Matters to be Provided For in Rules of Credit Union
  20. 1Paragraph 1
  21. 2Paragraph 2
  22. 3Paragraph 3
  23. 4Paragraph 4
  24. 4AParagraph 4A
  25. 5Paragraph 5
  26. 6Paragraph 6
  27. 8Paragraph 8
  28. 9Paragraph 9
  29. 10Paragraph 10
  30. 12Paragraph 12
  31. 13AParagraph 13A
  32. 14Paragraph 14
  33. Schedule 3.: . . .
  34. Powers of chief registrar
  35. 1Paragraph 1
  36. Duration of powers
  37. 2Paragraph 2

1ZASpecified financial activitiesF1

(1)

The financial activities specified for the purposes of the optional object of a credit union (see section 1(3ZZA)) are—

(a)

entering into conditional sale agreements, as the seller;

(b)

entering into hire purchase agreements, as the person from whom goods are bailed or (in Scotland) hired;

(c)

insurance distribution activities.

(2)

The Treasury may by regulations specify requirements or restrictions in relation to the carrying on by a credit union of a financial activity specified in subsection (1).

1ZBPower to specify further financial activitiesF1

(1)

The Treasury may by regulations—

(a)

amend section 1ZA so as to specify further financial activities for the purposes of the optional object of a credit union;

(b)

make such amendments of this Act, or any other enactment, as appear to them to be appropriate in consequence of any provision made under paragraph (a).

(2)

Amendments made by regulations under subsection (1) may, in particular, provide that a credit union may carry on a financial activity specified in the regulations if the credit union has the optional object specified in section 1(3ZZA).

(3)

Regulations under section 1ZA(2) made in relation to a financial activity specified in regulations under subsection (1) may, in particular, make provision about fees or other charges payable in respect of the activity or activities that are ancillary to the activity.

(4)

Before making regulations under this section, the Treasury must consult such persons as appear to them to be appropriate.

(5)

A statutory instrument containing (whether alone or with other provision) regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

1ACommon bonds appropriate to a credit unionF1

(1)

Under the rules of the society admission to membership must be restricted to persons who fall within one or more common bonds appropriate to a credit union (whether or not any other qualifications for admission to membership are required under the rules).

(2)

The common bonds appropriate to a credit union are—

(a)

following a particular occupation;

(b)

being employed by a particular employer;

(c)

residing or being employed in a particular locality;

(d)

being a member of a bona fide organisation or being otherwise associated with other members of the society for a purpose other than that of forming a society to be registered as a credit union;

(e)

any other common bond for the time being approved by the F2FCA.

(3)

If the rules of a credit union so provide, a person who is a member of the same household as, and is a relative of, another person who is a member of the credit union and falls directly within a common bond is treated as also falling within that common bond.

(4)

For the purposes of this section, a body corporate or a person applying for membership in his capacity as a partner in a partnership or an officer or member of the governing body of an unincorporated association—

(a)

falls within the common bond specified in paragraph (a) of subsection (2) if the principal business of the body corporate, partnership or unincorporated association—

(i)

requires it to employ or otherwise engage persons who follow that occupation, or

(ii)

relates to that occupation in some other way;

(b)

falls within the common bond specified in paragraph (b) of that subsection if the body corporate, partnership or unincorporated association—

(i)

employs the persons who qualify for membership under that common bond, or

(ii)

provides services, or is otherwise related, to that employer;

(c)

falls within the common bond specified in paragraph (c) of that subsection if the body corporate, partnership or unincorporated association has a place of business in, or other significant connection with, that locality; and

(d)

falls within the common bond specified in paragraph (d) of that subsection if the body corporate, partnership or unincorporated association is a member of a bona fide organisation or otherwise associated with other members of the society for the purpose specified in that paragraph.

(5)

The F3FCA may accept as sufficient evidence that the requirement of this section is met a statutory declaration to that effect given by three members and the secretary of the society.

1BFurther requirements where common bond relates to localityF1

(1)

The requirements of this section must be met where—

(a)

the rules of a society provide for one or more common bonds involving a connection with a locality, or

(b)

the rules of a society provide for one or more common bonds of such other description as may be specified.

(2)

The requirements are—

(a)

that the conditions in subsection (3) are met, or

(b)

that extraordinary circumstances exist justifying registration of the society as a credit union.

(3)

The conditions are—

(a)

that the number of potential members of the society does not exceed two million or such higher figure as may be specified; and

(b)

that it is reasonably practicable for every potential member to participate in votes of the society, serve on the society’s committee and have access to all the services offered by the society.

(4)

The F2FCA may accept as sufficient evidence that the conditions in subsection (3) are met a statutory declaration to that effect given by three members and the secretary of the society.

(5)

In this section “specified” means specified by order made by the Treasury.

5ACorporate membersF1

(1)

A credit union may admit bodies corporate as members if its rules so provide.

(2)

The number of corporate members of a credit union shall not at any time exceed ten per cent of the total number of members of the credit union or such higher percentage as may be specified.

(3)

The number of shares allotted to corporate members of a credit union shall not at any time exceed twenty-five per cent of the total shares allotted to all members of the credit union or such higher percentage as may be specified.

(4)

For the purpose of subsection (3) above, the total shares allotted to all members of the credit union shall be that found in the most recent year-end balance sheet submitted to the F2appropriate authority.

(5)

In this section—

(a)

“specified” means specified by order made by the Treasury;

(b)

“shares” means shares other than deferred shares.

(6)

In this Act “corporate member”, in relation to a credit union, means—

(a)

a body corporate which is a member of the credit union;

(b)

an individual who is a member of the credit union in his capacity as a partner in a partnership; or

(c)

an individual who is a member of the credit union in his capacity as an officer or member of the governing body of an unincorporated association.

7APower to issue interest-bearing sharesF1

(1)

A credit union may issue interest-bearing shares if—

(a)

its rules so provide;

(b)

its most recent year end balance sheet shows that it holds reserves of at least £50,000 or five per cent of its total assets, whichever is greater;

(c)

its auditors have made a report under F2 section 87 of the 2014 Act on that balance sheet;

(d)

it has submitted that balance sheet to the F3appropriate authority; and

(e)

it has submitted to the appropriate authority a report by its auditors (post-dating the balance sheet referred to in paragraph (b) above), stating that in their opinion the credit union satisfies such conditions as are specified by the appropriate authority for the purpose.

(2)

A credit union which issues interest-bearing shares must submit to the appropriate authority an annual report by the auditors appointed to audit its accounts and balance sheet fulfilling the requirements of paragraph (e) of subsection (1) above by the date specified by the appropriate authority for the purpose.

(3)

A credit union shall convert any interest-bearing shares in issue into shares which are not interest-bearing if—

(a)

its rules no longer provide for the issue of interest-bearing shares;

(b)

neither its most recent year end balance sheet nor the balance sheet immediately preceding it—

(i)

shows that the credit union holds reserves of at least £50,000 or five per cent of its total assets, whichever is greater; or

(ii)

has been submitted to the appropriate authority by the date specified; or

(c)

for two consecutive years it has not complied with subsection (2) above.

(4)

The Treasury may by order provide for subsections (1)(b) and (3)(b)(i) above to have effect as if the references to £50,000 and five per cent were references to such other sum or percentage as they think appropriate.

(5)

In this section “year end balance sheet” has the same meaning as in F4 section 82 of the 2014 Act .

(6)

In this Act “interest-bearing share” means a share issued on terms which entitle the holder to interest but not to a dividend.

11ALoans to be treated as securedF1

(1)

This section applies where—

(a)

a credit union makes a loan to a member of the credit union, and

(b)

at the time the loan is made, the member’s paid-up shareholding in the credit unionF2, excluding any deferred shares, is equal to or greater than his total liability (including contingent liability) to the credit union, whether as borrower, guarantor or otherwise.

(2)

On the application of the member to the credit union, the loan shall be treated for the purposes of this Act as a secured loan.

11EConditional sale and hire purchase agreementsF1

(1)

If the objects of a credit union include the optional object specified in section 1(3ZZA) it may (subject to such terms, including as to security, as its rules may provide)—

(a)

enter into a conditional sale agreement, as the seller, with a member of the credit union, or

(b)

enter into a hire purchase agreement, as the person from whom goods are bailed or (in Scotland) hired, with a member of the credit union.

(2)

A credit union may only enter into an agreement mentioned in subsection (1) with a corporate member if—

(a)

the credit union’s rules provide that it may do so, and

(b)

entering into the agreement would not result in the aggregate of the outstanding balances under all such agreements made by the credit union with corporate members exceeding 10% of the aggregate of the outstanding balances under all such agreements made by the credit union with members, or such higher percentage as may be specified in regulations made by the Treasury.

(3)

Subsection (4) applies where—

(a)

an agreement mentioned in subsection (1) is entered into by a credit union with a member, and

(b)

the agreement is not a secured agreement within the meaning of section 11F.

(4)

The terms of the agreement must include provision as to whether, for the duration of the agreement, the member is permitted to withdraw shares where the member’s paid-up shareholding in the credit union is, or following the withdrawal would be, less than the member’s total liability (including contingent liability) to the credit union.

(5)

Any interest charged under an agreement mentioned in subsection (1)—

(a)

must not exceed the rate specified in subsection (7), and

(b)

must be inclusive of all administrative and other expenses incurred in connection with the making of the agreement.

(6)

The rate specified in this subsection is 3% per month on the sum outstanding under the agreement.

(7)

The Treasury may by regulations amend subsection (7) to substitute a different rate for the rate that is for the time being specified.

11FAgreements to be treated as securedF1

(1)

This section applies where—

(a)

a credit union enters into an agreement mentioned in section 11E(1) with a member of the credit union, and

(b)

at the time the agreement is entered into, the member’s paid-up shareholding in the credit union is equal to or greater than the member’s total liability (including contingent liability) to the credit union.

(2)

On the application of the member to the credit union, the agreement is to be treated for the purposes of this Act as a secured agreement.

11GInsurance distribution activitiesF1

If the objects of a credit union include the optional object specified in section 1(3ZZA), it may (subject to such terms as the rules of the credit union may provide)—

(a)

carry on an insurance distribution activity which constitutes or involves the provision of a service to a member, and

(b)

charge such fee as it considers appropriate for providing the service.

17ASection 17: recovery of FCA ’s and PRA ’s costsF1

(1)

This section applies where the FCA or PRA has exercised its powers under section 17 in relation to a credit union.

(2)

The FCA or PRA may, if it considers it just to do so, direct that the expenses incurred by it in exercising the powers (or any part of those expenses) are to be met—

(a)

out of the credit union’s funds, or

(b)

by the credit union’s officers or former officers (or any of them).

(3)

Any sum which the credit union or other person is required by a direction to pay is a debt due from the credit union or person to the FCA or PRA .

22No conversion of credit union into company, etc.

F1 Sections 112 to 114 of the 2014 Act (conversion of registered society into company or amalgamation with, or transfer of engagements from registered society to, company) shall not apply to credit unions.

23APower to make provision corresponding to provision applying to building societiesF1

(1)

The Treasury may by regulations amend this Act so as to make provision for credit unions corresponding to any enactment applying to building societies.

(2)

The power conferred by subsection (1) may not be exercised so as to modify any of the following provisions of this Act—

(a)

sections 1 and 2 (registration as a credit union);

(b)

section 3 (use of name “credit union”);

(c)

section 8 (general prohibition on deposit-taking), but without prejudice to the power to add exceptions to those in sections 9 and 10 and to modify those sections;

(d)

section 21 (amalgamations and transfers of engagements);

(e)

section 22 (no conversion of credit union into company, etc. );

(f)

section 23 (conversion of company into credit union).

(3)

Regulations under subsection (1) may—

(a)

confer power to make orders, regulations and other subordinate legislation;

(b)

create criminal offences, but only—

(i)

in circumstances corresponding to an offence under the enactments relating to building societies, and

(ii)

subject to a maximum penalty no greater than is provided for in respect of the corresponding offence;

(c)

provide for the charging of fees, but not any charge in the nature of taxation.

(4)

The Treasury may by regulations make such amendments of enactments as appear to them to be appropriate in consequence of any provision made under subsection (1).

This includes power to make consequential amendments of the provisions listed in subsection (2).

F2(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)

Before making regulations under this section the Treasury must consult such persons as appear to them to be appropriate.

(7)

No regulations under this section are to be made unless a draft has been laid before and approved by a resolution of each House of Parliament.

24Modifications of requirements as to audit of accounts.F1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F1

31AF1

(1)

In this Act, references to deferred shares are to a class of shares where—

(a)

the rights and obligations of the credit union and the member in respect of those shares are set out in a single document, or in a series of documents (“the issue documents”);

(b)

each of the issue documents is provided to every applicant for the shares;

(c)

one of the issue documents contains a prominent statement to the effect that the shares are deferred shares for the purposes of this Act;

(d)

each of the issue documents contains a prominent statement stating whether the shares are, or are not, an investment covered by the Financial Services Compensation Scheme (see section 213 of the Financial Services and Markets Act 2000);

(e)

any document evidencing title to the shares contains the statements required by paragraphs (c) and (d) above;

(f)

one of the issue documents contains a term which prohibits the repayment of any principal to the shareholder except in Case A or Case B.

(2)

Case A is the winding up or dissolution of the credit union in circumstances where all sums due from the credit union to creditors claiming in the winding up or dissolution are paid in full.

(3)

Case B is where—

(a)

the credit union applies to the F2appropriate authority for consent to repay principal to the shareholder,

(b)

the credit union so applies otherwise than in consequence of a provision in any of the issue documents which requires it to apply, grants it any benefit for applying or imposes a sanction against failure to apply, and

(c)

the appropriate authority grants consent.

(4)

“Creditors” in subsection (2) above includes members holding shares, other than deferred shares, in the credit union, as regards the principal of those shares and any interest or dividend due on them.

(5)

On any modification of the definition of “deferred shares” in the Building Societies Act 1986 or an instrument made under that Act, the Treasury may, by order, modify the meaning of deferred shares in this section so as to assimilate it to the modified definition.

32Northern Ireland.

(1)

The Treasury may make reciprocal arrangements with the Department of Commerce for Northern Ireland or such other authority as may be specified for the purposes of this subsection by any Measure of the Northern Ireland Assembly with a view to securing that, on or after the commencement of this Act,—

(a)

the law applicable in England and F1Wales, or (as the case may be) Scotland, to F2societies registered as credit unions under the 2014 Act may be applied, in such cases and subject to such modifications as may be provided in the arrangements, to Northern Ireland credit unions; and

(b)

the law applicable in Northern Ireland to Northern Ireland credit unions may be applied, in such cases and subject to such modifications as may be provided in the arrangements, to F3societies registered as credit unions under the 2014 Act ;

and F4 section 142 of the 2014 Act (which enables societies registered in Northern Ireland to be treated for certain purposes as if they were registered under that Act) shall not apply to Northern Ireland credit unions.

(2)

The Treasury may by regulations F5. . . make provision for giving effect to any arrangements made under subsection (1) above, and such regulations may in particular—

(a)

confer rights and obligations (appropriate to credit unions) under this Act and F6 the 2014 Act on Northern Ireland credit unions in such circumstances as may be specified in the regulations;

(b)

confer functions on F7each of the FCA and the PRA in relation to Northern Ireland credit unions; and

(c)

make such modifications of this Act, the 2014 Act and the M1 Government of Ireland (Companies, Societies, etc.) Order 1922 as appear to the Treasury to be expedient to give effect to the arrangements.

(3)

In this section “Northern Ireland credit union” means a society registered as a credit union under the law of Northern Ireland.

(4)

An Order in Council made under paragraph 1(1)(b) of Schedule 1 to the M2Northern Ireland Act 1974 which contains a statement that its purposes correspond to those of this Act shall be subject to annulment in pursuance of a resolution of either House of Parliament instead of the Order, or a draft of the Order, being subject to the procedure set out in paragraph 1(4) or (5) of that Schedule.

1

The name of the society, which shall comply with section 3(1) above and with F1 section 10(1) and (2) of the 2014 Act (name not to be undesirable and to end with the word “limited").

2

The objects of the society.

3

The place which is to be the registered office of the society to which all communications and notices to the society may be addressed.

4F1

The qualifications for admission to membership of the society, including one or more common bonds appropriate to a credit union.

4AF1

The terms of admission to membership of the society, including any special provision for the insurance of members in relation to their shares.

5

The mode of holding meetings, including provision as to the quorum necessary for the transaction of any description of business, and the mode of making, altering or rescinding rules.

6

The appointment and removal of a committee, by whatever name, and of managers or other officers and their respective powers and remuneration.

8

Provision for the mode of withdrawal of shares and for payment of the balance due thereon on withdrawing from the society.

9

The mode and circumstances in which loans to members F1or other credit unions are to be made and repaid, including any special provision for the insurance of members or other credit unions in relation to loans made to them.

10

Provision for the custody and use of the society’s seal.

12

Provision for the withdrawal of members from the society and for the claims of the representatives of deceased members or the trustees of the property of bankrupt members, or, in Scotland, members whose estate has been sequestrated, and for the payment of nominees.

13AF1

If the issue of interest-bearing shares is permitted, provision for converting such shares into shares which are not interest-bearing to comply with subsection (3) of section 7A above.

14

Provision for the dissolution of the society, including provision requiring any assets remaining after the payment of debts, repayment of share capital and discharge of other liabilities—

(a)

to be transferred to another credit union; or

(b)

if not so transferred, to be applied for charitable purposes.

1

(1)

The chief registrar may, by order made with the consent of the Treasury, designate as an authorised bank for the purposes of this Act any body corporate or partnership carrying on the business of banking.

(2)

An order under sub-paragraph (1) above may be varied or revoked by a subsequent order made by the chief registrar with the consent of the Treasury.

(3)

Any order made under this paragraph shall be published in the Gazette.

2

(1)

When it appears to the Treasury that, the relevant provisions of the M1Banking Act 1979 having come into operation, there are in existence such number of recognised banks (within the meaning of that Act) as to render no longer necessary the powers conferred by paragraph 1 above, the Treasury shall by order made by statutory instrument provide that those powers may no longer be exercised.

(2)

An institution which, immediately before the date on which the Treasury order referred to in sub-paragraph (1) above comes into effect, was an authorised bank for the purposes of this Act solely by virtue of an order of the chief registrar under this Schedule shall cease to be an authorised bank for those purposes on that date.