Building Societies Act 1986

36 Powers in event of breach of limits on certain assets and liabilities

(1) The provisions of this section have effect where, by reason of—

(a) its liabilities in respect of non-retail funds and deposits being in excess of the limit imposed on them by section 7(3), or

(b) its liabilities in respect of sums deposited with the society being in excess of the limit imposed on them by section 8(1), or

(c) its commercial assets of any class being in excess of the limits imposed on assets of that class by section 20(2) or (3), or

(d) its liquid assets being in excess of the limit imposed on them by section 21,

the powers conferred by this section become exercisable by the Commission in relation to a building society (the limits referred to in paragraphs (a), (b), (c) and (d) above being referred to in this section as " the relevant statutory limits ").

(2) The Commission may give the society a direction under subsection (3), (5) or (6) below.

(3) A direction by the Commission under this subsection is a direction requiring the society, within a specified period, to submit for its approval a plan (in this section referred to as a " restructuring plan ") designed to secure the following purposes, that is to say—

(a) that the assets and liabilities of the society will not, by the end of the period of 12 months beginning with the date of the direction, exceed the relevant statutory limits as applied at the last day of that period, and

(b) that they will not thereafter exceed the relevant statutory limits.

(4) For the purpose of applying the relevant statutory limits as directed by subsection (3)(a) above—

(a) in the case of a limit which operates by reference to the end of a financial year of a society, the financial year of the society shall be treated as ending on the day as at which the limits are to be applied ; and

(b) the assets and liabilities of the society shall be determined by reference to a balance sheet prepared by the directors by reference to that day and sent to the Commission within the period of three months beginning with that day ;

and section 81(4) shall apply in the event of a default in complying with this provision as it applies in the event of a default in complying with subsection (2) of that section.

(5) A direction by the Commission under this subsection is a direction requiring the society—

(a) within the period of six months beginning with the date of the direction, to submit to its members for their approval at a meeting or by ballot the requisite transfer resolutions for a transfer of the business of the society to a company under section 97; and

(b) to notify the Commission of the result of the meeting or ballot.

(6) A direction by the Commission under this subsection is a direction requiring the society, at its option, either—

(a) within a specified period, to submit for approval a restructuring plan, or

(b) within the period of six months beginning with the date of the direction, to submit to its members for their approval at a meeting or by ballot the requisite transfer resolutions for a transfer of the business of the society to a company under section 97 ;

and, within a specified period, to notify the Commission of the option it has decided to pursue.

(7) Where a restructuring plan is submitted by a society to the Commission under subsection (3) or (6) above then—

(a) if it appears to the Commission that the plan is reasonably likely to secure its purposes, the Commission shall approve it and direct the society to carry it out;

(b) if it appears to it that the plan is, with modifications, likely to secure its purposes and the Commission and the society agree on appropriate modifications within the period of 21 days from the date on which the Commission notifies the society of the modifications it proposes for the society's agreement, the Commission shall approve the plan as modified and direct the society to carry it out;

but otherwise it shall reject the plan.

(8) Where a meeting or ballot is held, in pursuance of a direction under subsection (5) or (6) above, for the purpose of voting on the requisite transfer resolutions, then—

(a) if the resolutions are agreed to and the confirmation of the transfer by the Commission is obtained, the society shall proceed under section 97 to transfer its business to a successor company ;

(b) if either resolution is disagreed to, the society shall notify the Commission of that fact as soon as it is practicable to do so.

(9) In the event of the Commission receiving a notice from a society under subsection (8)(b) above, it may, if it thinks fit, serve on the society a direction requiring it, within a specified period, to submit to the Commission for its approval a restructuring plan; and if the Commission does so, subsection (7) above shall apply as if the plan had been submitted under subsection (3) above.

(10) The Commission may, if it thinks tit, extend or further extend, any period during which a building society is to take any steps required of it under any of the foregoing provisions of this section and may do so whether or not application is made to it before the expiry of the period in question.

(11) If a building society fails, within the period allowed to it under the foregoing provisions of this section—

(a) where it has been given a direction under subsection (3) above, to submit a restructuring plan,

(b) where it has been given a direction under subsection (5) above, to submit to members the requisite transfer resolutions,

(c) where it has been given a direction under subsection (6) above, to either submit a restructuring plan or submit to members the requisite transfer resolutions,

(d) where it has been directed under subsection (7) above to carry out a restructuring plan, to secure the purpose of it specified in subsection (3)(a) above,

(e) to agree to the requisite transfer resolutions submitted to the members in pursuance of subsection (5) or (6) above, or

(f) where it has agreed to the requisite transfer resolutions, to proceed under section 97 to transfer its business to the successor company,

or if the Commission rejects a restructuring plan under subsection (7) above, the powers conferred on the Commission by section 37 shall become exercisable in relation to the society.

(12) In this section " confirmation ", " the requisite transfer resolutions " and " transfer " have the same meaning as in section 97.