The Building Societies (Supplementary Capital) Order 1988

Inhibition on merger or business transfer

2.—(1) Subject to subparagraph (2) below, an issue term the effect of which is to prohibit, restrict or impose any sanction against the taking by the borrower of any steps towards—

(a) amalgamation with another society under section 93 of and Schedule 16 (mergers: supplementary provisions) to the Act,

(b) transfer of its engagements to any extent to another society in accordance with section 94 (transfer of engagements) of and Schedule 16 to the Act, or

(c) transfer of the whole of its business to a company in accordance with section 97 (transfer of business to a commercial company) and the other applicable provisions (as so described in section 97) of the Act,

is a disqualifying term for the purposes of paragraph 1(2) of Part I of this Schedule.

(2) None of the following are disqualifying terms for those purposes:

(a) a provision which requires notification of any other person of a proposal to take any of those steps;

(b) a provision which requires the consent of the lender (or, where the lender comprises more than one person, of all or some of them), or of a person acting on behalf of the lender, to a transfer of engagements of the borrower where that transfer is not a transfer of all its engagements;

(c) a provision, in a case where the interests of the lender are represented by a trustee, which requires a borrower which proposes to transfer its business to a company to satisfy that trustee that the transferee of the business will be or (as the case may be) remain an authorised institution or (if that trustee is not so satisfied) to obtain the consent of the lender (or, where the lender comprises more than one person, of all or some of them) to the transfer;

(d) a provision which, in connection with a transfer of the business of the borrower to a company, requires or permits issue terms to be varied or supplemented where and only where—

(i) that variation or supplement is not one which would or might cause any of the supplementary financial resources to which those issue terms relate and which comprise supplementary capital to be excluded from the financial resources considered appropriate by the Bank of England for the purposes of paragraph 4(2) of Schedule 3 (minimum criteria for authorisation) of the Banking Act 1987(1), and

(ii) the circumstances in which that variation or supplement may take place are restricted by one of the qualifying restrictions set out in subparagraph (3) below.

(3) For the purposes of subparagraph (2)(d) above the qualifying restrictions are:—

(a) a restriction to the effect that the variation or supplement of the issue terms referred to in that subparagraph is limited to dealing with matters arising out of the procedure by which the transfer takes place and the constitution of the transferee;

(b) a restriction that the issue terms may be varied or supplemented to an extent beyond the limits specified in paragraph (a) only if the Bank of England consents to that variation or supplement.

(1)

1987 c. 22.