The Building Societies (Deferred Shares) Order 1991

Explanatory Note

(This note is not part of the Order)

This Order is made under section 119(1) of the Building SocietiesAct 1986 which provides that“deferred shares” means shares of a class defined as such by order. Definition ofsuch a class has two primary effects. Before a society is authorisedunder section 9 of the Act to raise money from members or acceptdeposits it may nevertheless accept payments by way of subscription fordeferred shares up to limits specified insection 9. By virtue of section27(8) of the Act deferred shares are not to count as protectedinvestments for the purposes of the Investor Protection Fund set upunder Part IV of the Act.

The Order defines a class of shares to be deferred shares within themeaning ofsection 119(1) if they are issued fully paid upon terms to theeffect of the key term set out in the Schedule to the Order, and if thefact that the shares are deferred shares and so not protected by theInvestor Protection Scheme is prominently stated in a document furnishedto every applicant for such shares and in every document evidencingtitle to such shares (article 3(2)).

The key term prohibits the repayment of the principal of the sharesexcept on a dissolution of the society after all creditors andshareholders (other than holders of deferred shares) have been paid infull, 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 Orderthe provisions of which are more complex.