Merger Procedures

Part

BSOG The Building Societies Regulatory Guide

Chapter

Merger Procedures

Printed on: 16/09/2024

Rulebook at: 01/04/2014

BSOG 2

Merger Procedures

BSOG 2.1

Introduction

01/01/2007

Purpose of this chapter

BSOG 2.1.1

This chapter ultimately derives from the Merger Procedures Guidance Note issued by the Commission in May 1999. It gives guidance on the requirements of the 1986 Act, as amended. Under the Act certain functions of the Commission were transferred to the Financial Services Authority and subsequently, to the FCA and PRA. This chapter is not intended to be exhaustive and is not a substitute for looking at the 1986 Act as amendedand the Mergers Regulations 1987 (SI 1987/2005) as amended by the Mergers (Amendment) Regulations 1995 (SI 1995/1874), the Merger Notification Statement Regulations 1999 (SI 1999/1215), where applicable, and a society's own Rules. Nor is it a substitute for the society seeking its own legal advice. It gives a description of the relevant provisions of the 1986 Act, of the information which must be made available to the Prudential Regulatorand to societies' members, together with an outline of the procedures to be followed at general meetings, and the voting majorities required to pass the Merger Resolutions which the members are to be asked to approve. This chapter describes the role of the Prudential Regulatorin approving the statements to members under Schedule 16 to the 1986 Act, in its prudential supervision of mergers, and in confirmation hearings. It also gives a broad indication of the way in which the Prudential Regulatormay be expected to exercise its discretionary powers. Except as described in section 6, to which section 7 of this chapter also applies, this chapter is concerned only with voluntary mergers under Sections 93 and 94 of the 1986 Act.

01/04/2013

BSOG 2.1.1A

The 1986 Act assigns most of the functions relating to Merger Procedures to "the appropriate authority". In order to clarify this the term "Prudential Regulator" is used throughout this chapter, including where guidance is being given.

01/04/2013

BSOG 2.1.2

It is for the boards of societies to assess the case for a merger, and they must explain and recommend their decision to their members. However the Prudential Regulator's staff are available to give advice on the procedures to be followed and the information required to ensure that the members can reach fully informed decisions. Societies are strongly recommended to consult the Prudential Regulator early on in the formative stages of merger discussions. Such consultation will, of course, be treated in the strictest confidence. It will also be helpful to have regard to the indicative timetable set out in paragraph BSOG 2.8.3 G.

01/04/2013

BSOG 2.1.3

Societies should consult their own legal advisers about the application of the provisions of the 1986 Act, and the general law, to the particular features of a proposed merger.

01/04/2013

BSOG 2.1.4

This chapter considers each stage of the merger procedure in chronological order. The remainder of this section gives a synopsis of the relevant requirements of the 1986 Act, which are then discussed in more detail in subsequent sections:

(1) Section 2.2 Preliminary Matters, considers the rationale for a merger and its terms and the handling of public announcements, and gives guidance on certain prudential issues.

(2) Section 2.3 Information Provided to Members, discusses the form and content of the statutory Schedule 16 Statement and the accompanying rationale and statements by the board of the society, and describes the form of application to be made to the Prudential Regulator for approval of the Statement.

(3) Section 2.4 General Meetings and Resolutions, discusses the resolutions and majorities required to pass them, the notice of meeting, the register of members and members entitlement to vote, the arrangements for general meetings and the scrutineers report. It also describes the Prudential Regulator's discretionary powers.

(4) Section 2.5 Confirmation, describes the form of application to the Prudential Regulator for confirmation of a merger, and the procedures which the Prudential Regulator expects to follow in considering and hearing written and oral representations and in reaching its decision.

(5) Section 2.6 Transfer of Engagements under Direction, describes the modified procedure to be followed when a society has been directed by the Prudential Regulator to transfer its engagements to another society and/or to proceed by board resolution.

(6) Section 2.7 Registration and Dissolution, briefly discusses the process of registration of amalgamations or transfers of engagements and dissolution of the amalgamated or transferor societies.

(7) Section 2.8 Timetable, reviews the expected timetable, including statutory notice periods, which may be expected to apply to a merger from start to finish.

01/04/2013

Statutory requirements

BSOG 2.1.5

The statutory provisions concerning mergers are in Sections 93 to 96 of, and Schedule 16 to, the 1986 Act, where three types of transaction are provided for:

(1) Amalgamation, where two or more societies unite to form a new successor society;

(2) Transfer of engagements, where a society (the transferor) transfers its membership and the whole of its undertaking to another (the transferee), which then continues as before; and

(3) Partial transfer of engagements, where a society transfers only a part of its membership and business to another society (for example, some outlying branches).

The procedures for all three are much the same, and the differences are explained in the relevant sections of this chapter. The practice as described in this chapter is derived exclusively from previous experience of transfers of engagements because, so far, there have been no amalgamations nor partial transfers under the 1986 Act. However, it is not expected that the Prudential Regulator'shandling of amalgamation procedures would be significantly different from what is described here.

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BSOG 2.1.6

The purposes of the provisions of the 1986 Act are to ensure that the members are given all the material information they need about the terms of the merger which they are asked to approve and a proper opportunity to cast their votes. Subsequently, they are to be given the opportunity to make representations about that process before the merger is confirmed.

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BSOG 2.1.7

The 1986 Act makes no provision for a merger to be initiated by any other means than a proposal by a board put to the society's members. It requires that each member who is entitled to receive notice of the general meeting at which the Merger Resolutions are to be moved must also receive a copy of the Schedule 16 Statement. A merger must be approved by a shareholding members resolution and a borrowing members resolution. There is an additional voting requirement for the approval of a partial transfer of engagements.

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BSOG 2.1.8

If the terms of a merger include provision for the payment of compensation to directors or other officers for loss of office or of income, then the proposed payments must be approved by a separate special resolution. A further special resolution may also be required if there is to be a distribution to members which exceeds the limits described in paragraph BSOG 2.4.4 G.

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BSOG 2.1.9

Sections 93 to 96 of the 1986 Act specify certain procedures for the consideration of representations by interested parties concerning confirmation, and the criteria which the Prudential Regulator must consider before deciding whether or not to confirm a merger. The Prudential Regulator may not consider matters concerning the merits of merger proposals or the fairness of the terms which the members have approved by passing the Merger Resolutions.

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BSOG 2.1.10

The statutory requirements of the 1986 Act are explained and discussed in more detail in subsequent sections of this chapter. In addition, societies and their advisers must have regard to the legislation mentioned below.

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Enterprise Act 2000

BSOG 2.1.11

Societies should inform the Office of Fair Trading of a proposed amalgamation or transfer of engagements where the UK turnover associated with the enterprise which is being acquired exceeds 70 million or the enterprises which cease to be distinct supply or acquire goods or services of any description and, as a result of the merger, together supply or acquire at least 25 per cent of all those particular goods or services of that kind supplied in the UK or in a substantial part of it.
The OFT has a function to obtain and review information relating to merger situations, and a duty to refer to the Competition Commission for further investigation any relevant merger situations where it believes that it is or may be the case that the merger may or may be expected to result in a substantial lessening of competition.
It is essential that any submission to the OFT is undertaken at the earliest possible opportunity since, should the OFT decide to refer a merger to the Competition Commission that would be a material fact to be disclosed in the Schedule 16 Statement, unless it is impracticable to put the matter to members until the Competition Commission has reported.

01/04/2013

Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246)

BSOG 2.1.12

These Regulations have the effect that the employees of a transferor society automatically become the employees of the transferee society following the merger. They require, in particular, information to be given in certain cases to employees representatives, long enough before the merger takes place, to enable consultations to be held between the society and those representatives. Failure to inform or consult in this way is a ground for reference of the matter to an employment tribunal and there are other significant provisions. Societies are advised to consult "A Guide to the 2006 TUPE Regulations for Employees, Employers and Representatives" which explains the Regulations and which is available from the TUPE section of the Department of Trade and Industry Employment Matters webpage, under the heading "Trade Unions and collective rights" see www.dti.gov.uk/employment/.

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Taxes Acts

BSOG 2.1.13

Societies should take advice on the timing and amount of tax liabilities.

01/04/2013

Electronic Communications Order 2003

BSOG 2.1.14

Societies should be aware that this Order modifies various relevant provisions of the 1986 Act. This enables the use of electronic communications between societies, their members and other persons on matters relating to a proposed merger, such as the Schedule 16 statement and the voting arrangements. The Order requires that societies must obtain consent before using electronic means of communication. The remaining text of this chapter has not been amended to take account of the Order. A society proposing to use electronic communications in relation to a merger will need to take its own legal advice as to how the procedures described in this chapter will have to be adapted. In that event the Prudential Regulator will also adapt its own procedures appropriately.

01/04/2013

BSOG 2.2

Preliminary matters

01/01/2007

Rationale for a merger

BSOG 2.2.1

It is a matter for the board to decide whether to recommend a merger to its members. The overriding duty of the board is to reach a view having regard to what is in the best interests of the society, and its members as a whole, both present and future, borrowing members and shareholding members. The board may also reasonably consider the interests of customers who are not members, of the staff, suppliers of goods and services, and of the wider community.

01/04/2013

BSOG 2.2.2

A well planned and well matched merger can benefit both the shareholding and borrowing members and the staffs of both societies by producing a combined society with the financial strength and management expertise and experience needed to compete successfully in the market place. It must be recognised, however, that in many instances it will take time for economies of scale to be achieved and a careful assessment of projected costs is essential to a realistic view of whether such economies are likely to be achievable. On the other hand, a merger between two weak and over-extended societies may produce an even weaker one. It is better to negotiate a merger from a reasonably secure position than to be obliged to seek a merger when the society has become too weak to carry on as an independent entity.

01/04/2013

BSOG 2.2.3

This chapter cannot deal exhaustively with all the factors to be taken into account by a board when deciding whether to recommend a merger to its members. Moreover, there will be factors peculiar to particular cases. However, the following paragraphs draw attention to those matters which the Prudential Regulator expects boards to consider in all cases.

01/04/2013

BSOG 2.2.4

Consideration of a merger can normally be expected to emerge from the board's regular consideration of the strategic options available to the society. That is not to say that merger as a transferor society should always figure as an option in every society's corporate plan. On the other hand, every board should be alive to business trends which point to, or which, if not altered, will point to, the need to consider options for merger. In short, a merger should be foreseen and planned. Alternatively, of course, a board which wishes its society to remain independent must have a clear strategic view of how that can be achieved in a variety of realistic planning scenarios. Whether or not a board is considering a merger, it should as a matter of prudence, know how it would respond to a proposal or counterproposal to merge or to transfer its business to a commercial company.

01/04/2013

BSOG 2.2.5

If a board foresees the possibility of a merger, then it should plan for that eventuality. Societies which see themselves as transferees will need to consider the desired characteristics of potential partners, including, for example, geographical presence, mortgage book quality, and product market share. Societies contemplating the transfer of their engagements will need to consider whether the interests of their members would best be served by a local or regional alliance or access to a national network of branches and services. The board may also reasonably consider the interests of customers who are not members, of the staff, suppliers of goods and services, and of the wider community. It is also reasonable, particularly for local and regional societies, to consider the implications for the local economy, where, for example, a regional or head office may eventually be closed to achieve economies of scale.

01/04/2013

BSOG 2.2.6

The range of issues which both boards have to consider will vary from case to case and is for the board to decide. At one end of the scale there will be the case where a small society merges with a large one and, at the other end, where two or more societies of broadly comparable size join to form one significantly larger. Whatever the proposal under consideration the board will necessarily have regard to this primary duty to reach a view on what is in the best interests of the society, and its members as a whole. It will also be conscious of the need to give an account of the boards rationale in recommending the merger to members, in particular if a statutory merger statement is included in the Merger Document (see paragraph BSOG 2.3.23 G).

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Terms of a merger

BSOG 2.2.7

The terms negotiated between the parties in a merger will be set out in a formal agreement. In the case of a transfer of engagements, Section 94(6) of the 1986 Act requires the extent of the transfer, and in practice the other agreed terms, to be recorded in an Instrument of Transfer. For an amalgamation, Section 93(2) of the 1986 Act requires the parties to agree on a Memorandum and Rules for the successor society, and each to approve the terms of the amalgamation by Merger Resolutions, so that there must be agreement on the terms. The Prudential Regulator will expect the Instrument of Transfer or amalgamation agreement to be signed before the Prudential Regulator approves the Schedule 16 statement, although it will be conditional on, among other things, approval by members and confirmation by the Prudential Regulator. In both cases the boards of the societies will have approved the Instrument or agreement and the Schedule 16 statement and, in the case of an amalgamation, the Memorandum and Rules of the successor society. Before such approval by the boards, drafts of the proposed Memorandum and Rules should have been cleared with the FCA and the Prudential Regulator. The Rules of transferee societies should provide that members of transferor societies are not disenfranchised for any period after the merger is effected (see BSOG 2.3.16 G and rule 4(9) of the BSA Model Rules 5th edition).

01/04/2013

BSOG 2.2.8

Although vesting of the property, rights and liabilities of the transferor society in the transferee society on completion of a transfer of engagements is a statutory process by virtue of Section 94(8) of the 1986 Act, the Instrument of Transfer performs an important function. Not only is it required by the 1986 Act, but it is required to identify the extent of the transfer (Section 94(6)), since a transfer can be of all or part of the engagements of the transferor society. Thus, on a transfer of all the engagements of a society, the Instrument of Transfer should include a specific statement that all are included. If the transfer is of part only, then the instrument should specify precisely what is being transferred. As explained, an amalgamation agreement is required in practice for all amalgamations, but again the actual process of transferring the assets of the societies to, and vesting them in, the new society is by operation of the 1986 Act. Section 93(4) of the 1986 Act, which does this, does not allow for exceptions to the vesting since the nature of an amalgamation is that all the assets of all the societies are vested in the successor society.

01/04/2013

BSOG 2.2.9

The Instrument of Transfer, or amalgamation agreement, will also allow matters of detail to be recorded. So it will contain, for example, provision for:

(1) any changes to the terms and conditions of PIBS and share and deposit accounts, including the integration of the product lines of the transferor society(ies) into those of the transferee or successor society;

(2) any changes to the terms and conditions of mortgage accounts and other loans;

(3) any bonus to be paid to members;

(4) the terms and conditions on which staff will be employed or made redundant;

(5) pension scheme arrangements;

(6) integration of operations;

(7) the terms and conditions on which directors and other officers are to continue in office or cease to hold office, including the posts they will hold and any extra-contractual compensation to be paid for loss of office or reduction in emoluments;

(8) the specified target date for completion of the merger, bearing in mind that the actual date is a product of the 1986 Act (Sections 93(3)(b) & (4) and 94(8)), and for action if that date is not achieved;

(9) any conditions precedent, such as members votes and the Prudential Regulator's confirmation, and for the circumstances in which the Instrument or amalgamation agreement might be terminated.

01/04/2013

Bonus Payments to Members

BSOG 2.2.10

Whether any bonus is to be paid to members and, if so, its amount and distribution, are matters to be agreed by the boards of the societies concerned and to be approved by their members, subject to the discretion described in BSOG 2.4.41 G and 2.4.42 G. However, the Prudential Regulatorwill wish to be satisfied that the combined society will maintain a prudent level of capital resources after the bonus is paid. A bonus may, for example, be paid to the members of a transferor society with a higher capital ratio than the transferee society so as to equalise the reserves which both bring to the combined society. If it is thought desirable also to pay a bonus to the members of the transferee society, then the reserves of the combined society may be equalised at a level below the capital ratio of the transferee society, but only if it is prudent to do so. The statutory requirements for approval of bonus payments are described in BSOG 2.4.4 G.

01/04/2013

BSOG 2.2.11

A bonus is a distribution of the funds of either or both societies, and may be paid by a number of methods, or some combination of them, including, for example: a flat rate lump sum; a sum calculated as a percentage of balances; or an increase or (for mortgage accounts) a decrease in the interest rates paid or charged for a limited period. Maintenance of interest rate differentials existing before the date of completion of the merger between those offered by (say) the transferor society and the transferee society would not normally be characterised as a bonus. However, each society, and the Prudential Regulator, will wish to be satisfied that any differential is consistent with its established pricing policy and is not the result of a change adopted, for example, when the society decided to seek a merger. Each case where interest rate differentials are to be maintained, for whatever period, will need to be considered to determine whether or not it constitutes a bonus, and societies may wish to take professional advice on the matter.

01/04/2013

Compensation to Directors and Other Officers

BSOG 2.2.12

Any compensation proposed to be paid to directors or other officers must be disclosed in the Schedule 16 Statement and approved by a separate special resolution of the members (see BSOG 2.3.11 G and BSOG 2.4.3 G). Compensation is not defined in the 1986 Act, except to the extent that section 96(8) says that it includes benefits in kind. In the Prudential Regulator's opinion, compensation does not include statutory redundancy payments, damages for breach of contract or other payments, for example, falling due under the terms of a pre-existing contract of employment, or a pre-existing arrangement giving rise to a reasonable expectation. However, it does include any proposed ex-gratia payments in money or moneys worth. Societies should consider very carefully the extent to which any proposed payment may exceed the amount provided for by statute or contract. In view of the requirement in Section 96(3) of the 1986 Act that unauthorised payments must be repaid by the recipient, societies are advised to take legal advice on any payments which are not specifically authorised by the terms of a resolution passed by the members in accordance with Section 96(1) of the 1986 Act. All proposed payments requiring approval by such special resolution should be disclosed in the Schedule 16 Statement under the power in paragraph 1(4)(f) of that Schedule. In addition, the Schedule 16 Statement should disclose any other payments to directors or other officers arising directly from the merger. So that members are aware of the direct interest of the directors or other officers in a merger, societies should consider whether the amount, as distinct from the fact, of statutory or contractual payments should be disclosed where these arise directly from the merger.
More generally, societies need to consider whether any facts relevant to any director or other officer, or to any person(s) connected with them, should be disclosed where these are material to the interests of the members who are to be asked to vote on the proposed merger. In determining the amount of compensation which might be justified, the board must strike a balance between fairness to the individuals who will suffer a loss of income and the interests of the members, bearing in mind that the compensation will be at a cost either to any bonus to the members or to the reserves to be transferred to the combined society

01/04/2013

Public announcement

BSOG 2.2.13

Boards of both societies may wish to announce a merger proposal as soon as agreement in principle has been reached between them and, in particular, to inform their members and staff of the proposed terms. However, boards will often wish to delay an announcement for as long as possible, perhaps for prudential or commercial reasons, or because they first wish to settle all the details of the proposed terms. Societies with listed PIBS will need to have regard to the FCA's requirement concerning early disclosure of information affecting the price of securities. Subject to this, there is no objection to delay, in principle, and there may be good reasons for it. Unfortunately, experience shows that every days delay after agreement in principle has been reached carries an increasing risk of premature leak. Indeed, the very reasons for delay may make the merger a subject for intense speculation and increase the risks of a leak. In these circumstances then, boards must have contingency plans to make an early announcement to deal with any potentially damaging rumours and to avoid members being misled or left in a state of uncertainty.

01/04/2013

BSOG 2.2.14

The announcement, particularly information provided directly to members and staff, should make it clear that the merger proposal is subject to approval by the members and completion of the statutory procedures. Boards should be careful to avoid giving even the impression that the outcome is a foregone conclusion, and should indicate any matters of substance on which the proposed terms of the merger remain to be settled. Briefing of staff who will be responsible for responding to enquiries from members and the press should be considered carefully and prepared in advance of the announcement to avoid any risk of members being unintentionally misled.

01/04/2013

BSOG 2.2.15

The Prudential Regulator is not required to approve the content or wording of announcements or preliminary information sent to members. However, it will be happy to comment on drafts shown to it at an early stage, and may be able to help societies to avoid unintentionally misleading statements.

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Prudential issues

BSOG 2.2.16

Before a firm proposal is agreed, the participating societies should consult with the Prudential Regulator's staff to discover whether there is any prudential objection to the proposal. The Prudential Regulator will need to be satisfied that the combined society will be managed prudently from the date of completion of the merger and comply with the Principles for Businesses and with all the relevant rules made by the Prudential Regulator. The Prudential Regulator will also wish to know that post-merger arrangements and agreements provide for the proper integration or rationalisation of the operations of the combined society, and of its connected undertakings, joint ventures or arrangements with third parties (for example, for the provision of unsecured loans, insurance and investment services) and that any commercial conflicts of interest have been resolved.

01/04/2013

BSOG 2.2.17

In all cases, prudential information should be provided, but the amount of information will depend upon the circumstances of each case. For example, if a merger involves societies of much the same total asset size, or where the merger will result in a significant increase in the transferee society's assets, or involves a change of strategy, new kinds of business or carrying on business in a new geographical area, the Prudential Regulator will expect substantial prudential information and societies should also expect this to form the basis of more detailed discussions with the Prudential Regulator's staff. On the other hand, in a merger where a small society is transferring its engagements to a very much larger one, the prudential information to be provided is likely to be that much less. In all cases the Prudential Regulator will ask for the prudential information at an early stage so that there is adequate time for discussion before it is asked formally to approve the Schedule 16 Statement.

01/04/2013

BSOG 2.2.18

Boards should note, however, that while the Prudential Regulator will expect the kinds of information described here, it is for the boards themselves to exercise due diligence and to be satisfied that the merger and its terms are prudent and in the interests of their members.

01/04/2013

BSOG 2.2.19

As is noted, the Prudential Regulator's need for prudential information can be expected generally to relate to prudential issues, but societies may find it helpful to note the following paragraphs which describe some of the particular issues which the Prudential Regulator will expect to be addressed.

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Direction and management

BSOG 2.2.20

Current and future board composition and succession plans for, say, the three years immediately following the merger.

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BSOG 2.2.21

Current and future senior management and structure, indicating spans of responsibility (which may most easily be presented in chart form) and any areas where there may be a need for additional expertise or experience to be acquired by the combined society with plans and timescale for acquiring such expertise.

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Accounting and control systems

BSOG 2.2.22

Generally, outline plans and timetables for the integration of accounting, control and inspection systems, including the linking or harmonisation of computer systems. This may usefully be divided between initial or short term arrangements and foreseen longer term developments. More particularly, the information should include arrangements to ensure continuity and the integration of:

(1) accounting records;

(2) systems of internal control, including management information systems and IT systems; and

(3) systems of inspection (internal audit)

For all significant mergers the Prudential Regulator will wish to receive, prior to the effective date of the merger, a letter from the transferee society's external auditors stating whether, in their opinion, the accounting records and systems of control and of inspection established for the merged society will be effective from the effective date.

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Business plan

BSOG 2.2.23

The rationale for the merger will need to be explained and justified in full, including existing and potential future business and marketing opportunities, the benefits of geographical concentration or diversification of business, economies of scale (particularly administrative), and future funding and lending strategies. Proposals for rationalisation or integration of administrative offices and branches will need to be set out in full, including the implications of the proposed merger for the terms and conditions of staff employment and their future job prospects with the combined society.

01/04/2013

Financial prospects

BSOG 2.2.24

Information on the financial prospects for the combined society will need to include:

(1) estimates, broken down to an appropriate level of detail, of short term additional costs and long term savings (if any) anticipated from the merger; and

(2) revenue account, balance sheet and solvency ratio projections for the first three to five years of operation.

This information must be supported by statements of the assumptions on which it has been based. In addition, the effect of changes on those assumptions should be illustrated, from a best case to a worst case scenario.

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Connected undertakings and agencies

BSOG 2.2.25

The integration and future operation, management and control of connected undertakings, together with arrangements with other parties for the continuing provision of services under agency agreements, should be described in full.

01/04/2013

BSOG 2.3

Information Provided To Members

01/01/2007

Statutory requirements

BSOG 2.3.1

Part I of Schedule 16 to the 1986 Act requires a building society which desires to merge with another society to send to every member entitled to notice of a meeting of the society a statement concerning the matters specified in the Schedule. The statement is to be included in or with the notice of the meeting at which the Merger Resolutions are to be moved. No statement shall be sent unless its contents, so far as they concern the specified matters, have been approved by the Prudential Regulator. Where the transferee society has obtained the consent of the Prudential Regulatorto proceed by board resolution then it is exempt from this requirement (see BSOG 2.4.41 G and BSOG 2.4.42 G).

01/04/2013

BSOG 2.3.2

Meeting arrangements and resolutions are discussed in BSOG 2.4 .

01/04/2013

The Schedule 16 Statement

BSOG 2.3.3

The Schedule 16 Statement must set out the present financial positions of each of the merging societies, the terms of the merger agreed between them and summarise the main provisions of the Instrument of Transfer. It must also include any other matter which the Prudential Regulator may require. In the case of an amalgamation, the Statement must additionally include the proposed Memorandum and Rules of the successor society which are to be approved by the special resolution required to approve the merger (Section 93(2) of the 1986 Act), as well as the terms of the amalgamation agreement between the societies.

01/04/2013

BSOG 2.3.4

The Schedule 16 Statement does not have to be a discrete document. In fact it will usually be convenient to include it in a comprehensive Merger Document also containing the boards rationale for recommending the merger, the notice of the meeting at which the Merger Resolutions are to be moved, an explanation of the merger procedure (including details of the confirmation stage see section 5) and a description of the requirements of the society's Rules concerning entitlement to vote. However, the Schedule 16 Statement within the Merger Document should be clearly identified as such (either by printing it on a different colour of paper or by some other means). An example of a pro forma Merger Document is given in Annex 1.

01/04/2013

BSOG 2.3.5

The required contents of the Schedule 16 Statement are discussed in detail in the following paragraphs.

01/04/2013

The financial position

BSOG 2.3.6

Paragraph 1(4)(a) of Schedule 16 to the 1986 Act requires the Statement to contain information concerning the financial position of each of the societies participating in the merger. The members should be given sufficient information to enable them to gain an accurate understanding of the key financial features of their businesses. The information will include a balance sheet, recent results and certain financial ratios; for this purpose it is necessarily rather more detailed than is required for the annual Summary Financial Statement. In addition, further information will be required concerning accounting policies and other matters, as set out in BSOG 2.3.10 G.

01/04/2013

BSOG 2.3.7

The information should comprise consolidated accounts of each society and its connected undertakings prepared at a common balance sheet date which should be no more than 6 months before the date on which the Statement is approved by the Prudential Regulator, or the date on which the Statement is to be sent to the members if that is expected to be significantly later. Information regarding results should relate to the relevant period ending on the chosen balance sheet date. The figures may be derived from audited or unaudited accounts. In either case, the source must be stated. If unaudited figures are used, the Prudential Regulatorwill require a letter of comfort from the relevant society's external auditors confirming that, in their opinion:

(1) the figures have been correctly abstracted from the society's records;

(2) the financial information is not misleading in the context in which it appears; and

(3) in reviewing the data relating to the Statement, nothing has come to their attention which would cast doubt on the directors statement (see BSOG 2.3.8 G) that there has been no material change affecting the information given.

01/04/2013

BSOG 2.3.8

Since the financial information will necessarily relate to a period ending somewhat before the date of approval of the Schedule 16 Statement, the board is required to state whether or not there have been any material changes to the financial position in the interim. If the effect of a change cannot be quantified, it must be described so that the members at least know that it has been identified and is relevant to their consideration of the proposed merger. Failure to disclose such changes will be relevant to the Prudential Regulator's subsequent consideration of the society's application for confirmation of the merger (see BSOG 2.5.4 G, BSOG 2.5.12 G and BSOG 2.5.13 G).

01/04/2013

BSOG 2.3.9

Differences in accounting policies could result in some loss of comparability between the financial information given for each society. Some adjustments to the figures may, therefore, be necessary to give the members a proper understanding of the societies relative financial positions. Any adjustments made should be explained by way of a note. If there are no significant differences in accounting policies, then that should be stated for the avoidance of doubt.

01/04/2013

BSOG 2.3.10

Notes to the financial position should also provide information on the following matters:

(1) the book amounts and market values of listed securities held as liquid assets;

(2) the book amounts and current market values of land and buildings; with an indication of the basis on which current market value has been determined;

(3) any significant differences in policy or practice with regard to the depreciation and estimated asset lives of tangible fixed assets;

(4) pension arrangements of each society including, for funded schemes, details of latest actuarial valuations;

(5) summary information on the business of connected undertakings;

(6) an estimate of the costs and benefits of the proposed merger.

01/04/2013

Interests of Directors and Other Officers

BSOG 2.3.11

Subparagraphs 1(4)(b) and (c) of Schedule 16 to the 1986 Act require the Statement to disclose any interests of the directors in the merger and any compensation to be paid to them or other officers. This information must be comprehensive and clear. It should include the following:

(1) the interests of the directors in the merger, including appointment of existing directors to the main board or local board of the combined society, or to any other position with that society, together with any significant resultant change in present or expected future levels of fees or other emoluments and benefits in kind;

(2) any compensation payable to directors or other officers for loss of office or reduction in emoluments, and the basis on which it is calculated; if a global sum is proposed to be given to a group of persons, the intended manner of apportionment should be stated (see BSOG 2.2.12 G);

(3) any payments to be made to directors or other officers arising from the merger, whether provided for in contracts of employment or under covenant or some arrangement giving rise to a reasonable expectation;

(4) any proposed benefits to directors or other officers by way of fees for professional services, stating the nature of the services to be provided and the anticipated annual fee income; and

(5) any other benefits to directors or other officers, or to any persons connected with them, arising from, or as a consequence of, the merger.

01/04/2013

BSOG 2.3.12

If the directors or other officers have no material interest, either by way of change in remuneration, as widely defined above, or by payment of compensation for loss of office or in any other form, for example, a pension, this should be stated explicitly, for the avoidance of doubt.

01/04/2013

Bonus Payments to Members

BSOG 2.3.13

Paragraph 1(4)(d) of Schedule 16 to the 1986 Act requires the Statement to specify the bonus, if any, to be paid to members in consideration of the merger. The Prudential Regulator'sviews on what may, or may not, be regarded as bonus are given in BSOG 2.2.11 G, and the statutory requirements for approval of bonus payments are described in BSOG 2.4.4 G.

01/04/2013

BSOG 2.3.14

The method of calculation of a bonus should be explained in the Schedule 16 Statement; for example, x% of the lower of the share account balances held at the end of the last financial year and those balances held on the effective date of merger (giving precise dates and times for calculating the balances), and the estimated maximum total amount payable to members. The effect on the reserves of the combined society should be shown by stating the estimated gross and net costs of the bonus and the resulting reduction in the reserve/asset ratio (see also Annex 1, items A.3 and B.6). The ratio of gross capital to shares and borrowing of the combined society, after allowing for the net cost of the bonus to be paid to members, should be estimated to be x%, and on the same basis of calculation, but not accounting for the bonus payment, the ratio should be estimated to be y%.

01/04/2013

Other Matters

BSOG 2.3.15

As is noted in BSOG 2.2.9 G, the Instrument of Transfer (or amalgamation agreement) will normally make provision for a number of matters in addition to those concerning the interests of directors and other officers and any bonus to be paid to the members. Such matters must be explained in the Schedule 16 Statement, together with any other matters of which the Prudential Regulatormay require particulars to be given (see paragraph 1(4)(f) of Schedule 16 to the 1986 Act). They are discussed in the following paragraphs.

01/04/2013

BSOG 2.3.16

Post-merger membership rights should be secured by the adoption of BSA Model Rules which cover this matteror a similar Rule to the same effect. The purpose of the Rule is to ensure that members of a transferor society are not disenfranchised. It provides that they are deemed to have been members of the transferee society from the date when they became members of the transferor society. Societies Rules, in conformity with the 1986 Act, must provide, inter alia, that a member is entitled to vote on a resolution of the society if he was a member at the end of the last financial year before the voting date and on the voting date. If, for example, a transferee society has a financial year ending on 31 December, its AGM in the following April and the effective date for a merger is in March, then the deemed membership Rule will enfranchise those who were members of the transferor society on or before 31 December. The existence, or absence, of this Rule must be recorded in the Schedule 16 Statement in any case where it is likely to have any significant effect on members rights.

01/04/2013

BSOG 2.3.17

Proposed changes to the terms and conditions of share and deposit accounts must be fully and clearly explained in the Schedule 16 Statement. In a transfer of engagements, shares and deposits held with the transferor society will become held with the transferee society. Such accounts will either be transferred into the nearest equivalent account of the transferee society, become new products of the transferee society, or continue on existing terms but be closed to new investors. It is most helpful to tabulate the proposed integration of accounts in a schedule listing the accounts of the transferor society opposite the accounts of the transferee society to which they are to be transferred, together with the interest rates payable, or proposed to be paid, on each account. A similar presentation will be required to show the proposed integration of accounts in an amalgamation. In preparing this the provisions of Section 8 of the 1986 Act should be borne in mind.

01/04/2013

BSOG 2.3.18

Proposed changes to the terms and conditions of mortgage accounts must be explained (see paragraph 1(4)(e) of Schedule 16 to the 1986 Act). Alternatively, if no changes are proposed to be made, the Schedule 16 Statement must include an assurance to that effect, for the avoidance of doubt.

01/04/2013

BSOG 2.3.19

Terms and conditions of employment of staff, including any special bonus or other benefits in connection with the merger, as provided by the Instrument of Transfer (or amalgamation agreement), must be set out. In addition, the Prudential Regulator will require the Schedule 16 Statement to include an explanation of the Boards intentions with regard to the closure or integration of head office departments and branches, any reductions in the number of staff employed and redundancies, insofar as these matters are not provided for in the Instrument of Transfer (or amalgamation agreement).

01/04/2013

BSOG 2.3.20

Future pension arrangements for staff, directors and other officers, as provided by the Instrument of Transfer (or amalgamation agreement), are to be set out.

01/04/2013

BSOG 2.3.21

Finally, the conditional and termination clauses of the Instrument of Transfer (or amalgamation agreement) should be summarised.

01/04/2013

Board Rationale and Statements

BSOG 2.3.22

A board putting a merger proposal to its members has, in addition to its statutory duty to provide a Schedule 16 Statement, a fiduciary duty to provide its members with essential factual information and a fair assessment of the issues so that they can take informed decisions on whether to approve the boards proposals. The Prudential Regulator, therefore, expects that the Merger Document (see BSOG 2.3.4 G) will include an explanation by or on behalf of the board of the reasons for the merger and the choice of merger partner. This rationale should give a fair assessment of the advantages and disadvantages of the merger and should be entirely consistent with the facts set out in the Schedule 16 Statement. In addition to explaining the rationale and its consequences for the members, it should explain the effect on the staffs terms and conditions of employment and expectations for future employment prospects. The planned timescale for integration of the businesses should also be explained.

01/04/2013

BSOG 2.3.23

The 1986 Act requires that members must be notified of written non-confidential proposals to their society either to merge with another society or to be taken over by a commercial company. Part II of Schedule 16 to the 1986 Act imposes a duty to send a merger statement to members, advising them of a proposal to merge, and Part IA of Schedule 17 to the 1986 Act imposes a like duty to send a transfer proposal notification, advising them of a proposed takeover. If a proposal of either kind has been received, then notification of the prescribed particulars must be sent to every member entitled to notice of a meeting, either separately or together with every notice of the society's annual general meeting, and (where such notification has not already been given) must be included with every notice of the special meeting at which Merger Resolutions are to be moved.

01/04/2013

BSOG 2.3.24

Where notification of takeover or other merger proposals accompanies the notice of a meeting to consider Merger Resolutions, then

(1) any merger statement must give notice of the fact that a written merger proposal has been received unless notice has already been given to members, or it was received 42 or less days before the meeting, with details of the identity of the proposer, with or without particulars regarding the proposal. If the proposer requests in writing that the proposal be treated as confidential, disclosure is not required. The merger which the members are being asked to vote upon need not be the subject of a merger statement.

(2) any transfer proposal notification must give notice of the fact that a written proposal has been received with details of the identity of the proposer, with or without particulars regarding the proposal. If the proposer requests in writing that the proposal be treated as confidential, disclosure is not required.

An invitation to discuss a possible proposal probably would not constitute a proposal within either Schedule. Provision of merger or transfer proposal statements is a statutory requirement. Provided they accompany the notice of meeting, they may be included in a Schedule 16 Statement, or alternatively may more conveniently be included as one or more discrete paragraphs within the boards rationale explaining its choice of merger partner.

01/04/2013

BSOG 2.3.25

The rationale itself is not a statutory requirement, and is not subject to approval by the Prudential Regulator. However, the Prudential Regulatorwill take account of the information it provides when considering whether to confirm the merger (see BSOG 2.5, particularly BSOG 2.5.9 G and BSOG 2.5.12 G). Societies will, therefore, find it helpful to consult the Prudential Regulator'sstaff about the drafting and content of the rationale.

01/04/2013

BSOG 2.3.26

The whole Merger Document should be covered by a responsibility statement by the directors of each society. This may be given along the following lines:
The directors of Building Society and the directors of Building Society accept responsibility for the information relating to their respective societies which is contained in this document. To the best of the knowledge and belief of the directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

01/04/2013

BSOG 2.3.27

The Prudential Regulator will require the Schedule 16 Statement to include a statement as to whether or not the merger will conflict with any contractual obligations, including agency agreements, of either society or their connected undertakings.

01/04/2013

Application and the Prudential Regulator's Approval

BSOG 2.3.28

A society's formal application to the Prudential Regulatorfor approval of a Schedule 16 Statement is likely to be the culmination of many weeks of discussion with the Prudential Regulator'sstaff who will have reviewed and commented upon a draft or successive drafts of the Statement, having had regard also to drafts of the Instrument of Transfer (or amalgamation agreement) and the prudential information described in BSOG 2.2.Societies should also have cleared any proposed Rule changes or, in the case of an amalgamation, the proposed Memorandum and Rules of the successor society, with the FCA and the Prudential Regulator. The probable sequence of events is described more fully in BSOG 2.8 . The case where the Prudential Regulatorhas consented to a transferee society proceeding by board resolution, and thereby exempting it from the requirement to put Merger Resolutions, and sending a Schedule 16 Statement, to its members, is described in BSOG 2.4.41 G and BSOG 2.4.42 G.

01/04/2013

BSOG 2.3.29

Schedule 16 Statements must be prepared to the same standards as apply to financial statements and directors reports. An application to the Prudential Regulatorfor approval of a Schedule 16 Statement must be made in writing and should include a declaration made on behalf of the board, that the Statement is complete and includes all material information of which, in the opinion of the directors, the members should be aware. That declaration should say whether or not there have been any other merger or takeover proposals (confidential or otherwise see BSOG 2.3.23 G) and confirm that the information about them is correct. The application should be accompanied by the following documents:

(1) an authenticated copy of the executed amalgamation agreement or Instrument of Transfer, as the case may be;

(2) two authenticated copies of the final draft of the Merger Document (or documents) in printers proof form, including the Schedule 16 Statement, the board rationale, the notice of the general meeting and Merger Resolutions (including, in the case of an amalgamation, per section 93(2)(d) of the 1986 Act, three copies ofthe proposed Memorandum and Rules of the successor society), any merger or transfer proposal statements as mentioned in BSOG 2.3.23 G and BSOG 2.3.24 G, and the directors responsibility statements;

(3) any other documents, such as a covering letter for the Merger Document(s) and proxy voting forms;

(4) an assurance from the chairman of each society that the Schedule 16 Statement is complete, accompanied by a compliance schedule listing the requirements of the 1986 Act and of this chapter for a Schedule 16 Statement and indicating where in the statement of that society that requirement has been met and confirmation that all the interests of the directors and officers are included in it;

(5) an assurance by, or on behalf, of the board that the society's systems for verification of membership records are capable of providing the information required to fulfil the relevant requirements of the 1986 Act and the Rules (see BSOG 2.4.15 G);

(6) a letter of comfort from the society's external auditors as specified in paragraph BSOG 2.3.7 G;

(7) the appropriate fee as specified in the current Fees Rules;

(8) confirmation that the final draft as submitted for approval does not differ from that previously seen by the Prudential Regulatoror, where it does, indicating each change that has been made.

01/04/2013

BSOG 2.3.29A

Per section 93(2)(d) of the 1986 Act, in the case of an amalgamation, three copies of the proposed Memorandum and Rules of the successor society must also be sent to the FCA.

01/04/2013

BSOG 2.3.30

The Prudential Regulator'sapproval of the Schedule 16 Statement will be confirmed by returning to the society one authenticated copy of the Statement with the Prudential Regulator'scertificate of approval signed by an authorised signatory for the Prudential Regulator. There is no statutory requirement for copies of Schedule 16 Statements to be placed on the public files of societies but, because the documents are in the public domain, it will be the Prudential Regulator'spractice to pass copies to the FCAfor filing. Were a public announcement about the merger not to be made until after the Prudential Regulatorhad approved the Schedule 16 Statement, the Prudential Regulatorwould not pass a copy of the Statement to the FCAuntil after the announcement. The supporting documents listed above will not be passed to the FCA for inclusion on the public file.

01/04/2013

BSOG 2.3.31

The PRA is required to consult the FCA before approving a Schedule 16 Statement.

01/04/2013

BSOG 2.4

General Meetings and Resolutions

01/01/2007

BSOG 2.4.1

This section describes the requirements of the 1986 Act concerning members entitlement to vote, the register of members and the sending of notices of meetings. It also discusses general meeting arrangements, the resolutions and majorities required and the counting of votes. Finally, it gives guidance on the discretion which the Prudential Regulator may exercise in these matters. The directors of each society must satisfy themselves that they observe the general law on meetings, the relevant provisions of the 1986 Act and their own Rules.

01/04/2013

Resolutions and Voting Majorities

BSOG 2.4.2

The 1986 Act provides that a merger must be approved by the requisite Merger Resolutions (Sections 93(2)(c) and 94(2) and (5)(a)) as follows:

(1) a shareholding members resolution (see definition in paragraph 27A of Schedule 2 to the 1986 Act) passed on a poll by a majority of at least 75% of shareholders qualified to vote and voting; and

(2) a borrowing members resolution passed on a poll by a simple majority of borrowing members qualified to vote and voting (see definition in paragraph 29(1) of Schedule 2 to the 1986 Act);

provided that, in each case, notice has been duly given that the resolution is to be moved as a shareholding members resolution or a borrowing members resolution, as the case may be. A member may vote either in person at the meeting or by appointing a proxy (paragraphs 27A(b) and 29(1) of Schedule 2 to the 1986 Act do not provide that the voting on these may be conducted by postal ballot).
[Note: in the case of a partial transfer of engagements, in addition to the approval of the members as a whole by passage of the shareholding members resolution and borrowing members resolution described above, the society must obtain the approval of an affected shareholders resolution, which must be passed by the majority of the affected shareholders eligible to vote; that is, those shareholders in respect of whose shares it is proposed that the engagements should be transferred (Section 94(3) and (4)) of the 1986 Act. But note that the resolution must be passed by a majority of the affected members eligible to vote, not just a simple majority of those who actually do vote.]

01/04/2013

BSOG 2.4.3

Section 96(1) of the 1986 Act provides that, where a society wishes to pay compensation to directors or other officers for loss of office or diminution of emoluments, such compensation must be approved by a special resolution of the society's members (see also BSOG 2.2.12 G), separate from the Merger Resolutions. The special resolution must be passed by a majority of at least 75% of those qualified to vote and voting. The Treasury has not made regulations under Section 96(2) of the 1986 Act to set limits below which compensation may be paid without the authority of a special resolution. Therefore, in every case where compensation is proposed, the members must vote on the proposal as a separate issue from whether they approve the merger itself. Other officers include, in addition to the Chief Executive and Secretary, any persons who exercise managerial functions under the immediate authority of a director or the Chief Executive of a society (Section 119 of the 1986 Act defines manager and officer).

01/04/2013

BSOG 2.4.4

The members approval of bonus payments is required as part of the Merger Resolutions (see section 96(4) to (6) of the 1986 Act) and see BSOG 2.2.11 G for the Prudential Regulator'sview of what may constitute a bonus). If the total gross cost of the proposed bonus(es) (i.e. without any adjustment for prospective corporation tax recovery) is within the prescribed limit, then approval for it need only be included in each of the Merger Resolutions of the society whose funds are to be distributed. If it exceeds that limit then it must be included in each of the Merger Resolutions of each participating society. The prescribed limit was changed by the Building Societies (Mergers) (Amendment) Regulations SI 1995/1874 amending S1 1987/2005 and now is:

(1) in either a full transfer of engagements or an amalgamation, 5% of the total assets, as stated in the Schedule 16 Statement, of the society to whose members the bonus is to be paid;

(2) in a partial transfer of engagements, 5% of the share liabilities, as given in the Schedule 16 Statement, to be transferred;

(3) or a sum equal to the society's reserves after deducting its fixed assets (apportioned pro rata in respect of BSOG 2.4.4G (2) above), whichever is the less. The Regulations should be consulted for the full detail of the calculations.

01/04/2013

Entitlement to Vote

BSOG 2.4.5

Paragraph 5 of Schedule 2 to the 1986 Act provides that no person may be a member of a building society unless he or she is a shareholding member or a borrowing member. A shareholding member is a person who holds a share in the society (that is, an investment in a share account or PIBS). A borrowing member is a person who is indebted to the society in respect of a loan fully secured on land. However, the Rules may provide that borrowing membership is conferred by a loan substantially secured on land, or shall cease if the loan is foreclosed or the land is taken into possession by the society. A minor (that is a person under 18 years of age) may be a member, but may not vote on any resolution.

01/04/2013

BSOG 2.4.6

The mandatory provisions of Schedule 2 to the 1986 Act concerning a members entitlement to vote on a resolution, which must be reflected in societies Rules, are that the member must be a member on the voting date, must have been a member at the end of the last financial year before the voting date (paragraph 23(1) of Schedule 2) and must have attained the age of 18 years (paragraphs 5(3) and 34(2) of Schedule 2) on or before the date of the meeting. So far as borrowing members are concerned, the member is not entitled to vote in that capacity if his indebtedness to the society at any relevant date is less than 100 (paragraphs 29(2) and 36 of Schedule 2).

01/04/2013

BSOG 2.4.7

However, Schedule 2 specifies the following further provisions, some, none or all of which may be included in a society's Rules with respect to the entitlement of shareholding members to vote on any resolution; a person must (see Schedule 2 paragraphs 23(3) to (5) and 36):

(1) have a qualifying shareholding (which must not be set higher than 100), in one or more share accounts or PIBS, on the qualifying shareholding date;

(2) hold shares on the voting date; and

(3) have held shares continuously between those two dates.

01/04/2013

BSOG 2.4.8

The qualifying shareholding date is either the last day of the financial year preceding the voting date or, if the voting date falls during that part of a financial year which follows the conclusion of the society's Annual General Meeting commenced in that year, the first day of the period beginning 56 days before the date of the meeting. Therefore, if a society's Rules include the provisions concerning shareholding and continuity of membership described in BSOG 2.4.7 G, and if the voting date is later than the AGM in that year, a person to be entitled to vote on a shareholding members resolution must:

(1) have been a shareholding member on the last day of the previous financial year;

(2) have held shares to the value of at least 100 on the day 56 days before the date of the meeting;

(3) have held shares continuously from the 56th day through to the voting date; and

(4) hold shares on the voting date.

But note that there is no requirement for continuity of shareholding between BSOG 2.4.8G (1) and (2). (In contrast, in the case of an ordinary or special resolution, membership at BSOG 2.4.8G (1) may be satisfied by either borrowing or shareholding membership provided the shareholding member satisfies the other conditions of BSOG 2.4.8G (2) to (4) in order to vote in his or her capacity as a shareholder.) Note also that a person cannot meet a requirement for holding shares on a given date, or during a given period, by relying on his holding of a share account with an overdrawn balance; and a person cannot meet a requirement for being a member on a given date (for example, at BSOG 2.4.8G (1) ) by relying on his holding of such a share account.

01/04/2013

BSOG 2.4.9

The mandatory provisions of Schedule 2 to the 1986 Act concerning entitlement to vote on a borrowing members resolution are, as noted above, that the member must have been, and be, indebted to the society for at least 100 (whether on one or more accounts) at the end of the last financial year before the voting date, and on the voting date, in respect of an advance fully secured (or, if the Rules permit, substantially secured) on land (paragraphs 5(2), 23(1), 29(2) and 36 of Schedule 2) and have attained the age of 18 years by the date of the meeting (paragraphs 5(3) and 34(2) of Schedule 2). But note that there is no dispensation in the 1986 Act for the Rules to reduce the qualifying amount below 100, nor to provide for a continuity of membership qualification.

01/04/2013

BSOG 2.4.10

Schedule 2 makes provision in respect of joint shareholders (paragraph 7) and joint borrowers (paragraph 8). The only person entitled to exercise the right to vote on behalf of the joint shareholders or joint borrowers is the one who is named first in the records of the society, described respectively as the representative joint (share)holder or the representative joint borrower.

01/04/2013

BSOG 2.4.11

A member may vote once only on any resolution, irrespective of the number of accounts he or she may hold. The amount of the balance(s) held on an account(s) is not material, except to qualify to vote (see BSOG 2.4.7 G and 2.4.8 G). Thus, a member with several share accounts and/or several mortgage accounts, whether as sole and/or representative joint shareholder or representative joint borrower, may vote once only on any resolution. When the membership votes as a whole on an ordinary or a special resolution, each member may vote only once, whether he or she is a shareholding or a borrowing member or both. Where shareholding members and borrowing members vote separately, as on the Merger Resolutions, members entitled to vote may vote only once, if a shareholding member, on the shareholding members resolution and once, if a borrowing member, on the borrowing members resolution. A person entitled to vote both as a shareholding member and as a borrowing member may, of course, vote once on each resolution.

01/04/2013

BSOG 2.4.12

The voting date is defined by paragraph 23(6) of Schedule 2 as, for this purpose, either:

(1) for members who appoint a proxy, the last date specified by the society for the receipt of proxy voting forms, which may not be more than 7 days before the date of the meeting (paragraph 24(6) of Schedule 2). A proxy vote remains valid if the member ceases to be a member after the proxy voting date but before the date of the meeting (paragraph 24(2) of Schedule 2); or

(2) for all other members, the date of the meeting.

01/04/2013

BSOG 2.4.13

The guidance given in the foregoing paragraphs of this section is intended to give a general description of the provisions of the 1986 Act and of the Rules suggested by the BSA Model Rules. Societies should satisfy themselves that they observe the specific provisions of the 1986 Act and of their own Rules.

01/04/2013

Register of Members

BSOG 2.4.14

Every society is required to maintain a register of the names and addresses of its members and whether each member is a shareholding member or a borrowing member or both (paragraph 13 of Schedule 2 to the 1986 Act). The register should, so far as possible, be de-duplicated; that is, multiple account holders should be identified and their names recorded once only in the register. A society's systems must also be capable of recognising those members who are eligible to vote by, for example, aggregating share account balances of multiple account holders to check that they have the requisite qualifying shareholding, by checking members continuity of shareholding (if and where applicable), and by identifying minors including (separately) those who will shortly attain their majority (see BSOG 2.4.6 G and BSOG 2.4.9 G). Other situations requiring careful consideration are, for example, in relation to powers of attorney, personal representatives, and death of the representative joint holder or borrower. This information is required to ensure that the notice of the meeting is sent to all the members entitled to receive it and so that the scrutineers have adequate systems to validate the votes cast on the Merger Resolutions (see also BSOG 2.4.20 G).

01/04/2013

BSOG 2.4.15

It will be necessary for the directors of a society contemplating a merger to satisfy themselves, in consultation with their external auditors, that the society's systems are capable of delivering the information described above. The Prudential Regulatorwill require an assurance on this point when the society applies for approval of the Schedule 16 Statement (see BSOG 2.3.29G (5)). One of the criteria which the Prudential Regulatorhas to consider at the confirmation stage is whether some relevant requirement of the 1986 Act or the Rules was not fulfilled (see BSOG 2.5.15 G to BSOG 2.5.19 G).

01/04/2013

BSOG 2.4.16

The problem of avoiding duplication in the register of members is significant for most societies of any size. It has been aggravated by the proliferation of types of account over the last decade or so. Societies generally now seek to establish, when new accounts are opened, whether or not the applicant is an existing member and, if so, which accounts are relevant to voting and other membership rights. The task of identifying multiple account holders is complicated by confidentiality requirements. For example, if two accounts are held by a Mr A Smith and a Dr A Smith, both at the same address, the society cannot know (in the absence of other information such as date of birth) whether the two accounts belong to the same person, one opened before and one after he qualified, or by the doctor and his son. A letter of enquiry to one asking about both accounts would risk breaching customer confidentiality. If it is the same person, there is a risk that he will be given the opportunity to vote twice or, if neither account holds more than 100 but they aggregate above that qualifying amount, be denied a vote to which he is entitled.

01/04/2013

BSOG 2.4.17

Where a society identifies a number of accounts which appear to be held by a single member, but it cannot be sure, then it must send separate meeting notices in respect of each account. However, its systems should identify the possible multiple holding so that, if more than one vote is received in respect of that group of accounts, the scrutineers are alerted to the possibility, and can check the proxy forms for evidence of invalid duplicate votes. The voters declaration suggested by the BSA, in conformity with paragraph 34 of Schedule 2 to the 1986 Act, provides some protection against votes being cast by minors, and attempts the same for duplicate votes (see Enclosure 2 to BSA Circular 5177). It is, however, the duty of each society to make sure that its register of members is reliable.

01/04/2013

General Meeting Arrangements

BSOG 2.4.18

BSOG 2.4.19 G to BSOG 2.4.34 G consider the requirements for sending notices of meetings and Schedule 16 Statements to members, and the conduct of meetings at which Merger Resolutions are to be moved. It is for societies to satisfy themselves that they comply with the relevant requirements of the 1986 Act, their Rules and the general law on meetings.

01/04/2013

Notice of Meeting

BSOG 2.4.19

The statutory requirements concerning notices are in paragraph 22 of Schedule 2 to the 1986 Act. Notice of the meeting must be given to each shareholding and borrowing member of the society who would be eligible to vote at the meeting if the meeting were held on the date of the notice (a single date for all notices irrespective of when they are despatched). In addition, notice must also be given to any person who will attain the age of 18 years after the date of the notice but on or before the date of the meeting, and to every person who becomes a shareholding or borrowing member of the society after the date of the notice but before the final date for receipt of proxy voting forms, and who would, in either case, be eligible to vote at the meeting if he remained a member until then. (In practice, this may mean sending out a notice to every such person, even if they will, in fact, not be entitled to vote). The Schedule 16 Statement must be sent in or with the notices (paragraph 1(2) of Schedule 16 to the 1986 Act). Accidental omission to give notice of a meeting to any person entitled to receive it does not invalidate the proceedings at the meeting. However, accidental omission does not include a systemic failure to send notices (e.g. omitting to send notices to new members, or omission of a group or class of members from the mailing list arising from a fault in a computer programme), nor all cases of error by management see also BSOG 2.4.39 G.

01/04/2013

BSOG 2.4.20

The 1986 Act also provides, in paragraph 21 of Schedule 2, for the length of notice to be given to members. The period of notice given must be not less than 21 days or such longer period as the society's Rules prescribe. The precise procedures for sending notices, the way in which the days are to be counted, and presumed receipt of notices duly sent, will normally be set out in the Rules. Particular points to note are:

(1) the 21 days notice expires with the closing date for the receipt of proxy voting forms, not the date of the meeting;

(2) if reliance is to be placed on a provision in the Rules that notices can be deemed to be served 24 hours after posting, then first class post or equivalent means of delivery should be used, but it is advisable to allow a margin of at least an extra day or two, or more if second class post is used;

(3) if a society contracts with a commercial mailing firm, it must ensure that the firm is comprehensively instructed about the society's despatch and delivery requirements, and the society should carry out spot checks to satisfy itself that its instructions are being properly carried out. A failure by the contractor may invalidate the meeting, even if the society itself has used its best endeavours to police the operation.

01/04/2013

BSOG 2.4.21

The Schedule 16 Statement is required, by paragraph 1(2) of that Schedule, to be sent in or with the notice of the meeting to every member entitled to that notice. As is suggested in BSOG 2.3.4 G, it may be expedient to include both in a comprehensive Merger Document.

01/04/2013

BSOG 2.4.22

Notices and Statements need not be sent to any member in whose case the society has reason to believe that communications sent to him at his registered address are unlikely to be received by him (paragraph 14 of Schedule 2 to the 1986 Act). However, a society is required instead to place notices of the meeting prominently in every branch office, or to place advertisements in newspapers circulating in the areas in which the society's members live. Such notices or advertisements must be placed at least 21 days before the date of the meeting, and must state where members can obtain copies of the Schedule 16 Statement, the Merger Resolutions and proxy voting forms (Schedule 2, paragraph 35(4)).

01/04/2013

BSOG 2.4.23

It should be noted, however, that a members registered address may not be the address shown in the society's register of members but a different address to which the member has requested that communications from the society be sent (Schedule 2, paragraph 13(4)).

01/04/2013

Conduct of the Meeting

BSOG 2.4.24

The meeting should be held at a time and place considered by the board to be most convenient for the generality of the society's members. This may well not be the same as the traditional time and place for the annual general meeting. In deciding on this, the board should take account of the geographical location of their members. For example, for a society with a majority of its members living in a compact geographical region there must be a strong presumption in favour of an evening meeting. Consideration should be given to the possibility of a larger attendance than usual at a meeting to consider a merger.

01/04/2013

BSOG 2.4.25

Subject to the society's Rules, its chairman will normally chair the meeting. His function as chairman of the meeting is to ensure that all views are presented and properly discussed. He is unlikely to be able to fulfil that role if he acts also as chief advocate of a merger which is controversial among members. In such cases it might be appropriate to give to another director the initial task of explaining the merger and of responding to questions from members.

01/04/2013

BSOG 2.4.26

Merger Resolutions or the other resolutions mentioned in BSOG 2.4.1 G to BSOG 2.4.3 G, cannot be amended at the meeting except in a way which does not change their substance at all. This is because an amendment to such a resolution has to be subject to the same procedure and period of notice to members as the resolution itself. If a board decides, after due notice of such a resolution has been sent to the members, that the resolution should be amended, then it will be necessary to submit the amended resolution, with due notice, to a general meeting at a later date, unless of course there is still time to fulfil the notice requirements.

01/04/2013

Conduct of the Voting

BSOG 2.4.27

The conduct of the voting must not only be fair but also be seen to be fair, otherwise the result may be called into question. So it is highly desirable that the votes are counted by independent scrutineers. The board may ask the scrutineers, in advance of the meeting, for a running tally of the number of votes being cast if it thinks it might properly encourage more members to vote if the response is low. However, to ask the scrutineers how the votes are being cast, before the time comes at the meeting to instruct proxies, carries the risk of accusations, however unfounded they may be, and possible challenge at the confirmation stage, that the board suppressed proxy votes against the resolutions, or unduly influenced members to vote in favour. A board which asks the scrutineers for a running tally of votes, and which circulates its members with further exhortations to vote, must be prepared to argue its case in the face of such accusations at the confirmation hearing. Any circular to members sent after the Merger Document must, therefore, be very carefully considered.

01/04/2013

BSOG 2.4.28

Experience has demonstrated the need for societies to take the greatest care to ensure that they comply strictly with the statutory procedural requirements and their own Rules on meetings and resolutions. The chairman of the meeting should ensure that he or she is well briefed and aware of the Rules and the general law relating to procedural resolutions, such as resolutions to adjourn the meeting. The Prudential Regulatorwill require a confirmatory report from the scrutineers on the validity of the voting procedures when the society applies for confirmation (see BSOG 2.4.38 G).

01/04/2013

BSOG 2.4.29

The procedures for the conduct of proxy voting will normally be provided for in the society's Rules, in conformity with paragraphs 24 and 34 of Schedule 2 to the 1986 Act which requires that every proxy form sent by a society to its members must enable the member to direct the proxy how to vote (Schedule 2 paragraph 24(4A)). To minimise the risk of the society's proxy voting procedures being misunderstood, the Prudential Regulator recommends that the proxy form should include:

(1) adequate space to insert the name of a proxy other than the chairman of the meeting, and a statement (which must also appear in the notice of the meeting) that the proxy appointed need not be a member of the society (a reminder that the voting members own name should not be inserted might avoid a common problem);

(2) provision to instruct the proxy to vote either in favour of the resolution, or against it;

(3) an explicit statement that if the member does not instruct the proxy to vote for or against the resolution, then the proxy will cast the vote, or abstain, as he or she thinks fit;

(4) the declaration in accordance with paragraph 34 of Schedule 2;

(5) full recital of the text of the shareholding members resolution or borrowing members resolution or, if this is not practicable (e.g. because of space restrictions), a clear indication that the full text may be found in the notice of the meeting;

(6) instructions as to the return of the completed proxy forms, including the last date for receipt by the society or by the scrutineers. A pre-addressed and pre-paid envelope or other sealed means of return should be provided.

01/04/2013

BSOG 2.4.30

The 1986 Act does not require societies to send proxy voting forms to members with notices of meetings (except where directors are to be elected). However, the Prudential Regulator believes that, on a matter as important as a merger, societies would be well advised to send a proxy voting form to members with the notice of meeting. This will avoid any suggestion that members were discouraged from voting, that obstacles were put in their way, or that the society wished (for whatever reason) to be able to identify those who had requested proxy voting forms. If a society decides, nevertheless, not to send proxy forms to members entitled to vote, then it should make clear to the members that proxy voting forms can be obtained on demand from its branches and/or by application to a central point.

01/04/2013

BSOG 2.4.31

The arrangements for the collection of the proxy forms should be such as to secure confidentiality and to avoid the risk of loss, whether accidental or deliberate. The procedures may provide for return of proxy forms to the scrutineers either directly (if permitted by the society's Rules) or to the society's offices. Where proxy forms are returned to the society's offices, the Prudential Regulator recommends that the procedures should incorporate the following features:

(1) the proxy form should be enveloped or otherwise sealed so that the members voting instructions are concealed;

(2) the envelope provided should be clearly marked so that the society can readily identify and separate it from other mail without the envelope being opened;

(3) staff responsible for receiving and sorting mail should be given specific instructions about the handling of proxy forms and the overriding importance of security;

(4) secure storage of proxy forms should be provided up to the point at which they are handed over to the scrutineers;

(5) equivalent handling and security procedures should be applied to proxy forms handed in at branches.

01/04/2013

BSOG 2.4.32

The Prudential Regulator suggests that proxy voting forms for shareholders and borrowers should be easily distinguishable, perhaps by colour coding, both as an aid to members who may be entitled to vote in each capacity, and as an aid to the scrutineers counting the votes.

01/04/2013

BSOG 2.4.33

Members may, after submitting a proxy vote, choose to attend the meeting and vote in person. There must, therefore, be satisfactory systems in place at the meeting to identify and cancel any proxy votes they may have returned.

01/04/2013

Ballots

BSOG 2.4.34

Paragraph 33 and 33A of Schedule 2 to the 1986 Act specifically exclude shareholding members resolutions and borrowing members resolutions from its permission for the Rules to provide for voting by postal or electronic ballot. This is reinforced in the definition of these resolutions in paragraphs 27A and 29 of Schedule 2. Although other resolutions associated with the merger process might be capable of being approved by ballot, in practice voting on all resolutions related to the merger will be by members voting in person or by proxy at a general meeting.

01/04/2013

Scrutineers Report

BSOG 2.4.35

The scrutineers are responsible for checking the validity of votes cast in person and by proxy. Given the need to ensure that the vote represents the views of the members, the scrutineers should be independent of the society and should not have a direct interest in the result of the voting. It will usually be appropriate to appoint the society's auditors, and it is desirable that they should be appointed not just for the arithmetical count of votes but also to supervise the voting process as a whole so that they are in a position to confirm, after the vote, that all the requirements of the 1986 Act and the society's Rules have been complied with. This would include:

(1) determining and validating member mailing lists for notices of meetings and Schedule 16 Statements;

(2) despatch procedures;

(3) timing of notices and despatch of documents;

(4) form and content of proxy voting forms;

(5) receipt and custody of completed proxy voting forms;

(6) validation of completed proxy voting forms to establish that members are qualified to vote and that forms are properly completed;

(7) identification and validation of members attending and voting at the general meeting;

(8) voting procedures at the meeting including casting of proxy votes, count of votes cast in person and aggregation of proxy and personal votes.

01/04/2013

BSOG 2.4.36

To fulfil the duties outlined above, it is suggested that the scrutineers would need to:

(1) examine the systems and procedures to be employed by the society, before they are implemented, to ensure that they are satisfactory;

(2) carry out such checks and tests as they consider necessary during the operation of the procedures as will enable them to be satisfied that the specified procedures are being carried out in practice;

(3) provide that where validation functions are carried out by the society's staff this is done under the direction and supervision of the scrutineers;

(4) direct and supervise the count of the votes cast both by proxy and personally at the meeting.

01/04/2013

BSOG 2.4.37

Validation checks during the counting of votes may be expected to include the following:

(1) only proxy forms which comply with the 1986 Act and the society's Rules have been used;

(2) the member is eligible to vote under the 1986 Act and under the society's Rules (a proxy vote may still be valid even though the member ceases to be a member after the closing date for receipt of proxies see BSOG 2.4.12G (2));

(3) only one proxy form per member eligible to vote is included in the count (separate forms may be sent to and returned by a person eligible to vote on both a shareholding members resolution and a borrowing members resolution);

(4) minors are excluded or that there is an explicit confirmation by each member voting by proxy that he is aged 18 or over;

(5) the proxy form is completed and signed and is otherwise valid (where a proxy voting form lacks a signature but is otherwise valid, it is usual, if time permits, for the scrutineers to return the form to the member for signature and return in a pre-paid envelope).

01/04/2013

BSOG 2.4.38

The scrutineers initial report will be made to the society at the meeting (which may be adjourned for this purpose). The Prudential Regulator will require, in support of a society's application for confirmation under Sections 93(2)(d), 94(7)(a) and 95(3), a report from the scrutineers on the result of the vote (distinguishing between votes cast in person and by proxy), the total number of members eligible to vote (and the proportion of that number that the votes cast represent), and also confirmation that, in the opinion of the scrutineers the arrangements for the conduct of voting were such as to ensure that:

(1) notices of the meeting and Schedule 16 Statements were sent to all those entitled to receive them, in accordance with the 1986 Act and the Rules of the society having regard, among other things, to the matters referred to in this chapter;

(2) the periods of notice given complied with the requirements of the 1986 Act and of the society's Rules, taking into consideration established conventions for the counting of days;

(3) there were satisfactory procedures to ensure confidentiality of proxy voting forms and to minimise the risk of loss or unauthorised access;

(4) there were satisfactory procedures to ensure that the count of votes cast personally at the meeting included only votes cast by members eligible to vote and who had not mandated, or had withdrawn, a proxy vote.

01/04/2013

BSOG 2.4.39

In relation to the notice of the meeting, the scrutineers report may properly have regard to the provision of paragraph 22(3) of Schedule 2 to the 1986 Act that accidental omission to give notice of a meeting to, or non-receipt of notice of a meeting by, any person entitled to receive notice of the meeting shall not invalidate the proceedings at that meeting. It should be noted, however, that there is authority to the effect that accidental and non-receipt would not cover all cases of error on the part of the society, for example an erroneous decision of management not to send notices to particular persons or groups of persons.

01/04/2013

BSOG 2.4.40

The Prudential Regulatorwould find it helpful if the scrutineers report would also comment upon any procedural difficulties encountered and give an analysis of the reasons why votes were found to be invalid, if the numbers of invalid votes appear to be significant (see also BSOG 2.5.14 G).

01/04/2013

The Prudential Regulator's Discretion

BSOG 2.4.41

The Prudential Regulator has power under Section 94(5)(b) of the 1986 Act to exempt the transferee society in a transfer of engagements from the duty to call a meeting and put a Schedule 16 Statement and Merger Resolutions to its members, but to proceed instead by board resolution (see paragraph 1(1) of Schedule 16 to the 1986 Act). Before it exercises this discretion the Prudential Regulator will wish to review the prudential information described in section 2.2 and, in particular, will wish to be satisfied that the merger will not affect the interests of the members of the transferee society to any significant extent. In assessing this last point, the Prudential Regulator will consider, in particular, the reduction, if any, in the capital ratios of the merged society immediately following the merger and any plans to eliminate, or mitigate, this reduction; and any plans to remove products and services, close branches or change interest rates as a result of the merger. The Prudential Regulator will also wish to know whether the merger will mean a change of policy by the society, for example by a significant move into a new geographical area or into a new business activity. Unless it is persuaded otherwise in the circumstances of any particular case, the Prudential Regulator will not normally grant this exemption unless the total assets of the transferee society are substantially larger than the total assets of the transferor society, and a total asset ratio of 5:1 will be used by the Prudential Regulator as a broad first measure of relative significance. The general presumption will be that a society, being a mutual institution, should consult its members over an issue as important as a merger unless there are compelling arguments to the contrary.

01/04/2013

BSOG 2.4.42

However, if the transferor society proposes to pay bonuses in excess of the prescribed limit (see paragraph BSOG 2.4.4 G) then, notwithstanding that the Prudential Regulator has granted an exemption, the transferee society must seek the approval of its members of a resolution on the terms of the merger (Section 96(4)(b) of the 1986 Act). Similarly, if the transferee society has to change its Rules to avoid disenfranchising members of the transferor society (see paragraph BSOG 2.3.16 G) it must do so by special resolution. It would be wrong to invite the members to approve a Rule change which was a consequence of a merger without inviting them to approve the merger itself.

01/04/2013

BSOG 2.5

Confirmation

01/01/2007

BSOG 2.5.1

No merger can take effect until it has been confirmed by the Prudential Regulator. This section describes the form of application and public notice required and explains the Prudential Regulator's view of how the statutory Confirmation Criteria should be interpreted. Finally, it gives guidance on the procedure customarily followed by the Prudential Regulator when considering confirmation applications and hearing representations. Section 93(2)(d) of the 1986 Act, on amalgamations, and Section 94(7)(a), on transfers of engagements, together with paragraph 7 of Schedule 16, provide that when the necessary Merger Resolutions have been passed the societies concerned must apply to the Prudential Regulator for confirmation of the merger in such manner as the Prudential Regulator may direct. The societies are also required, by paragraph 8 of Schedule 16, to publish notices of their applications in one or more of the London, Edinburgh and Belfast Gazettes as the Prudential Regulator directs, and if it so directs, in one or more newspapers. The choice of official Gazettes and national or local newspapers will, of course, have regard to the area in which the societies members live.

01/04/2013

BSOG 2.5.2

The parties in an amalgamation should make a joint application for confirmation to the Prudential Regulator, while the parties to a transfer of engagements should make separate applications for confirmation of the transfer. These applications should specify the date on which the merger is intended to take effect and should be accompanied by two authenticated copies of the Instrument of Transfer, or the amalgamation agreement, and of the Merger Document or separate Schedule 16 Statement. In addition, in the case of an amalgamation, three signed copies of the Memorandum and Rules of the successor to the amalgamating societies should be sent to the Prudential Regulator and the FCA. The scrutineers report described in BSOG 2.4.38 G to BSOG 2.4.40 G, and a certified copy of the minutes of the general meeting at which the Merger Resolutions were moved, must be enclosed with each application.

01/04/2013

BSOG 2.5.3

A pro forma public notice of application, and pro forma letters of application are set out in Annex 2.

01/04/2013

The Confirmation Criteria: Statutory Provisions

BSOG 2.5.4

Section 95(3) and (4) of the 1986 Act provides that the Authority must confirm an amalgamation or transfer of engagements unless it considers that any one or more of the following Three Criteria apply:

(1) some information material to the members decision about the merger was not made available to all the members eligible to vote; or

(2) the vote on any resolution approving the merger does not represent the views of the members eligible to vote; or

(3) some relevant requirement of the 1986 Act or of the Rules of any of the societies was not fulfilled.

Section 95(5) then provides that the Prudential Regulatorshall not be precluded from confirming a merger by virtue only of the non-fulfilment of some relevant requirement of the 1986 Act or the Rules (the Third Criterion in BSOG 2.5.4G (3) ) if it appears to the Prudential Regulatorthat the failure could not have been material to the members decision about the merger, and the Prudential Regulatorgives a direction under that sub-section that the failure is to be disregarded.

01/04/2013

BSOG 2.5.5

Where the Prudential Regulator would be precluded from confirming a merger by reason of any of the defects specified in the Three Criteria, Section 95(6) provides that it may direct a society to remedy the defects. A direction under that sub-section may require a society to call a further meeting; for example, to vote again in the light of a revised Schedule 16 Statement containing material information previously omitted, or after correction of defects in the systems for sending notices of meeting and Statements and validation of votes. If the Prudential Regulator is then satisfied, having considered evidence furnished by the society, that the defects have been substantially remedied, it must confirm the merger. If not, then confirmation must be refused.

01/04/2013

Scope of the Prudential Regulator's powers

BSOG 2.5.6

The Prudential Regulator'spowers in connection with applications for confirmation of a merger are confined to considerations of whether, in the light of the facts, any of the Three Criteria apply. It is not for the Prudential Regulatorto consider, or make judgements about, the merits of a proposed merger or the fairness of its terms; these matters are first for the board of a society, and then for its members to decide. Once the members have approved the merger and its terms, the Prudential Regulatorhas no powers to require a society to make any changes to those terms. The Prudential Regulator'sdiscretionary powers are similarly confined to the matters described in BSOG 2.5.4 G and BSOG 2.5.5 G.

01/04/2013

BSOG 2.5.7

The Prudential Regulatorhas no general power to determine disputes between a society and its members. Disputes concerning the services provided by societies in the ordinary course of their business are generally a matter, in the first instance, for a society's internal complaints procedure. They may also fall within the jurisdiction of the Financial Services Ombudsman. Disputes between a building society and a member of the society, in his capacity as a member, in respect of any rights or obligations arising from the Rules of the society or the provisions of the 1986 Act, fall within the jurisdiction of the High Court or, in Scotland, the Court of Session (Section 85 of and Schedule 14 to the 1986 Act).

01/04/2013

BSOG 2.5.7A

However, the FCA does have power, on the written application of an eligible member, to direct that the member has the right to obtain names and addresses from the society's register of members. Before it gives such a direction, the FCA is required to be satisfied that the member requires that right for the purpose of communicating with members of the society on a subject relating to its affairs, and must have regard to the interests of the members as a whole and to all the other circumstances (Schedule 2, paragraph 15). A fee is payable by the applicant. Chapter 1A on applications for access to the register of members explains who is eligible to apply.

01/04/2013

Purpose of Confirmation

BSOG 2.5.8

The purpose of the confirmation process is to enable:

(1) interested parties to make representations with regard to the Three Criteria;

(2) the society to respond to those representations;

(3) the Prudential Regulator to make such enquiry as it considers necessary to reach informed conclusions on the Three Criteria.

01/04/2013

BSOG 2.5.9

The Prudential Regulator, in reaching its view on each of the Three Criteria, has to assess not only the points made to it in representations, and the society's responses, but also to make such further enquiries as it considers necessary. In deciding how far it should pursue such enquiries, the Prudential Regulator has to have regard to the role and effect of confirmation, and to the mischief which it is intended to prevent. The Prudential Regulator considers that one role of confirmation is to provide a protection to members against the provision to them by the society of information which is inadequate, obscure or misleading, and against voting irregularities: in other words to ensure that the vote represents the informed decision of the members. The Prudential Regulator would hope that this safeguard would work in the majority of cases by raising relevant issues early by causing the board of a society to take care not to put confirmation at risk on this account rather than by the Prudential Regulator finding that it needed to withhold confirmation at the last stage. In considering the First Criterion, the Prudential Regulator will have regard to the totality of the information provided to the members by the board of a society and not exclusively to the Schedule 16 Statement.

01/04/2013

BSOG 2.5.10

The task of the Prudential Regulator is accordingly:

(1) to reach a considered view on each of the Three Criteria;

(2) if that view is that none applies, to confirm;

(3) if either of the First Two Criteria apply to direct the appropriate remedial action, or to refuse confirmation;

(4) if the Third Criterion applies, to consider whether it is appropriate to direct that any failure be disregarded: if not, to direct the appropriate remedial action or to refuse confirmation.

In considering the Three Criteria, the Prudential Regulator may well have to look again at the Schedule 16 Statement, or at issues which were considered in connection with approving that Statement. In doing so, it has a duty to consider information and arguments put to it by representers and by the society, which of their nature were not available earlier, as well as those arising from its own further consideration of the criteria. The Prudential Regulator would clearly only change the view reached at the time of approval of the Schedule 16 Statement if there were good reasons to do so. But it is under a duty to examine the Statement and connected issues at the time of confirmation in the light of any new information and arguments which become available. Accordingly, the Prudential Regulator cannot be bound at the confirmation stage to the view that was taken at the earlier stage as to whether further factual information should be included in the Schedule 16 Statement or as to the accuracy of its contents.

01/04/2013

BSOG 2.5.11

The task of considering each of the Three Criteria is still necessary even if there are no representations. Without such enquiry and consideration the confirmation process would not properly be carried out. The Prudential Regulator's view of how the Three Criteria should be interpreted and applied is given in the following paragraphs.

01/04/2013

The First Criterion

BSOG 2.5.12

This criterion requires the Prudential Regulator to consider whether some material information was not made available to the members. The Prudential Regulator's own view, in which it concurs with the view developed by the Commission in its confirmation decisions, can be summed up as follows:

(1) the words made available to all the members eligible to vote mean that the criterion is mainly, if not exclusively, directed to the information provided by a society to the generality of its members;

(2) the extent of information not made available can reasonably be assessed by considering how far the totality of information made available falls short of what might be expected to be put to its members by a financial institution of standing and repute seeking to put sufficient information and a fair and balanced assessment of it, and the board's conclusions, to the members to enable them to take an informed decision;

(3) the words material to the members decision require the Prudential Regulator then to focus on whether it is within the bounds of reasonable possibility that the members decision would have been different, had any deficiency in information been made good, i.e. whether it could have changed the decisions on voting of sufficient members to lead to a different conclusion. If it is within the bounds of reasonable possibility that the deficiency might have changed the outcome, it is not for the Prudential Regulator to determine whether it would actually have done so it should put the decision back to the members. This test requires the Prudential Regulator to take account both of the size of the vote and of the size of the majority within it;

(4) the relevance of a particular piece of information to an investor and to a borrower may well be different. Accordingly, it is necessary to consider materiality separately in relation to the shareholding members resolution and the borrowing members resolution.

01/04/2013

BSOG 2.5.13

The Prudential Regulator's approach to determining whether this criterion is met will accordingly be:

(1) to review the material put to members, in the light of the members representations made and the society's responses, but also taking points of its own accord;

(2) to consider, on the basis of that review, what information relevant to the decision of shareholders, or of borrowers, or both, might reasonably have been expected to be put to members by the board of a society of repute considering its fiduciary duty, and the extent to which (if at all) the information actually put falls short of that;

(3) to consider separately in relation to the shareholding members resolution and in relation to the borrowing members resolution, whether any deficiency so identified was sufficient to amount to information material to the members decision.

01/04/2013

The Second Criterion

BSOG 2.5.14

This criterion requires the Prudential Regulator to consider whether the votes on the Merger Resolutions do not represent the views of the members. The main mischief to which it appears to be directed is a merger approved by a small and unrepresentative vote. However, a very low turnout, of itself, does not necessarily mean that the criterion applies. It has to be considered in the context of the other criteria, and of any other factors which may have affected the turnout: for example, whether all the members entitled to vote were fully and clearly informed of the terms of the merger proposal and its consequences; whether the members were afforded adequate facilities and opportunity to cast their votes; and the scrutineers report on the conduct and counting of votes, including the number of, and reasons for, invalid proxy votes.

01/04/2013

The Third Criterion

BSOG 2.5.15

This criterion requires the Prudential Regulator to consider whether the relevant requirements of the 1986 Act and the Rules have been fulfilled. The phrase some relevant requirement of this Act or the rules of the society appears explicitly three times in Section 95 of the 1986 Act:

(1) sub-section (4)(c) in the specification of this criterion;

(2) sub-section (5) which gives the Prudential Regulator power to disregard certain non-fulfilments;

(3) sub-section (10) which provides that a failure to meet such a relevant requirement shall not invalidate a transfer of engagements, although such failure by a society without a reasonable excuse is a criminal offence.

The interpretation of the phrase is also directly relevant to sub-section (6) the power of the Prudential Regulator to give the society a direction to remedy defects specified in paragraphs (a) to (c) of sub-section (4).

01/04/2013

BSOG 2.5.16

Sub-section (11) defines relevant requirement:
In this section relevant requirement, with reference to this Act or the rules of a society, means a requirement of section 93 or 94 or this section or of Schedule 16 to this Act or of any rules prescribing the procedure to be followed by the society in approving or effecting an amalgamation or transfer of engagements.
The Prudential Regulator considers that this sub-section should be read naturally. The words prescribing the procedure to be followed by the society in approving or effecting a merger apply only to the Rules, in order to specify which of the Rules of the society are relevant requirements. They do not apply as a matter of normal construction of the sentence to the applicable provisions of this Act: nor is it necessary that they should do so, since those provisions are specified in the sub-section.

01/04/2013

BSOG 2.5.17

The Prudential Regulator recognises that the interpretation of relevant requirement of the Act, which it considers stems from the natural construction of Section 95(11) of the 1986 Act and which is necessary to give effect to Parliaments intentions for Section 95(6) and (10), does not quite fit Section 95(5). The test which the Prudential Regulator has to apply in the case of sub-section (5) to a non-fulfilment of a relevant requirement of the 1986 Act is:
if it appears to the Prudential Regulator that it could not have been material to the members decision about the amalgamation or transfer.
That test clearly is designed to relate to a failure to meet a procedural requirement or to some other failure which might have an effect on the voting.

01/04/2013

BSOG 2.5.18

The wording of Section 95 of the 1986 Act is such that no construction of the phrase is entirely free from difficulty. The Prudential Regulator view is that the wording, and the intentions of Parliament, are best met by following the natural construction of sub-section (11), as a result applying a wide interpretation in sub-sections (4), (6) and (10), but only considering that it is open to the Prudential Regulator to make a direction under sub-section (5) in relation to non-fulfilment of a procedural requirement or other failure to which the test in that sub-section is apposite.

01/04/2013

BSOG 2.5.19

The Prudential Regulator considers that the relevant requirements of the Rules are those which prescribe the procedure to be followed that is, in particular, the Rules concerning membership, special meetings, notice of meetings, procedure at meetings, entitlement of members to vote on resolutions, appointment of proxies and joint shareholders and borrowers.

01/04/2013

Procedure

BSOG 2.5.20

The procedure to be followed in the confirmation process is prescribed by Part III, paragraphs 7 to 9, of Schedule 16 to the 1986 Act. Any interested party has the right to make written representations, and/or to give notice of intention to make oral representations to the Prudential Regulator with respect to a society's application for confirmation. Written representations are to be copied to the participating societies, which are to be afforded the opportunity to comment on them in writing or orally at the hearing of their applications. (The Prudential Regulator will in general be prepared to use electronic rather than paper-based communication if requested by the society or a prospective representer and some of the following procedures may have to be adapted accordingly.)

01/04/2013

Representations

BSOG 2.5.21

Persons making representations should state why they claim to be interested parties, for example their category of membership of the society, and the ground or grounds for their representations by reference to the Three Criteria discussed above. Written representations, or notice of a persons intention to make oral representations, or both, must be in writing. They must reach the Prudential Regulator at the address, and by the date, given in the Merger Document issued to members and subsequently published by notice in the official Gazettes and newspapers as required by the 1986 Act. Persons who make written representations and who subsequently decide also to make oral representations must, nevertheless, give notice of that intention in writing to the Prudential Regulator by the same date. Representations received out of time will not be considered unless, exceptionally and at the sole discretion of the Prudential Regulator, they appear to the Prudential Regulator to raise matters of substance relevant to the Three Criteria which are not already under consideration.

01/04/2013

BSOG 2.5.22

Representations or notices to the Prudential Regulator will fall into one of the following three categories:

(1) written representations only

(2) written representations with notice of intention to make oral representations

(3) notice of intention to make oral representations only.

01/04/2013

BSOG 2.5.23

The Prudential Regulator will acknowledge the receipt of each representation or notice and will send a copy of annex 4 of this chapter, on merger confirmation procedures, to each representer. It will send copies of all written representations to the societies concerned and will afford them an opportunity to comment on them.

01/04/2013

BSOG 2.5.24

Copies of the society's comments on representations in thecategory set out in BSOG 2.5.22G (2) will be sent to those who made the representations so that they may concentrate their oral representations on the points which they consider to remain at issue. Persons making written representations who wish to see the society's response must, therefore, give notice of intention to make oral representations. The Prudential Regulatorwill consider the written representations in the category set out in BSOG 2.5.22G (1) and the societies responses to them in advance of the date set for hearing oral representations. The society may, exceptionally, apply to put to the Prudential Regulatorin confidence documents which the society considers to be commercially sensitive: the Prudential Regulatorwill decide on the merits of each case whether, and on what terms, to accept them as being confidential. Persons in the category set out in BSOG 2.5.22G (3) will be asked to inform the Prudential Regulator, in advance of the hearing, of the subject and general grounds of the representations they intend to make and their responses will be copied to the society.

01/04/2013

BSOG 2.5.25

Interested parties may join together in making collective representations and they may also appoint a person, either one of their number or another, to represent them at the hearing. They should notify the Prudential Regulator in advance if this is what they intend to do.

01/04/2013

Conduct of the hearing

BSOG 2.5.26

The Prudential Regulator may appoint one or more persons to hear and decide applications on its behalf. In the absence of notices of intention to make oral representations the Prudential Regulator would expect to decide the applications having regard to the written representations, the societies responses and other information available to it, without the need for an oral hearing.

01/04/2013

BSOG 2.5.27

The Prudential Regulator will notify the societies and those making oral representations of the time and place of the hearing. If there are a significant number of persons wishing to make oral representations, then the hearing may extend beyond one day and may be adjourned from time to time and from place to place. The Prudential Regulator will try to advise participants of the day when they may expect to make their representations and when the societies representatives may be expected to respond.

01/04/2013

BSOG 2.5.28

The Prudential Regulator expects that hearings will be in public. Members of the general public and the press will be asked to wait outside at the outset of the hearing. The participants will then be asked if any of them has good reason to object to the admission of the general public and the press (such as, for example, the need to refer to personal financial affairs). The Prudential Regulator may decide that parts of the hearing shall be in private if that appears to it to be desirable. If there are no reasonable objections, the general public and the press will then be admitted, within the limits of the space available.

01/04/2013

BSOG 2.5.29

The procedure will be informal. While all participants will be invited to speak concisely and to avoid repetition the Prudential Regulator will be considerate towards those who are not professionally represented. The individual or panel taking the hearing on behalf of the Prudential Regulator may question the participants as the hearing proceeds. The sequence of events will be broadly as follows:

(1) any preliminary matters (such as the admission of the public or other procedural questions) will be dealt with;

(2) the person(s) appointed to hear the applications will introduce the proceedings;

(3) the representatives of the societies will be invited to present their applications for confirmation, including a description of the events at the meetings at which the Merger Resolutions were put to the members, the statement of the voting on the resolutions, as well as any other matters which they wish to introduce at that stage;

(4) the other participants will be invited to make their representations; where appropriate the Prudential Regulator would expect to call them in a list marshalled, so far as possible, by subject matter;

(5) the representatives of the societies (or of the relevant society) will be invited to reply to, or comment on, the points made by the other participants;

(6) the other participants will be invited to comment on the societies replies in so far as those replies raise new issues.

01/04/2013

BSOG 2.5.30

The above procedure may be varied according to the circumstances at the hearing, and is intended only as a guide to the probable order of events. The hearing may be adjourned if the Prudential Regulator considers that is necessary to enable facts to be checked or additional information to be obtained.

01/04/2013

The Prudential Regulator's decision

BSOG 2.5.31

The Prudential Regulator will not normally give an oral decision at the end of the hearing and may be expected to reserve its decision to be issued later in writing, setting out its reasons. Copies of the written decision will be sent to the participants and, on request, to any other person. The decision may also be published, and the Prudential Regulator usually asks the FCA to place copies on the public files of the participating societies.

04/10/2013

BSOG 2.5.32

The PRA is required to consult the FCA before confirming an amalgamation or transfer of engagements or making a direction under section 95 of the 1986 Act. The PRA will notify the FCA if it confirms an amalgamation or transfer of engagements and will furnish the FCA with a copy of any direction it makes.

01/04/2013

BSOG 2.6

Transfer Of Engagements Under Direction

01/01/2007

BSOG 2.6.1

This section describes the Prudential Regulator's powers to direct a society to transfer all its engagements to one or more other societies and/or to proceed by board resolution, and the modified merger procedure consequently prescribed by the 1986 Act. Section 42B of the 1986 Act provides that, if the Prudential Regulator considers it expedient to do so to protect the investments of shareholders or depositors, it may direct a society, among other things, to transfer all its engagements to one or more other societies within a specified period (subsection (1)(a)). In such a case, or where the Prudential Regulator would have directed a transfer of engagements, but for the fact that negotiations were already under way, the Prudential Regulator may also direct that the approval of the transfer of engagements by the transferor society may be by board resolution rather than by Merger Resolution. In these circumstances, because neither a Schedule 16 Statement nor Merger Resolutions are required, the 1986 Act requires the society instead to send to every member entitled to notice of a meeting a Merger Notification Statement before it applies for confirmation of the transfer of engagements, (paragraphs 3 and 4 of Schedule 8A to the 1986 Act). Finally, in these circumstances, the First and Second Criteria concerning information made available to, and the views of, the members (see section 2.5) are replaced by a single criterion: the members or a proportion of them would be unreasonably prejudiced by the transfer; (paragraph 5 of Schedule 8A to the 1986 Act).

01/04/2013

BSOG 2.6.1A

The PRA is required to consult the FCA before giving a direction under section 42B of the 1986 Act.

25/04/2013

BSOG 2.6.2

Where a society is proceeding under a Section 42B(3) direction by board resolution, the Schedule 16 Statement is replaced by a Merger Notification Statement and a general meeting of the society is not required. The contents of the Merger Notification Statement are prescribed by The Building Societies (Merger Notification Statement) Regulations 1999 (SI 1999/1215).

01/04/2013

BSOG 2.6.3

The Merger Notification Statement must have been approved by the Prudential Regulatorbefore it is sent to the members, and must be sent within the specified time limit. Applications for approval should, in general, follow the procedure described in BSOG 2.3.28 G, and the final draft of the Merger Notification Statement should be accompanied by the relevant documents listed in BSOG 2.3.29 G, but as appropriate to the particular case and the less extensive information the statement is required to contain. The statement must include particulars of any compensation payable to directors or other officers of the transferor society to which the Prudential Regulatorhas given its consent under paragraph 2(1) of Schedule 8A to the 1986 Act.

01/04/2013

BSOG 2.6.4

BSOG 2.4 (General Meetings and Resolutions) does not apply, except that the directors will need to be satisfied that the society's register of members is correct to enable the society to send Merger Notification Statements to those entitled to receive them.

01/04/2013

BSOG 2.6.5

When the board has resolved to transfer the society's engagements and Merger Notification Statements have been sent to its members, the society may apply to the Prudential Regulatorfor confirmation of the transfer of engagements, but using an adaptation agreed with the Prudential Regulatorof the pro forma in Annex 2A. The procedure described in BSOG 2.5 is to be followed, including the publication of notices in the official Gazettes and newspapers and the form of application. However, the lapse of time between each stage of the procedure may be modified according to the particular circumstances of a case, and having regard to the need to protect the investments of shareholders or depositors. While a scrutineers report will not be required, the Prudential Regulatorwill require a report from the society's external auditors on the adequacy of the society's systems to fulfil the requirements of the 1986 Act and the Rules with regard to the sending of Merger Notification Statements. This is, of course, relevant to the Prudential Regulator'sconsideration of the Third Criterion.

01/04/2013

BSOG 2.6.6

As is noted in BSOG 2.6.1 G, the First and Second Criteria are replaced, in those circumstances, by a single criterion as to whether the members or a proportion of them would be unreasonably prejudiced by the transfer. Whether this special criterion applies will be a matter of judgement for the Prudential Regulatorto make in the light of any representations made to it and its own enquiries in respect of the particular case. It follows also that, in considering the Third Criterion, the Prudential Regulatorwill take account of the modified procedure.

01/04/2013

BSOG 2.7

Registration And Dissolution

01/01/2007

BSOG 2.7.1

When the Prudential Regulator has confirmed a merger (whether voluntary or under direction) it will notify the FCA and the societies concerned.

01/04/2013

BSOG 2.7.2

In the case of an amalgamation, the FCAis required to be satisfied as regards the proposed Rules, Memorandum and name of the successor society. The amalgamating societies are, therefore, advised to clear drafts of the proposed Rules and Memorandum with the FCAat an early stage (see BSOG 2.3.28 G). When they apply to the Prudential Regulatorfor confirmation under Section 93(2) of the 1986 Act, the amalgamating societies must send three signed copies of the Rules and Memorandum to the Prudential Regulator and the FCA(Section 93(2)(d)). If the FCAis satisfied on these matters it will, upon confirmation by the Prudential Regulator, register the successor society and issue to it a certificate of incorporation specifying the date (the specified date) from which the incorporation takes effect, and will return to it one copy each of the Rules and Memorandum together with a certificate of registration. Copies are placed on the public file of the successor society.

01/04/2013

BSOG 2.7.3

On the specified date of the amalgamation, all the property, rights and liabilities of the amalgamating societies are transferred to the successor society, the successor is given such permission under Part 4Aof the Act as the Prudential Regulatorconsiders appropriate, and the amalgamated societies are dissolved and their registrations cancelled by the FCA, having consulted the PRA(Section 93, sub-sections (4), (5) and (6) and Section 103(1) of the 1986 Act). In deciding on the appropriate terms of the permission for the successor society, the Prudential Regulatorwill have regard to the terms of the permissions of the amalgamating societies, including any limitations or requirements. It will also have regard to the business plan for the successor society.

01/04/2013

BSOG 2.7.4

In the case of a transfer of engagements, the FCAwill register a copy of the Instrument of Transfer and issue a registration certificate to the transferee society. A copy of the Instrument of Transfer and the registration certificate are placed on the public file of the transferee society. On the date specified in the registration certificate, the property, rights and liabilities of the transferor society are transferred to the transferee society, by virtue of Section 94(8) of the 1986 Act, the transferor society's authorisation is revoked by the FCA, and the society itself is dissolved (Section 94(10)). The transferor society's registration is subsequently cancelled by the FCA, having consulted the PRA,under Section 103(1).

01/04/2013

BSOG 2.8

Timetable

01/01/2007

BSOG 2.8.1

The time taken to complete a merger will vary from case to case. As a general rule of thumb, it is unlikely that a merger can proceed from board decision through approval of the Schedule 16 Statement, general meeting and confirmation hearing, to the effective date, in less than 6 months. It is essential to the good and orderly management of a merger that the societies concerned meet with the Prudential Regulator's staff as soon as their boards have resolved to seek a merger, and agree upon a provisional timetable. This can then be fixed by the time the Schedule 16 Statement is approved. The members can then be notified, as they must be, of the date provisionally set for the confirmation hearing and of the proposed date of completion of the merger in the Merger Document.

01/04/2013

BSOG 2.8.2

The likely sequence of events is as follows:

Stage 1

Informal consultations with the Prudential Regulator'ssupervisory staff on both substance and timing of the proposed merger.

Stage 2

Submission to the Prudential Regulatorof:

(a)

prudential information: this should be available to the Prudential Regulatorfor discussion with the society well before the Schedule 16 Statement is submitted for approval;

(b)

written details of the proposed terms of the merger: it will be helpful for both the societies and the Prudential Regulator to be clear about these matters as soon as possible after Stage 1 and well before Stage 3 is reached.

Submission to the FCA and the Prudential Regulator, in the case of an amalgamation, of preliminary draft Rules and Memorandum, noting any unresolved issues.

Stage 3

Submission to the Prudential Regulatorand, in respect of (b) below, to the FCA,in draft, of the following:

(a)

the Instrument of Transfer or amalgamation agreement embodying the merger terms provisionally agreed by the respective boards of directors;

(b)

in the case of an amalgamation, the proposed Rules and Memorandum of the successor society;

(c)

the Merger Document, including the Schedule 16 Statement, unless consent to proceed by way of board resolution is being sought in respect of the transferee society, together with the explanations of change, comparability and commitments referred to in BSOG 2.3.8 G to BSOG 2.3.10 G and BSOG 2.3.27 G;

(d)

notice of the meeting at which the Merger Resolutions are to be moved, which may form part of (c) above;

(e)

the proxy voting forms to be used.

After examination of these drafts, the Prudential Regulatoror, as the case may be, the FCAwill return them with any comments and, if necessary, will discuss them with the societies and their advisers. Any clearance by the Prudential Regulatorat this stage is provisional, and the Prudential Regulatormay seek further modification of the documents in the light of later information. Similarly, any clearance given by the FCAis subject to review of the proofs submitted at stage 4.
If the transferee society is applying for consent to proceed by way of board resolution, formal application to do so (with supporting justification) should be made to the Prudential Regulatorat this stage.

Stage 4

Submission of printers proofs of the above draft documents.

Stage 5

Informal clearance of near-final proofs (particularly of the Schedule 16 Statement(s)) by the Prudential Regulator.
Informal clearance of proof copies of Rules and Memorandum by the FCA and the Prudential Regulator, in the case of an amalgamation.

Stage 6

Formal submission of the Schedule 16 Statement(s) for approval by the Prudential Regulator. The covering letter should include a declaration on behalf of the board of the society either:

(a)

that there has been no material change in the financial position of the society since the date of the information provided in the Schedule 16 Statement; or

(b)

that there has been such a change and that it is fairly reflected in the wording of the statement.

This submission should be accompanied by:

(c)

a certified copy of the Instrument of Transfer or amalgamation agreement as executed;

(d)

two copies of the final printers proof of the Schedule 16 Statement signed by the secretaries of each society;

(e)

a final printers proof of the complete Merger Document to be sent to members, together with any covering letter and other documents to be sent with it, including proxy voting forms;

(f)

an assurance from the chairman of each society that the Schedule 16 Statement is complete and that all material interests of directors and officers are disclosed in it;

(g)

an assurance by or on behalf of the board on systems.

(h)

letter of comfort from the society's external auditors when required (see BSOG 2.3.7 G);

(i)

confirmation that drafts submitted for approval are identical to those seen at stage 5;

(j)

the fee payable by each society to the Prudential Regulator.

NB Schedule 16 Statements should not be printed for distribution to members until after Stage 7.

Stage 7

Approval by the Prudential Regulatorof the Schedule 16 Statement, or the Prudential Regulator'sconsent to proceed by board resolution. Approval or consent will be given by letter and one proof copy of the Schedule 16 Statement, with the certificate of approval signed on behalf of the Prudential Regulator, will be returned to the society.

Stage 8

Printing and circulation of documents to members in time to be received by them at least 21 days before the voting date for the meeting at which the Merger Resolutions are to be moved (see BSOG 2.4.12 G, BSOG 2.4.19 G and BSOG 2.4.20 G).

Stage 9

The meetings at which the Merger Resolutions are moved.

Stage 10

If the Merger Resolutions have been passed, application to the Prudential Regulatorfor confirmation and publication of notices of that application in the London and Edinburgh or Belfast Gazettes, and in other newspapers (as the Prudential Regulatordirects). The application must notify the Prudential Regulatorof the specified effective date for the merger, and be accompanied by two authenticated copies of the Instrument of Transfer or amalgamation agreement. In addition, in an amalgamation, three signed copies, each,of the Memorandum and Rules of the successor society, should be sent to the FCA, and to the Prudential Regulator. The societies must report to the Prudential Regulatoron the outcome of their meetings.

Stage 11

Notification by the Prudential Regulatorof the time and place of the confirmation hearing, if it is necessary to hold an oral hearing. The societies should allow sufficient time before the proposed effective date for the Prudential Regulatorto consider and write its decision, and in case it proves necessary to adjourn the hearing.

Stage 12

Confirmation hearing and decision by the Prudential Regulatorwhether to confirm the merger. The PRA must consult the FCA before confirming an amalgamation.

Stage 13

Registration by the FCAto give effect to the amalgamation or transfer of engagements.

01/04/2013

BSOG 2.8.3

The following table indicates the likely minimum time to be taken by the main stages outlined above:

Pre Day 1

Board Resolution to Merge
Initial discussions with Prudential Regulatorre timetable and prudential information Submission of terms and initial prudential information to Prudential RegulatorSubmission of draft Rules and Memorandum to the FCA and Prudential Regulator(amalgamations)

Day 1

First draft of Schedule 16 Statement and chairman's letter and notice of meetings, draft Rules and Memorandum (amalgamations) (Stage 3)

Day 28

Prudential Regulator gives informal approval to Schedule 16 Statement, Instrument of Transfer signed (Stage 5)

Day 35

Formal Schedule 16 approval by the Prudential Regulator(Stage 7)

Day 35-43

Printing, enveloping and mailing of Schedule 16 Statement and notice of meetings (Stage 8)

Day 65-70

Last date for receipt of proxy votes (depending on Act and Rules)

Day 72

SGM (Stage 9)

Day 75

Application to Prudential Regulatorfor confirmation (Stage 10) and submission ofRules and Memorandum to the FCA and Prudential Regulator(amalgamations)

Day 93

Closing date for receipt of representations

Day 114

Confirmation hearing (Stage 12)

Day 142

Prudential Regulator's Decision on Confirmation (Stage 12)

Day 160

Effective Date

01/04/2013

BSOG 2.8.4

Notes:

(1) Within the above timetable prudential information to be submitted.

(2) A significant amount of financial information needs to be assessed by the Prudential Regulatorprior to approval of Schedule 16 Statement.

(3) Prior to approval of Schedule 16 Statement a plan/timetable for integration of systems to be drawn up. Auditors sign off required prior to effective date.

(4) Where the Prudential Regulator is the PRA it is under a statutory obligation to consult the FCA in respect of approval of the Transfer Statement and Confirmation. This consultation will take place within the above timetable.

04/10/2013

BSOG 2 Annex 1

Pro forma merger document

01/01/2007

This annex consists only of one or more forms. Forms are to be found through the following address:
Pro forma merger document - bsog_chapter2_ann1.pdf

01/04/2013

BSOG 2 Annex 2A

Publication of Notice of application to the Authority for confirmation of an amalgamation or transfer of engagements in the London, Edinburgh, or Belfast Gazettes and in any newspapers as may be directed by the Authority

01/01/2007

This annex consists only of one or more forms. Forms are to be found through the following address:
Publication of Notice of application to the Authority for confirmation of an amalgamation or transfer of engagements in the London, Edinburgh, or Belfast Gazettes and in any newspapers as may be directed by the Authority - bsog_chapter2_ann2.pdf

01/04/2013

BSOG 2 Annex 2B

Form of application to the Authority for confirmation of an amalgamation

01/01/2007

This annex consists only of one or more forms. Forms are to be found through the following address:
Form of application to the Authority for confirmation of an amalgamation - bsog_chapter2_ann2.pdf

01/04/2013

BSOG 2 Annex 2C

Form of application to the Authority for confirmation of transfer of engagements (transferor society)

01/01/2007

This annex consists only of one or more forms. Forms are to be found through the following address:
Form of application to the Authority for confirmation of transfer of engagements (transferor society) - bsog_chapter2_ann2.pdf

01/04/2013

BSOG 2 Annex 2D

Form of application to the Authority for confirmation of a transfer of engagements (transferee society)

01/01/2007

This annex consists only of one or more forms. Forms are to be found through the following address:
Form of application to the Authority for confirmation of a transfer of engagements (transferee society) - bsog_chapter2_ann2.pdf

01/04/2013

BSOG 2 Annex 3

Index to chapter 2

01/01/2007

BSOG 2 Annex 3

INDEX

Account Terms and Conditions:

BSOG 2.2.9G (1) to BSOG 2.2.9G (2), BSOG 2.3.17 G to BSOG 2.3.18 G

Accounts (Societies)

see Financial Assessments and Projections

Accounting Control and Inspection Systems:

BSOG 2.2.22 G

Accounting Policies:

Schedule 16 Statement

BSOG 2.3.9 G & BSOG 2.3.10G (3) to BSOG 2.3.10G (5)

Affected Shareholders Resolution

BSOG 2.4.2 G

Amalgamation

BSOG 2.1.5 G

Application for Confirmation

BSOG 2.5.1 G to BSOG 2.5.3 G

Pro Forma Application

BSOG 2 Annex 2A

Schedule 16 Statement

BSOG 2.3.3 G

Vesting and Dissolution

BSOG 2.7.2 G to BSOG 2.7.3 G

Amalgamation Agreement

BSOG 2.2.7 G; BSOG 2.2.9 G; BSOG 2.3.3 G; BSOG 2.3.15 G to BSOG 2.3.21 G

Announcement of Merger Proposal

BSOG 2.2.13 G to BSOG 2.2.15 G

Application and the Prudential Regulator's Approval

Schedule 16 Statement

BSOG 2.3.28 G to BSOG 2.3.30 G

Application for Confirmation

BSOG 2.5.1 G to BSOG 2.5.3 G

Pro Forma Applications

Annexes BSOG 2 Annex 2A, BSOG 2 Annex 2B and BSOG 2 Annex 2C

Auditors

(see Financial Assessments and Projections)

Prudential Regulator's Powers

Discretionary Powers

BSOG 2.4.41 G to BSOG 2.4.42 G; BSOG 2.5.4 G to BSOG 2.5.6 G

Disputes with Members

BSOG 2.5.7 G

Board Resolution

BSOG 2.4.41 G to BSOG 2.4.42 G

Board Statements and Board Rationale

(see also Rationale for Merger)

BSOG 2.3.22 G to BSOG 2.3.27 G

Boards Statement (or Boards Rationale)

BSOG 2.3.22 G; BSOG 2.3.25 G

Contractual Obligations Statement

BSOG 2.3.27 G

Financial Position Statement re Material Changes

BSOG 2.3.8 G

Merger (disclosure) Statement

BSOG 2.3.23 G

Responsibility Statement

BSOG 2.3.26 G

Board Structure

see Management Structure

Bonuses

Approval by Members

BSOG 2.4.4 G

Schedule 16 Statement

BSOG 2.3.13 G to BSOG 2.3.14 G

Terms of a Merger

BSOG 2.2.9G (3); BSOG 2.2.10 G to BSOG 2.2.11 G

Borrowing Members

Mortgage Account Terms

BSOG 2.2.9G (2); BSOG 2.3.18 G

Voting Entitlement

BSOG 2.4.9 G

Borrowing Members Resolution

BSOG 2.4.2G (2); BSOG 2.4.16 G; BSOG 2.4.29G (5);

Branch Network

BSOG 2.2.5 G

Business Plan

BSOG 2.2.23 G

Chairmans (or Boards Statement)

BSOG 2.3.22 G; BSOG 2.3.25 G

Compensation to Directors and Other Officers

(see also Interests of Directors and Other Officers)

Approval by Members

BSOG 2.1.8 G; BSOG 2.4.3 G

Schedule 16 Statement

BSOG 2.3.11G (2) & BSOG 2.3.12 G

Terms of Merger

BSOG 2.2.9G (7); BSOG 2.2.12 G

Competition Commission

BSOG 2.1.11 G

Conditions of a Merger

see Terms of a Merger

Confirmation

BSOG 2.5

Application

BSOG 2.5.1 G to BSOG 2.5.3 G

Prudential Regulator's Powers

BSOG 2.5.6 G to BSOG 2.5.7 G

Criteria: see Confirmation Criteria

Decision

BSOG 2.5.31 G

Hearing

BSOG 2.5.26 G to BSOG 2.5.30 G

Notice of Application

BSOG 2.5.1 G; BSOG 2 Annex 2A to BSOG 2 Annex 2D

Procedure

BSOG 2.5.20 G

Pro Forma Applications

Annexes BSOG 2 Annex 2A, BSOG 2 Annex 2B and BSOG 2 Annex 2C

Purpose of Representations: see Representations

BSOG 2.5.8 G to BSOG 2.5.11 G

Confirmation Criteria

BSOG 2.5.4 G to BSOG 2.5.19 G

First Criterion

BSOG 2.5.4G (1); BSOG 2.5.12 G to BSOG 2.5.13 G

Second Criterion

BSOG 2.5.4G (2); BSOG 2.5.14 G

Third Criterion

BSOG 2.5.4G (3); BSOG 2.5.15 G to BSOG 2.5.19 G

Conflicts of Interest

BSOG 2.2.16 G; BSOG 2.3.27 G

Connected Undertakings

BSOG 2.3.7 G; BSOG 2.3.10G (6)

Financial Prospects

BSOG 2.3.7 G

Prudential Requirements

BSOG 2.2.16 G, BSOG 2.2.25 G

Contractual Obligations Statement

BSOG 2.3.27 G

Control and Inspection Systems

BSOG 2.2.22 G

Decision by Prudential Regulator on Confirmation

BSOG 2.5.31 G

Deposit Account Terms

BSOG 2.2.9G (1); BSOG 2.3.17 G

Directors Compensation

see Compensation to Directors and Other Officers

Directors Interests

(see also Compensation to Directors and Other Officers)

BSOG 2.2.9G (7); BSOG 2.3.11 G to BSOG 2.3.12 G

Directors Responsibility Statement

BSOG 2.3.26 G

Disputes with Members

BSOG 2.5.7 G

Dissolution

BSOG 2.7

Effective Date (Amalgamation)

BSOG 2.7.3 G

Electronic Communications Order 2003

BSOG 2.1.14 G

Employment Regulations

BSOG 2.1.12 G

Enterprise Act 2000

BSOG 2.1.11 G

Entitlement to Vote

(see Voting Entitlement)

Financial Prospects

Prudential Requirements

BSOG 2.2.24 G; BSOG 2.3.6 G to BSOG 2.3.10 G

Financial Terms of a Merger

see Bonuses

General Meeting Arrangements

(see also Voting)

BSOG 2.4

Conduct of Meeting

BSOG 2.4.24 G to BSOG 2.4.26 G

Notice of Meeting

BSOG 2.4.19 G to BSOG 2.4.23 G

Postal Ballots

BSOG 2.4.34 G

Proxy Voting

BSOG 2.4.29 G to BSOG 2.4.33 G

Scrutineers Report

BSOG 2.4.35 G to BSOG 2.4.40 G

Voting Conduct

BSOG 2.4.27 G to BSOG 2.4.33 G

Hearing

BSOG 2.5.26 G to BSOG 2.5.30 G

Information Provided to Members

BSOG 2.3

Board Statements

BSOG 2.3.22 G to BSOG 2.3.27 G

Application for the Prudential Regulator's Approval

BSOG 2.3.28 G to BSOG 2.3.30 G

Schedule 16 Statement

BSOG 2.3.3 G to BSOG 2.3.21 G

Statutory Requirements

BSOG 2.3.1 G to BSOG 2.3.2 G

Inspection Systems

BSOG 2.2.22 G

Instrument of Transfer

BSOG 2.2.7 G; BSOG 2.2.9 G

Registration by the FCA

BSOG 2.7.4 G

Schedule 16 Statement

BSOG 2.3.3 G; BSOG 2.3.15 G to BSOG 2.3.21 G

Interests of Directors and Other Officers

(see also Compensation to Directors and Other Officers)

BSOG 2.2.9G (6); BSOG 2.3.11 G to BSOG 2.3.12 G

Joint Shareholders and Borrowers

Voting Entitlement

BSOG 2.4.10 G

Letter of Comfort

BSOG 2.3.7 G; BSOG 2.8.2 G (Stage 6 h)

Mailing of Schedule 16 Statement

BSOG 2.3.1 G; BSOG 2.4.21 G to BSOG 2.4.23 G

Management Structure

Prudential Requirements

BSOG 2.2.16 G; BSOG 2.2.20 G to BSOG 2.2.21 G

Meetings

see General Meeting Arrangements

Membership

Records

BSOG 2.4.14 G to BSOG 2.4.17 G

Rights (Post Merger)

BSOG 2.2.7 G; BSOG 2.3.16 G

Memoranda of Successor Society (for Amalgamations)

BSOG 2.2.7 G

Schedule 16 Statement

BSOG 2.3.3 G; BSOG 2.3.28 G

Registration by the FCA

BSOG 2.7.2 G

Merger Notification Statement

BSOG 2.6.1 G to BSOG 2.6.5 G

Merger (disclosure) statement

BSOG 2.3.23 G

Merger Document

Pro Forma Merger Document: Annex A

BSOG 2.3.4 G; BSOG 2.3.22 G; BSOG 2.3.26 G; BSOG 2.4.21 G

Mortgage Account Terms

BSOG 2.2.9G (2); BSOG 2.3.18 G

Mortgage Book Quality

BSOG 2.2.5 G

Multiple Accounts

BSOG 2.4.11 G

Notice of Application for Confirmation

Pro Forma Notices of Application: Annex B

BSOG 2.5.1 G

Notice of Meeting

BSOG 2.4.19 G to BSOG 2.4.23 G

Scrutineers Report

BSOG 2.4.35 G to BSOG 2.4.40 G

Office of Fair Trading

BSOG 2.1.11 G

Partial Transfer of Engagements

BSOG 2.1.5 G

Affected Shareholders Resolution

BSOG 2.4.2 G

Pension Terms

BSOG 2.2.9G (5); BSOG 2.3.20 G

Planning for a Merger

see Rationale for a Merger

Postal Ballots

BSOG 2.4.34 G

Proxy Voting

BSOG 2.4.29 G to BSOG 2.4.33 G; BSOG 2.4.12G (1)

Prudential Requirements for a Merger

BSOG 2.2.16 G to BSOG 2.2.25 G

Accounting, Control & Inspection Systems

BSOG 2.2.22 G

Business Plan

BSOG 2.2.23 G

Financial Prospects

BSOG 2.2.24 G

Management Direction

BSOG 2.2.20 G to BSOG 2.2.21 G

Connected Undertakings and Agencies

BSOG 2.2.25 G

Public Announcements

BSOG 2.2.13 G to BSOG 2.2.15 G

Qualifying Shareholding

BSOG 2.4.7 G

Qualifying Shareholding Date

BSOG 2.4.8 G

Rationale for a Merger

(see also Board Statements and Board Rationale)

BSOG 2.2.1 G to BSOG 2.2.6 G

Factors for Board Consideration

BSOG 2.2.5 G to BSOG 2.2.6 G

Rationalisation

(see also Staff Implications)

Prudential Requirements

BSOG 2.2.16 G; BSOG 2.2.23 G

Redundancies

BSOG 2.2.9 G; BSOG 2.3.19 G

BSOG 2.4.14 G; BSOG 2.4.17 G

Members Access to

BSOG 2.5.7 G

Registration by the FCA

BSOG 2.7

Representations

BSOG 2.5.21 G to BSOG 2.5.25 G

Resolutions

(see also Voting)

BSOG 2.4

Affected Shareholders Resolution

BSOG 2.4.2 G

Prudential Regulator Discretion

BSOG 2.4.41 G to BSOG 2.4.42 G

Board Resolution

BSOG 2.4.41 G to BSOG 2.4.42 G

Borrowing Members Resolution

BSOG 2.4.2G (2); BSOG 2.4.9 G; BSOG 2.4.29G (5)

Compensation to Directors and Other Officers

BSOG 2.4.3 G

Members Approval of Bonus Payments

BSOG 2.4.4 G

Partial Transfer of Engagements

BSOG 2.4.2 G

Shareholding Members Resolution

BSOG 2.4.2G (1)

Special Resolutions

BSOG 2.4.1 G to BSOG 2.4.4 G

Responsibility Statement

BSOG 2.3.26 G

Rules of Successor Society (for Amalgamation)

BSOG 2.2.7 G

Schedule 16 Statement

BSOG 2.3.3 G; BSOG 2.3.28 G

Registration by the FCA

BSOG 2.7.2 G

Rules of Transferee Society (re Post Merger Membership Rights)

BSOG 2.2.7 G; BSOG 2.3.16 G

Schedule 16 Statement

Merger Confirmation Procedures

01/01/2007

BSOG 2 Annex 4.1

4.1

Introduction

4.1.1

This annex is for the guidance of those making written representations to the Prudential Regulator and/or those participating in oral confirmation hearings. It sets out the procedures which the Prudential Regulator will normally follow.

4.1.2

The 1986 Act provides that when the necessary merger resolutions have been passed the societies must obtain confirmation by the Prudential Regulatorof the merger in accordance with Section 93(2) (amalgamations) or Section 94(7) (transfers of engagements) of the 1986 Act. If the Prudential Regulatorconfirms the merger the FCAwill issue a registration certificate.

4.1.3

References to the relevant provisions of the 1986 Act are given in parenthesis in this annex. The term merger means either an amalgamation or a transfer of engagements as provided by sections 93 and 94 of the 1986 Act.

4.2

The role of confirmation

4.2.1

The role of the confirmation procedures is limited. Section 95(3) and (4) of the 1986 Act provide that the Prudential Regulator must confirm a transfer unless it considers that:

(1)

some information material to the members decision about the merger was not made available to all the members eligible to vote; or,

(2)

the vote on any resolution approving the merger does not represent the views of the members eligible to vote; or,

(3)

some relevant requirement of the 1986 Act or the rules of any of the societies was not fulfilled.

4.2.2

These are the only grounds on which the Prudential Regulator may refuse confirmation, or direct the society to remedy any defects. It is not the Prudential Regulator's function to make any judgement about the merits of the proposals which the members have approved.

4.2.3

If the Prudential Regulator finds that there are defects, it may direct the society to take steps to remedy them. These include the calling of further meetings. If it is then satisfied that the defects have been substantially remedied, it must confirm the merger; if not, it must refuse confirmation (Section 95(6) of the 1986 Act).

4.2.4

The Prudential Regulator may direct that non-fulfilment of some relevant requirement of the 1986 Act or of the rules of the society is to be disregarded, if it appears to the Prudential Regulator that the failure could not have been material to the members decision (Section 95(5)). Relevant requirement in this context means a requirement of section 93, 94 or 95 of or Schedule 16 to the 1986 Act or of any rules prescribing the procedure to be followed by the society in approving or effecting the merger (Section 95(11) of the 1986 Act).

4.2.5

The 1986 Act provides that any accidental failure to send the notice of meeting and merger statement to any person entitled to receive them does not invalidate the proceedings at the general meeting (paragraph 22(3) of Schedule 2 to the 1986 Act).

4.3

Representations to the Prudential Regulator

4.3.1

Any interested party has the right to make representations to the Prudential Regulator with respect to the societies applications for confirmation. They should state clearly why the person making the representations claims to be an interested party e.g. membership of the society and the matters to which the representations are directed.

4.3.2

Written representations, or notice of a persons intention to make oral representations, or both, must be in writing. They must reach the Prudential Regulator at 20 Moorgate, London, EC2R 6DA by the date quoted in the merger documentation issued to members and published in the official Gazettes and (usually) some newspapers. Persons who make written representations, but subsequently decide also to make oral representations must, nevertheless, give notice of that intention, in writing, to the Prudential Regulator by the same date (paragraphs 8 and 9 of Schedule 16 to the 1986 Act). The Prudential Regulator will in general be prepared to use electronic rather than paper-based communication for notices and written representations if requested by the society or a prospective representer. A specific electronic address will be provided for that purpose, and some of the relevant procedures may have to be adapted accordingly.

4.3.3

Representations or notices to the Prudential Regulator will fall into one of the following three categories:

(1)

Written representations only.

(2)

Written representations with notice of intention to make oral representations.

(3)

Notice of intention to make oral representations only.

4.3.4

The Prudential Regulator will send copies of all written representations to the society, and will afford it an opportunity to comment on them (paragraph 9 of Schedule 16 to the 1986 Act).

4.3.5

Copies of the society's comments on representations in category 4.3.3(2) will be sent to those who made the representations so that they may concentrate their representations at oral hearings on the points which they consider to remain at issue. Persons making written representations who wish to see the society's comments must, therefore, also give notice of intention to make oral representations. Any documents referred to in the society's comments will be made available by the society for inspection at a specified place which will be notified to those making oral representations. (The society may, exceptionally, apply to put to the Prudential Regulatorin confidence documents which the society considers to be commercially sensitive: the Prudential Regulatorwill decide on hearing argument whether, and on what terms, to accept them as confidential). Persons in thecategory set out in BSOG 2 Annex 4.3.3G(3) will be asked to inform the Prudential Regulator, in advance of the hearing, of the subject and general grounds of the representations they intend to make. The Prudential Regulatorwill pass this information to the society.

4.3.6

4.4

Purpose of the hearing

4.4.1

The purpose of the hearing is to enable interested parties to make representations, and to enable the Prudential Regulatorto make such enquiry as it considers necessary, both of the society and of those making representations, in order to reach an informed view on those aspects of the decision on confirmation to which the representations are directed. The Prudential Regulatorwill examine all the representations, whether written or oral, in relation to the three statutory criteria described in BSOG 2 Annex 4.2.1G . In the light of that examination, and consideration of all the representations and the society's response, the Prudential Regulatorwill decide whether to confirm, or direct the society to correct any defects, or to refuse to confirm the merger. It is for the Prudential Regulatorto decide whether the matters discussed in representations are relevant to the statutory criteria.

4.5

Persons hearing the applications

4.5.1

The hearing will be taken by a person or persons appointed by the Prudential Regulator to hear and decide the applications on its behalf, and they will be assisted by staff of the Prudential Regulator.

4.6

Time and place

4.6.1

Hearings will normally start at about mid-morning on the day quoted in the merger documentation sent to members, and at a place which will be notified to the participants. If there are a significant number of persons wishing to make oral representations, then the hearing may extend beyond one day and may be adjourned from time to time and from place to place.

4.7

Procedure at the hearing

4.7.1

The Prudential Regulator expects that oral hearings will be in public. Members of the general public and the Press will be asked to wait outside at the outset of the hearing. The participants will then be asked if any of them has good reason to object to the admission of the general public (including the Press). The Press and the general public will then be admitted, within the limits of the space available, unless an objection by a participant is upheld by the Prudential Regulator. However, the Prudential Regulator may decide that parts of the hearing shall be in private if that appears to it to be desirable (for example, if representers feel it necessary to disclose their personal affairs).

4.7.2

The procedure will be informal. While all participants will be expected to speak concisely and to avoid repetition, the Prudential Regulator will be considerate towards those who are not professionally represented. The persons appointed to hear the applications may question the participants as the hearing proceeds. The sequence of events will be broadly as follows:

(1)

Any preliminary matters (such as the admission of the public or other procedural questions) will be dealt with.

(2)

The person chairing the hearing on behalf of the Prudential Regulator will introduce the proceedings.

(3)

The representatives of the Societies will be invited to speak to their applications, including a description of the events at the meetings at which the merger resolutions were put to the members, a statement of the voting on the resolutions, and any other matters which they wish to introduce at that stage.

(4)

The other participants will be invited to speak to their representations. Where appropriate the Prudential Regulator would expect to call them in a list marshalled, so far as possible, by subject matter.

(5)

The representatives of the society will be invited to reply to, or comment on, the points made by the other participants.

(6)

The other participants will be invited to comment on the society's replies.

4.7.3

The above procedure may be varied according to the circumstances at the hearing, and is intended only as a guide to the probable order of events. The hearing may be adjourned if the Prudential Regulator considers that necessary to enable facts to be checked or additional information to be obtained.

4.8

The Prudential Regulator's decision

4.8.1

The Prudential Regulator will not normally give an oral decision at the end of the hearing. The Prudential Regulator will subsequently issue a written decision, setting out its reasons. A copy of the written decision will be sent to each of the participants in the hearing and to those who made written representations and, on request, to any other person. The decision may also be published.

01/04/2013