BSOG 3 Annex 4 Transfer Confirmation Procedures

4.1

Introduction

4.1.1

G

This annex is for the guidance of those making written representations to the Authorityand/or those participating in oral confirmation hearings. It sets out the procedures which the Authorityintends to follow.

4.1.2

G

The 1986 Act provides that when a society has approved the transfer of its business to a plc by passing the transfer resolutions, it must then obtain confirmation by the Authorityof the transfer and its terms (Section 97(4) of the 1986 Act). If the Authorityconfirms the transfer, then all the property, rights and liabilities of the society, except any shares in its successor company, transfer on the vesting date to the successor company (Section 97(6) of the 1986 Act), which date is specified in or determined by the transfer agreement between the society and the successor company.

4.2

The role of confirmation

4.2.1

G

The criteria to which the Authorityhas to have regard are limited. It is not within the Authority'spower to make any judgment about the merits or fairness of the proposals which the members have approved.

4.2.2

G

Section 98(2) and (3) of the 1986 Act provide that the Authoritymust confirm a transfer unless it considers that:

(1)

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

(2)

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

(3)

there is a substantial risk that the successor will not have -

(i)

such permission under Part IVof the Financial Services and Markets Act 2000, or

(ii)

such permission under paragraph 15 of Schedule 3 to that Act (as a result of qualifying for authorisation under paragraph 12 of that schedule), as will enable it to carry on the business which it will have as a result of the transfer without being taken (by virtue of section 20 of that Act) to have contravened a requirement imposed on it by the Authorityunder that Act; or

(4)

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

4.2.3

G

These are the only grounds on which the Authority may refuse confirmation, or direct the society to remedy any defects. If the Authority finds that there are defects it may direct the society to take steps to remedy them. If the Authority is then satisfied that the defects have been substantially remedied, it must confirm the transfer; if not, it must refuse confirmation (Section 98(5) and (6) of the 1986 Act).

4.2.4

G

In the case of the ground mentioned in paragraph 4.2.2(4), the Authoritymay direct that non-fulfillment of some relevant requirement of the 1986 Act or of the rules of the society is to be disregarded, if it appears to the Authoritythat the failure could not have been material to the members' decision (Section 98(4) of the 1986 Act). "Relevant requirement" in this context means a requirement of the provisions of the 1986 Act applicable to the transfer of a society's business (which are Sections 97 to 102 and 102B to D, paragraph 30 of Schedule 2, Schedule 17 and the Transfer Regulations made under the 1986 Act) and any Rules prescribing the procedure to be followed by the society in approving the transfer and its terms (that is, generally, 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).

4.2.5

G

The 1986 Act provides that any accidental omission to give the notice of the meeting to, or non-receipt of the notice by, a person entitled to receive it does not invalidate the proceedings at the special general meeting (Schedule 2, paragraph 22(3)).

4.3

Purpose of the hearing

4.3.1

G

The purpose of the hearing is to enable interested parties to make representations, and to enable the Authorityto make such enquiry as it considers necessary, both of the society and of those making representations, in order to reach an informed view. The Authoritywill examine all the representations, whether written or oral, in relation to the four statutory criteria described in paragraph 4.2.2. In the light of that examination, and consideration of all the representations and the society's response, the Authoritywill make its decision.

4.4

Making representations to the Authority

4.4.1

G

Any interested party has the right to make written and oral representations to the Authority with respect to the society's application for confirmation. Those making written representations and those giving notice of intention to make oral representations should state clearly why they claim to be interested parties (e.g. the category of their membership of the society). Those making written representations should also identify the ground or grounds, in paragraph 4.2.2, to which their representations are directed and it will be helpful if those giving notice of intention to make oral representations will do likewise.

4.4.2

G

Written representations, or written notice of a person's intention to make oral representations, or both, must be addressed to the Financial Services Authority and must reach the Authority at 25 The North Colonnade, Canary Wharf, London E14 5HS by the date quoted in the transfer documentation issued to members. Unwritten representations and notice (for example by telephone) cannot be accepted. Persons who make written representations but subsequently decide also to make oral representations must, nevertheless, give notice of that intention, in writing, to the Authority at the above address by the same date (paragraph 7 of Schedule 17 to the 1986 Act). The Authority 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.

4.4.3

G

Representations or notices to the Authoritywill 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.

4.4.4

G

The Authoritywill send copies of all written representations to the society, and will afford it an opportunity to comment on them (paragraph 8 of Schedule 17 to the 1986 Act). The Authoritywill consider the written representations in categories 4.4.3(1)and (2), and the society's responses to them. A synopsis of the representations (probably in the form of a summary of each of the main points made and the numbers of persons making each point) and the society's responses may be made available to those participating in the oral hearing. This is intended to inform those making oral representations of the points already under consideration by the Authoritywith a view to avoiding unnecessary repetition.

4.4.5

G

Copies of the society's comments on representations in category 4.4.3(2)will be sent to those who made the representations in time for the oral hearing so that they may concentrate their oral representations on the points which they consider to remain at issue. A person making written representations who wishes 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 Authorityin confidence documents which the society considers to be commercially sensitive: the Authoritywill decide on hearing argument whether, and on what terms, to accept them as being confidential). Persons in category 4.4.3(3)will be asked to inform the Authority, in advance of the oral hearing, of the subject and general grounds of the representations they intend to make; the Authoritywill copy any response to the society.

4.4.6

G

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 oral hearing. They should notify the Authority in advance if this is what they intend to do. The Authority will notify this to the society.

4.5

Panel taking the hearing

4.5.1

G

A Panel will be appointed by the Authorityto consider and decide the application on its behalf. The panel will conduct the oral hearing if one is required.

4.6

Time and place

4.6.1

G

Oral hearings will normally start at about mid-morning on the date quoted in the transfer documentation sent to members and at a place which will be notified to the participants. If there is 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 Authority will try to advise participants of the day when they may expect to make their representations, and of when the society's representatives may be expected to respond.

4.7

Procedure at the hearing

4.7.1

G

The Authorityexpects that oral hearings will be held in public. Members of the general public and the press will be asked to wait outside at the commencement 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 or the press (such as, for example, the need to refer to personal financial affairs). Unless an objection by a participant is upheld by the Authority, the press and the general public will then be admitted, within the limits of the space available. However, the Authoritymay decide that parts of the hearing shall be in private if that appears to it to be desirable.

4.7.2

G

The procedure will be informal. All participants will be expected to speak concisely and avoid repetition. The Authoritywill be considerate towards those who are not professionally represented. Members of the Panel taking the hearing may question the participants. 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 chairman of the Panel will introduce the proceedings;

(3)

the representatives of the society will be invited to speak to the application, including a description of the events at the meeting at which the transfer 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. The Authorityexpects 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

G

This 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 Authority considers that necessary to enable facts to be checked or additional information to be obtained.

4.8

The Authority's decision

4.8.1

G

At the end of the oral hearing, the Authoritywill reserve its decision. A copy of its written decision, including its findings on the points made in representations, will be published and copies will be sent to the society, and to those making written and/or oral representations.