The protection provisions here are in effect designed to ensure that if a building society becomes a plc a predator company, to use the language of the Stock Exchange, will not gobble it up within five years. I could envisage a position where a couple of building societies, having become public liability companies, would form the view after two or three years that it was in their interests for one to take over the other and form a larger financial institution. There would normally be a takeover. Perhaps the Minister would clarify how this legislation would operate in the event of that type of development.
Building Societies Bill, 1988: Committee Stage (Resumed).
Question proposed: "That section 102 stand part of the Bill".
They can convert but then of course they could not be taken over for five years after that date. This is to prevent what the Deputy has mentioned. It is also intended to prevent speculators attempting to bring about a conversion with a view to a takeover. That is the idea behind these restrictions. The purpose is achieved by prohibiting the company from allocating more than 15 per cent of its shares to any one person or to persons acting together or by requiring the company's articles to incorporate that prohibition for a period of five years. There has been a lot of pressure to make the period somewhat less but it is important that they can act independently for a period after conversion to plc before any change can take place.
The idea is to give the building societies some time to adapt to the market, but one could equally argue that if a building society was at such risk of takeover it had no business going into the market in the first place, being clearly vulnerable. One could possibly envisage a couple of building societies going to the market and forming the view after two or three years' trading that it was in the interests of the stability of their members and their businesses that one should be taken over by the other. I am not talking about a predator company coming in in the classic sense. It might be in the interests of the continued viability of the two societies to effect a formal amalgamation or takeover of one by the other, having experienced the ill winds of the Stock Exchange for three years. Is there a need for a provision in the Bill to deal with such a situation? Let us assume a building society is converted to a plc, gets into financial trouble and that a major bank is willing to bail them out in the context of a takeover. It is not unknown for a failing company on the stock market to be taken over by another company and to have their financial position turned around. The provision here is designed as a protection but it could work to the opposite effect. There can be circumstances where it is in the interests of the members and shareholders of a company that it be taken over, due possibly to management failure.
That is specifically catered for in section 102 (4).
Does the Minister envisage the Central Bank being able to intervene to annul the application of the first three subsections of the section?
Quite so.
Anything can happen in that situation.
That is exactly what is intended.
Question put and agreed to.
Sections 103 to 106, inclusive, agreed to.
SECTION 107.
I move amendment No. 49:
In page 101, subsection (2) (b), line 30, to delete "subsection (4)" and substitute "subsection (3)".
Amendment agreed to.
I move amendment No. 50:
In page 103, line 7, to delete "(4)" and substitute "(3)".
Amendment agreed to.
I move amendment No. 51:
In page 103, line 14, to delete "(5)" and substitute "(4)".
Amendment agreed to.
Section 107, as amended, agreed to.
Section 108 to 117, inclusive, agreed to.
SECTION 118.
Question proposed: "That section 118 stand part of the Bill".
This deals with stamp duty chargeable on any instrument effecting the transfer of a share in a building society. We have dealt at length with the need to keep down the purchase price of houses and to ensure that people do not incur unnecessary expense. One of the largest areas of expense beyond purchasing one's house is the level of stamp duty imposed and the level of VAT on legal and conveyancing fees. The Chair may call me out of order because this does not arise directly under this section, but I would urge the Minister to look very seriously at the application of VAT at the rate of 25 per cent on the purchase of domestic dwellings. This should be looked at again in the context of the expense involved in home purchase. The Minister should also look again at the question of stamp duties as they affect the house purchaser. If we deem it desirable to exempt from stamp duty any instrument effecting the transfer of shares in a building society, one could suggest that a different approach to stamp duty on house purchase should commend itself to the Minister.
Question put and agreed to.
Section 119 to 126, inclusive, agreed to.
SECTION 127.
I move amendment No. 52:
In page 114, lines 38 and 39, to delete "and such money or account may be held in the form of a shareholding in the society" and substitute "and the provisions of any such enactment in relation to the rights and obligations of a bank in respect of accounts in a bank shall apply to a building society as they apply to a bank".
Amendment agreed to.
I move amendment No. 53:
In page 114, after line 39, to insert the following subsection:
"(2) Any deposit or account to which subsection (1) relates may be held in the form of a shareholding in the society.".
Amendment agreed to.
Section 127, as amended, agreed to.
First Schedule agreed to.
Second Schedule agreed to.
Third Schedule agreed to.
Fourth Schedule agreed to.
Fifth Schedule agreed to.
Title agreed to.
Bill reported with amendments.
When is it intended to take Report Stage?
On Tuesday 23 May, subject to the agreement of the Whips.
Report Stage ordered for Tuesday, 23 May 1989.