Building Societies Act 1986 (Modifications) Order 2024

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Building Societies Act 1986 (Modifications) Order 2024.

I was going to start by welcoming the noble Baroness, Lady Neville-Rolfe, to her place, but I see that she has moved along the Bench. However, I am sure that we will have the opportunity in future.

The Government have committed to modernising the Building Societies Act 1986 to ensure that building societies, which are mutually owned financial institutions, primarily offering savings and mortgage products to members, can compete effectively with retail banks. This order forms part of this commitment, by amending the Building Societies Act 1986 to remove some unnecessary burdens on the sector by aligning certain corporate governance requirements with the same flexibilities afforded to companies under the Companies Act 2006. This aligns within the Government’s wider ambition to unlock the full potential of the mutuals sector, recognising the sector’s potential to drive innovation and economic growth across the country through its emphasis on support for members and communities.

Specifically, this order modernises the 1986 Act by amending and deleting the relevant provisions in Sections 60 and 61, which currently impose a normal retirement age of 70 for directors, which in turn enables building societies to provide a compulsory retirement age for directors in their rules. By amending these provisions, this order will provide building societies with greater flexibility in appointing directors and end blanket age-based restrictions, modernising the 1986 Act in line with the Companies Act 2006.

Moreover, this order will amend Section 80 of the 1986 Act to alter the requirement for the balance sheet of a building society to be signed by two directors and the CEO and instead allow one director to sign the balance sheet on behalf of the board. This removes an unnecessary burden for building societies and aligns the legislation with that for companies, which requires only one director to sign their accounts.

Overall, these amendments make small but important updates to the 1986 Act by removing outdated corporate governance requirements and providing building societies with the same modern flexibilities as retail banks operating under the Companies Act 2006.

Furthermore, I understand that these changes will be welcomed by the sector. For example, the prospect of an amendment to allow one director to sign a building society balance sheet on behalf of the board was welcomed during a consultation published by the previous Government in December 2021. Although the removal of the retirement age for building society directors was not proposed in the 2021 consultation, it was suggested by the Building Societies Association and another large building society in their responses to the consultation, as published in the consultation response in December 2022.

Finally, I shall touch briefly on future considerations. Earlier this year, the Building Societies Act 1986 (Amendment) Act 2024 achieved Royal Assent. This allows for real-time virtual participation at building society general meetings and provides the Government with the powers to introduce subsequent amendments further to modernise the 1986 Act. The Government will introduce these remaining changes in due course.