A Building Society must act within its functions. Actions outside the functions are presumptively valid in the same manner as with a company. There was a similar protection for outsiders dealing with the Building Society to that applying with companies.
Acts lawfully and effectively done in favour of persons dealing with the Society in good faith are valid notwithstanding the absence of a power on the Society in that regard
The Society was managed by a board of directors and chief executives. There must be at least three directors. The directors are elected by members of the Society at AGM or through a postal vote. The directors were generally non-executive director who oversaw the management.
Directors must prepare annual accounts which must be laid before the AGM for approval. They must produce financial statement circulated to members at least 21 days before the AGM.
Many of the rules applicable to company directors, apply to directors of a Building Society. They must register their interest in particular matters. Persons connected with a particular transaction are obliged to disclose their interest and to the board.
Disclosures must be kept in a register. Long-term employment and consultancy contracts must be disclosed. The terms of the contract must be available for inspection by members.
Directors involved in property transactions with the Society must obtain approval at general meetings. A transaction entered without the necessary approval is void. Loans made to directors or connected person cannot not be at any more favorable rate than to equivalent borrower.
A Building Society must have a chief executive responsible to the board of directors. Every Building Society must appoint an auditor at their general meetings. The roles of the auditor are broadly similar to that in relation to companies. The roles of the auditors were enhanced greatly by the 2003/2004 financial service legislation which applies.
Appointment of Directors
The Building Society is to have at least three directors. There is to be a Chairman who is not to be Chief Executive except with the consent of the Central Bank. The Chief Executive is responsible under the authority of the Board of Directors for the conduct of the business of the Society.
Steps must be taken to ensure that directors are persons with knowledge and experience of the functions of those offices. Central Bank consent is required to the approval of director. Prior notice is required of a proposal to approve a Chief Executive.
Directors of the Society are appointed at general meeting or by postal ballot during the three-month period preceding the general meeting. Persons entitled to vote are those members of the Society who are entitled to vote under the rules. There are procedures in relation to nomination of directors which constrain the rules to a certain extent.
Directors other than the director who is also Chief Executive shall retire from office not later than the third Annual General Meeting following his election and is eligible for re-election without nomination, subject to the rules.
A director of a Building Society must disclose contracts or proposed contracts in which he or certain widely defined connection to persons have an interest. Copies of declarations must be registered and recorded.
Certain favourable contracts must be approved by the members in general meeting including contracts for a period which may exceed five years, during which employment cannot be terminated by notice or could only be terminated in specified circumstances (golden umbrellas type clauses), disincentivising termination of employment.
A Building Society must keep copies of directors’ employment contracts at its chief office. They shall be open for inspection by members.
A Building Society shall not enter property transactions with directors or persons connected to them without the consent of the Society in general meeting. This section is broadly equivalent to the equivalent section in the Companies Act in respect of purchase or sales of non-cash assets in the company’s registration.
The Society shall not make loans to the directors, enter guarantees or give security on their behalf. Provisions broadly parallel, Section 31 of the Companies Act 1990 in respect of loans, security etc. to director’s and persons connected to directors.
Breach of the above arrangement is voidable and is an offense. Persons who are authorised to transaction may be subject to civil and criminal liability. Loans and equivalent transactions which are permissible under limited exceptions to the above prohibitions e.g. in relation to value must be recorded and details must be open for inspection.
Officers of the Society who are directors or who provide services or are connected with entities which provide services to the Society must disclose the same and the same must be recorded. Associated companies are entities other than subsidiaries and related companies of the Society; the relevant services are conveyancing, surveying, valuing, PR, insurance and other specified services. The same must be disclosed.
Particulars of director’s salaries are to be included in the accounts. Tax-free remuneration may not be given. Director’s names are recorded on the head of business letter.
Certain persons may be disqualified from acting as auditors or directors of a Building Society. These include persons disqualified or convicted of certain offences in relation to fraud and dishonesty.
Application may be made to court to disqualify a person from being directors, auditors or managers of Building Societies where they have been guilty of certain offences, breached certain duties or conducted themselves in ways which make them unfit to be concerned in the management, liquidation, receivership etc. of a Building Society.
Each Society must hold an annual general meeting in the first four months of its financial year. They considered the account and directors reports.
The directors may convene special general meeting. The auditor may convene a special general meeting if resigning. Members may requisition a general meeting subject to certain conditions. Generally at least a certain significant number is required to requisition the meeting.
A Building Society must hold an Annual General Meeting in the State in the first four months of its financial year. The Central Bank may extend the four-month period. Between 21 and 42 days’ notice must be given of the meeting. Notice may be given by letter to members or by advertisement in the press.
A Building Society must keep a register of members at its chief office including certain prescribed particulars in respect of them.
Members are generally entitled to vote on resolutions. In some cases, they must be registered for at least a year as a member and must have had shares of at least a certain value for that period.
Generally, each member has one vote. A special resolution may be passed by a majority. A conversion resolution may be passed by a majority and is subject to special provisions.
Generally, a member may appoint a proxy subject to compliance with the rules and certain statutory limitations on the terms of the rules which provide for minimum rights in respect to proxy.
A member has a right to demand a poll. At least 10 members must demand the poll. Members, at least 25 in number or such lesser numbers as may be allowed, specified in the rules may propose and circulate resolutions at AGM. Generally, the Society must circulate the resolution subject to certain provisions in relation to potentially defamatory, vexatious or resolutions which may diminish public confidence in the society.
Rules may provide for postal ballots. A notice must be given of at least between 21 and 42 days before the date for receipt of final ballot. The ballot papers must be accompanied by such documents as would be required at the meeting.
Building Societies must keep proper accounts and records of its business. The accounts must correctly record the transactions of the Society and disclose its financial position. It must enable the directors to discharge their functions. Systems of internal audit must be established and maintained.
Accounting records must be kept at the chief office and be open for inspection by directors. They must be preserved for six years. Equivalent provisions apply to subsidiaries.
Building Societies must prepare financial accounts annually similar to those applicable to companies. Group accounts may be required where there are subsidiaries. The directors must report on the accounts to the members, a summary financial statement derived from the accounts giving a fair and accurate summary account of the Society’s financial position and development is to be prepared.
A copy of the summary financial statement and auditor’s report if qualified must be sent to every member of the Society not less than 21 days before the Annual General Meeting.
Building Societies are to display in a conspicuous place in every branch office or place of business, a statement as the Central Bank may direct, in relation to the business carried on by the Society.
The accounts are to be laid before the Annual General Meeting. They are to be furnished to the Central Bank. The Central Bank may require specified copies of any documents to be sent to all members.
There are provisions regarding appointment or approval of auditors which are broadly similar to those in respect of companies. The Central Bank may appoint an auditor if none is appointed. Details of appointment must be given to the Central Bank. It may make requirements in respect of appointment of auditors and may veto the appointment of auditors.
There are provisions regarding the appointment and removal of auditors. At least 28 days’ notice must be given to the Society and Central Bank of a resolution appointing an auditor other than a retiring auditor or removing an auditor. Notice of the intended resolutions must be given to the members in the same way as a general meeting or with the approval of the Central Bank by advertisement.
There are provisions in relation to the resignation of auditors, broadly similar to those for companies save that the Central Bank has an interest and role in the process. The auditor’s report is to be read at the general meeting. The auditors are to report on the accounts and the director’s report. The report is to be laid before the Annual General Meeting. They are to state specified matters in their opinion.
Auditors have statutory rights to all books, records, and vouchers of the society and other documents relating to its affairs.
Auditors must report certain matters to the Central Bank in writing including inability of the Society. Facts and circumstances which materially affect the society’s ability to fulfil its obligations to shareholders and depositors, defects in accounting records and systems, material inaccuracies, any qualification to the report.
An officer or employee of a Building Society or subsidiary which makes a false or deceptive statement in the following context is guilty of an offence. This applies to statements made to auditors which conveys or propose to convey any information. The auditor is entitled to require explanations of matters that are within the knowledge or can be procured by officers or employee. Giving false information or failure to give information is an offence.