C&G will return with new scheme for Lloyds takeover: Society still hopes to make handout to all savers and get round court's two- year ruling. Vivien Goldsmith reports

THE OLD scheme to deliver cash to Cheltenham & Gloucester borrowers and savers is dead. The society expects to be able to come back with a new one, but not for several weeks.

The society still believes it can devise a new plan as part of a deal to be taken over by Lloyds Bank that will put cash into the hands of all C&G customers and reward larger savers with larger sums.

A C&G spokeswoman said the society did not want to offer shares or preference shares.

The judgment by the Vice Chancellor, Sir Donald Nicholls, which said that payments could not be made to members of the society unless they had held a share account for at least two years, opens up several possible courses of action.

For instance, he confirmed that it was quite in order for members of the society to vote for a scheme that would direct cash to non-members. These include savers with money in deposit accounts not classified as share accounts. Currently C&G does not have a live deposit account. The London Deposit Account was closed to new investors in May 1993.

It is conceivable that savers with accounts opened in the two years before the cut-off day - just before the announcement of the deal in April - might be encouraged to transfer funds to a new deposit account which would allow them to be paid out.

Under the old deal, voting investors stood to gain pounds 500 plus 10 per cent, borowers a flat pounds 500 and deposit account holders 10 per cent of their savings.

The society still has to get the deal through tight voting requirements, which involve members voting for cash for themselves and the non-members. But that is easier than having as part of the voting body the disaffected 27 per cent of shareholding members who would be excluded from the payout because of the two-year rule.

Three-quarters of the shareholders must vote in favour, and at least half of those qualified to vote, or votes representing 90 per cent of the value of shares held by members, must vote in favour.

A separate vote of borrowers just needs a simple majority. But the High Court judgment said the two-year rule applies to those who held shares. So borrowers who do not happen to have had a share account for at least two years will be in the same position as savers who have opened accounts within the last two years.

C&G is not opening any new accounts - even for existing savers. This is a temporary bar and should be removed before the new scheme is announced.

The society is writing to all 1.4 million customers this weekend advising that mortgage accounts and all savings accounts should be kept open. It closes the letter by saying: 'Your vote will be important for the future of the society.'