Patricia Hewitt, Economic Secretary to the Treasury, said the Government was opposed to changing the Building Societies Act in spite of protests that it allows just 50 individual members to force a de-mutualisation vote at societies with millions of members. "What I think would be wrong would be to prevent members from coming forward at all with a conversion proposal, because building societies belong to the members and it is part of the democratic ethos that they should be allowed a say," Ms Hewitt said.
The rebuff is a blow to heads of building societies, seven of which may be forced to hold votes on de-mutualisation proposals by April. The proposals were lodged last week by Michael Hardern, the eccentric "carpetbagger in chief", and Stephen Major, a plumber from Lisburn, Co Antrim.
On Radio 4's Today programme, Ms Hewitt said: "It is very irritating for building society boards to have to go through this all the time but it is part of the process. One could say the same about takeover bids."
Building societies complain that the rules are disruptive to their business because a 2.5 million-strong society can be held to ransom by just 50 members, or 0.002 per cent of the vote. Shareholders at a listed company need10 per cent of voting shares to force a vote. Adrian Coles, director general of the Building Societies Association, said: "We will continue to point out that 50 individuals being in a position to manipulate a 2.5 million-strong society is too small a number."
Chief executives of the eight societies facing conversion proposals - Bradford & Bingley, Britannia, Yorkshire, Leeds & Holbeck, Skipton, Coventry, Chelsea and Portman - held an unprecedented meeting yesterday to thrash out legal methods of stopping carpetbaggers.
While Bradford & Bingley will go ahead with a vote in April, the other societies believe Mr Hardern's proposals may be flawed in law. They are seeking a legal opinion which may allow the proposals to be struck out.
Mr Hardern's resolutions call on the societies' boards "to take immediate steps to convert to plc status and distribute free shares to members". This may clash with a 1974 legal decision, Hinkmott v. Woolwich, which stops members using resolutions to interfere with the running of a society.Reuse content