Knight's reforms receive cautious welcome at A&L

Compromise Treasury proposals to amend the forthcoming Building Societies Bill received a cautious welcome yesterday from societies preparing to convert to banks, as Alliance & Leicester members voted overwhelmingly in favour of a switch.

Around 500 mostly disgruntled Alliance & Leicester members attended the meeting at the London Arena in Docklands.

Woolwich and Alliance & Leicester said Treasury suggestions that it might amend a controversial "10-per-cent rule" on takeovers showed that dialogue over the Bill was still possible.

The Bill, to be published in draft form next week, proposes to do away with protection against predators for any de-mutualised society which takes over or merges with another institution within the first five years.

Woolwich, Northern Rock and Alliance & Leicester argue that they are in turn vulnerable to action from unrepresentative minorities.

Angela Knight, the Treasury minister, told The Independent earlier this week that she was looking at ways of protecting a converted society from being "bounced" by a small minority of shareholders into removing the five-year protection from takeover. The minority might want to call for a shareholder vote to open the way to a hostile bid.

Treasury sources said yesterday that the draft might seek to amend the rules whereby just 10 per cent of shareholders can requisition a special general meeting of the newly floated company and vote to abandon the five- year protection against takeovers.

A spokeswoman said: "The aim is to make sure that companies are not forced to give up their protection by a small action group."

Although the way this can be done has yet to be fully considered, in order not to fall foul of the Companies Act, one option might be to increase the proportion of shareholders who would then have to vote in favour of a merger in a ballot.

Simon Everard, chairman of Alliance & Leicester, said at the end of the often ill-tempered meeting, that 70 per cent of investing members had voted and that 96 per cent of them voted in favour. He said 97 per cent of borrowers who voted were in were in favour. Speakers from the floor raised questions ranging from the share distribution scheme prosed by the society to the share options being awarded to the board of the society.

"If the basic priniciple of mutuality is one investor, one vote, why didn't you tell us in January [when the conversion plans were announced]," asked Patrick Mountain, who has received over 1,500 letters from furious members of the society.

They wanted Alliance & Leicester to award shares proportionate to the amount of savings they had with the society rather than the proposed flat rate of pounds 250 per member.

Peter White, chief executive, said this was the method used by Abbey when it floated on the market and was also fair to the majority of members who had pounds 2,000 or less in their accounts.

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