The Building Societies Commission is understood to have indicated informally that it would not challenge a complex new scheme that conforms with the Building Societies Act and the interpretation placed on it by last Wednesday's judgment from Sir Donald Nicholls, the Vice-Chancellor. Sir Donald ruled that the existing bid was illegal, at least partly because Lloyds was attempting to offer cash to C&G members of less than two years' standing.
That seemed an insuperable obstacle, because there are 226,000 such members, 27 per cent of the total. Unless they were altruistic enough to approve an offer in which they would receive nothing, their presence would be likely to thwart the requirement that half the members had to vote and be 75 per cent in favour.
Andrew Longhurst, C&G's ambitious chief executive, immediately closed the society's doors to new customers while his legal experts worked out the implications.
Sir Donald confirmed that it was 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, but one can easily be created for the purpose of pushing through a takeover. Its last deposit account, the London Deposit Account, was closed to new investors in May 1993.
Savers with share accounts opened between April 1992 and June 1994, for example, might be offered a tempting deal to transfer funds to a new deposit account carrying a high interest rate and a guaranteed capital sum payable on a takeover. They would then be disenfranchised. The surviving members - those of more than two years' standing - could then vote on a bid.
A spokesman for the Building Societies Commission said: 'It is now up to the C&G as to what they do next. We can only respond when we have a scheme to respond to.'
C&G added: 'We are not going to make an announcement for several weeks. We have to make sure any revised plan is within the terms of the Building Societies Act and the Nicholls judgment. Our lawyers have not been in touch with the Commission.' Lloyds Bank said: 'C&G is driving this one now. We are considering the implications, but C&G went to court with the BSC, not us.'
Abbey National converted from a building society to a bank in 1989 by giving all members - even those who had arrived within the previous two years - the same number of shares. These could be converted into cash as soon as dealing in them began. But C&G is known to be against a share-exchange deal, largely because all members would have to receive the same number of shares.
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