The Legal Right of Building Society Members to Call a Special General Meeting
There is a common misconception that a building society’s Board has complete discretion over whether constitutional issues are put before Members.
That is not the legal position.
The right of Members to request a Special General Meeting (SGM) is not merely a provision of a building society’s Rules. It is a statutory right conferred by the Building Societies Act (1986), with a building society’s Rules implementing the framework prescribed by Parliament.
Parliament requires every building society to provide this right
Schedule 2, Part I, paragraph 3 of the Building Societies Act specifies the matters that every building society’s Rules must contain.
Among those mandatory provisions are:
“the right of members to requisition meetings”; and
“the right of members to move resolutions at meetings”.
In other words, this is not a voluntary governance arrangement adopted by Nationwide. Parliament has required every building society’s constitution to include these Member rights.
The statutory right to require a Special General Meeting
The substantive right appears in Schedule 2, Part III, paragraph 20A.
Paragraph 20A provides that:
“A members’ requisition is a requisition of not less than the requisite number of members of the society; and that number is 500…”
It further requires the requisition to:
- state the objects of the meeting;
- be signed by the requisitioning Members; and
- be deposited at the Society’s principal office.
The Act permits a society’s Rules to impose reasonable qualification requirements (such as a maximum two year membership qualification and minimum savings or mortgage balance), which Nationwide has done.
A building society’s rules re calling a SGM (e.g. Nationwide’s Rule 14) therefore does not create the right to requisition a Special General Meeting. Rather, it gives effect to the statutory regime established by Parliament.
The deposit requirement
Paragraph 20A(7) provides:
“The rules of the society may also require a sum of money, not exceeding £50 per requisitionist, to be deposited with the requisition; and, where any money is so deposited, it shall be forfeited to the society, or returned to the persons who deposited it, as provided by the rules.”
This wording is significant.
The Act limits the amount that may be required per requisitionist, but it does not state that each requisitionist must personally provide their own £50.
Indeed, Parliament chose to provide that any returned money is to be paid to “the persons who deposited it“, rather than to “the requisitionists”.
In my view, the better construction of paragraph 20A(7) is that the legislation limits the aggregate deposit by reference to the number of requisitioning Members, but does not prescribe the source of those funds.
(Accordingly, if 500 qualified Members requisition an SGM, I am prepared to lodge the entire deposit myself. Supporting the requisition will not require each Member to contribute £50.)
I should add that, while I consider this to be the natural reading of the statutory language, I am not aware of any reported judicial authority directly considering this point.
If the Board refused to call the meeting
The legislation also anticipates the possibility of a society failing to comply with a valid requisition.
Schedule 2, paragraph 20B provides that if the society does not, within 28 days, call a meeting to be held within 63 days:
“the requisitionists, or any proportion of them exceeding one half, may themselves call a meeting…”
The Act also allows the requisitionists to recover their reasonable expenses from the Society, with the Society in turn having a right to recover those sums from the directors responsible for the default.
The statutory scheme therefore provides a practical enforcement mechanism should a Board fail to comply with its obligations.
Amending the Rules
Calling a Special General Meeting does not, by itself, amend a building society’s constitution.
Any amendment to the society’s Memorandum or Rules must be approved by a Special Resolution.
A 75% threshold is prescribed by the Building Societies Act. Schedule 2, paragraph 27 provides that a Special Resolution is passed only where it receives:
“not less than three quarters of the number of the members … voting…”
Building societies’ Rules adopt precisely the same statutory definition, providing that a Special Resolution requires a majority of 75% of votes cast.
Conclusion
The constitutional architecture established by the Building Societies Act is clear.
Parliament has given Members — not Boards — the right to require a Special General Meeting.
It has prescribed the process by which that right is exercised.
And it has provided the mechanism by which a building society’s constitution may be amended, subject to the approval of a 75% majority of voting Members.
Those are not discretionary powers granted by a building society. They are statutory rights conferred on Members of building societies by Parliament.