Paudge Connolly (Cavan-Monaghan, Independent)

The import of this Bill is that legislation will be updated so building societies will be enabled to demutualise and convert into companies while protecting the development of mutual societies. However, the Irish Nationwide Building Society will be the most immediately affected by the enactment of the Bill. As soon as the Bill clears the Oireachtas, the way will be paved for the demutualisation and sale of the Irish Nationwide Building Society. Under previous law the Irish Nationwide Building Society would have had to wait five years after demutualisation before it could be sold to another company. The Irish Nationwide Building Society will now be free to opt out of a five-year ban. The EBS will not have that option, however, as this is restricted to building societies which have required a minimum deposit of €10,000 for five years to qualify for membership. After demutualisation, the Irish Nationwide Building Society will change from a company owned and controlled by policy holders to a public limited company. That will leave the company open to a stock exchange flotation or to be purchased by another company, which is the most likely scenario.

With such a stampede to pass legislation within the next 24 hours, it is most likely that the Irish Nationwide Building Society will be sold before the year's end — some people reckon it will be before November. Under existing legislation, however, members could not propose a conversion resolution. Section 19 of the Bill does not even allow a discussion on conversion at annual general meetings. Members will never be allowed, therefore, to question the EBS's policy of remaining mutual or even contemplate demutualisation. How can that be justified in a democracy? Section 19 must be amended to permit discussion or proposals to initiate a demutualisation.

The corporate governance question needs to be addressed but the Bill fails to do that. Building society boards have tended to be dominated by strong individuals, and the Irish Nationwide Building Society is certainly in that category, with a mere three non-executive directors. Such a small board will be able to dictate and decide the terms of the demutualisation and the way the proceeds will be distributed.

The Bill should be amended to set a minimum of seven non-executive and a maximum of two executive members of the board, in line with best corporate governance policy. Any board considering demutualisation should be required to have a minimum of nine members for the period during which demutualisation is being arranged. A members oversight committee should also be a prerequisite to review the demutualisation proposal.

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