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Substantial property transactions involving directors and connected persons.
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56.—(1) A building society shall not enter into an arrangement—
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(a) whereby a director of the society or a person connected with such a director acquires or is to acquire one or more non-cash assets of the requisite value from the society; or
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(b) whereby the society acquires or is to acquire one or more non-cash assets of the requisite value from such a director or a person so connected;
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unless the arrangement is first approved by a resolution of the society in general meeting.
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(2) For the purposes of this section a non-cash asset is of the requisite value if at the time the arrangement in question is entered into its value is not less than £50,000 or, in the case of a society with reserves of less than £500,000, is not less than 10 per cent. of the reserves.
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(3) In this section “non-cash asset” means any property or interest in property other than cash and for this purpose “cash” includes foreign currency; and a reference to the acquisition of a non-cash asset includes a reference to the creation or extinction of an estate or interest in, or a right over, any property and also a reference to the discharge of any person's liability other than a liability for a liquidated sum.
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(4) An arrangement entered into by a society in contravention of this section and any transaction entered into in pursuance of the arrangement (whether by the society or any other person) shall be voidable at the instance of the society unless—
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(a) restitution of any money or any other asset which is the subject matter of the arrangement or transaction is no longer possible or the society has been indemnified in pursuance of subsection (5) (b) by any other person for the loss or damage suffered by it;
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(b) any rights acquired bona fide for value and without actual notice of the contravention by any person who is not a party to the arrangement or transaction would be affected by its avoidance; or
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(c) the arrangement is, within a reasonable period, affirmed by the society in general meeting.
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(5) Without prejudice to any liability imposed otherwise than by this subsection, but subject to subsection (6), where an arrangement is entered into with a society by a director of the society or a person connected with him in contravention of this section, that director and the person so connected, and any other director of the society who authorised the arrangement or any transaction entered into in pursuance of such an arrangement, shall (whether or not it has been avoided in pursuance of subsection (4)) be liable—
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(a) to account to the society for any gain which he had made directly or indirectly by the arrangement or transaction; and
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(b) jointly and severally with any other person liable under this subsection, to indemnify the society for any loss or damage resulting from the arrangement or transaction.
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(6) Where an arrangement is entered into by a society and a person connected with a director of the society in contravention of this section, that director shall not be liable under subsection (5) if he shows that he took all reasonable steps to secure the society's compliance with this section and, in any case, a person so connected and any such other director as is mentioned in that subsection shall not be so liable if he shows that, at the time the arrangement was entered into, he did not know the relevant circumstances constituting the contravention.
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