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The BBC's Rory Cellan-Jones
"Members would be worse off if they became banks"
 real 28k

Adrian Coles of the Building Societies Association
"The key problem for building societies is that there's a very biased voting system"
 real 28k

Wednesday, 1 December, 1999, 14:00 GMT
Carpetbaggers race to beat deadline
portman building society Carpetbaggers made a last attack before the new law took effect

Legislation to protect the status of building societies has come into effect, but it may prove too late for the Portman, Chelsea and Skipton - the UK's fifth, eighth and seventh largest.

The laws were introduced after the remaining building societies appealed to MPs.

What the new law means
Demutualisation resolutions must be supported by more of a society's members before a vote on the issue can be forced
The number required is dictated by the size of the building society's assets
For example, the threshold for the Portman rises from 50 to 500
Carpetbaggers open accounts to gain membership, demand demutualisation and then sell the "windfall" shares they are given as members once the society converts to a publicly listed status.

In recent years a wave of demutualisation has swept through the industry, with windfall profits of billions of pounds for members of such former building societies as the Halifax and the Woolwich.

The remaining building societies argue that they provide long-term benefits for their members, and that it should not be so easy for carpetbaggers to join a mutual society just to force a vote on demutualisation.

Portman latest victim

Not to be outdone, carpetbaggers have made a last-ditch attack on Bournemouth-based Portman, Cheltenham-based Chelsea and the Skipton, in North Yorkshire, operating through the carpetbagger.com website.

On Tuesday, the Portman said carpetbaggers had demanded a vote on whether to demutualise and distribute windfall shares to members.

But the society said it had made no decision about whether the resolution should be put to members and would check its validity before making an announcement.

Deputy chief executive Robert Sharpe said: "The board remain resolutely committed to Portman remaining as a building society, which it believes is in the best interests of both savers and borrowers.

"If the resolution proves to be valid then we will vigorously defend our mutual status," he said.

The attack on the three building societies follows the successful move by carpetbaggers on Britain's second-biggest, the Bradford & Bingley, in April when a resolution in favour of a demutualisation was approved despite the opposition of its board.

Portman spokesman Mike Dobson said the resolution appeared to have been rushed in ahead of the 1 December deadline.

Doors closed

Portman was forced to stop new members opening savings accounts in January after speculation that it was about to agree to a takeover bid sparked a rush of new carpetbagger account openings.

The society currently has over 6bn of assets and 115 branches across the south of England.

It reported 20.6% growth in pre-tax profits in 1998 to 49.6m, with net lending more than doubling to 823m.

Its assets grew 17.7% to 5.6bn at the end of December, while savers' balances rose 12% to 4.31bn.

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See also:
29 Jun 99 |  The Company File
Mutuals fight back
17 Nov 99 |  Business
Building society offers 1,000 windfalls
09 Jun 99 |  The Company File
Mutuality pays off

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