Fact sheet

What is the difference between a building society shareholder and a depositor?

People and institutions investing in building societies can be divided into two categories - the depositor and the investing member (or shareholder). Depositors are not members of the society and have no say in its running.

Shareholders, as members, have the right to receive information on the activity of the society, including the summary financial statement, and notification of the annual general meeting and any special general meeting. Shareholders can vote in elections for the board of directors, attend annual general and other meetings and, providing the correct procedures are followed, propose motions or stand for election themselves.

Where there are joint holders of a share account, only the first-named account holder is entitled to all of the members' rights described above.

Depositors are not members of the society and have few of the rights of shareholders. Depositors for example, need not be notified of the annual general meeting as they are not entitled to attend that meeting or vote on matters under consideration. Also depositors are not automatically sent a copy of the summary financial statement, although generally copies of this document are available from societies on request.

Until recently, depositors had a theoretical priority over shareholders in a winding-up of a building society. That situation has been completely changed by the implementation of the EU’s Bank Recovery and Resolution Directive, which introduces instead a new priority for retail customers of both banks and building societies. For building societies, no effective distinction is now made between depositors and shareholders (apart from holders of deferred shares). The highest priority is given to amounts covered by the Financial Services Compensation Scheme (FSCS). The next priority is given to amounts held by individuals, or micro-, small or medium sized enterprises that exceed the limit for FSCS coverage. Other investors then have the same priority as general unsecured creditors. The priorities on insolvency , and the general methods of protecting savers, are fully explained in  an official publication called The Bank of England’s approach to resolution, published in October 2014 : http://www.bankofengland.co.uk/financialstability/Documents/resolution/apr231014.pdf 

Irrespective of the points made above, the Financial Services Compensation Scheme applies to all building society shareholders. If the Scheme was ever required in the case of a building society savers would be entitled to 100% compensation on the first £85,000 invested. More information on the Scheme is available here.

Deposit Accounts and the Building Societies Act 1997

The Building Societies Act 1997 imposes restrictions on the categories of deposit accounts which an individual may hold with a building society.

Apart from a number of exceptions, individual investors may only have share accounts with societies. The exceptions - where customers may still open deposit accounts - include current accounts; client or trustee accounts; qualifying time deposits; deposits at overseas branches; and where the society has announced publicly that it intends to transfer its business to a company.


Simon Rex

Information Services Manager

Tel: 0207 520 5914 simon.rex@bsa.org.uk