Charitable assignment
On 20 March 2000 Chelsea introduced a requirement that any new investing members must assign to Chelsea Building Society Charitable Foundation any windfall conversion benefits to which he or she may become entitled.
This requirement applies to anyone who opens a share account with Chelsea unless that person:
- has been a shareholding member of Chelsea continuously since 19 March 2000 or
- has been a borrowing member of Chelsea continuously since 19 March 2000 or
- belongs, at the date of application, to one of the classes of exempt customers. A list of the classes of exempt customers is available on request from the Secretary at Chelsea's Head Office. The reason why some individuals are exempt is to avoid unfairness.
The reason that Chelsea has introduced this requirement is to avoid disruption to its normal business caused by the action of speculators whose main objective is to receive conversion benefits.
Chelsea Building Society Charitable Foundation is a registered charity, constituted so that a majority of its trustees are independent of Chelsea Building Society. It provides financial assistance in the form of grants to registered charities.
What do we mean by windfall conversion benefit?
This means a benefit in the form of a distribution, usually in cash/shares, to shareholding members or depositors under the terms of any transfer of the business of Chelsea Building Society to a company (ie on a conversion or takeover). Borrowing members will not be required to assign windfall conversion benefits which may be received by them in their capacity as borrowing members.
What do we mean by assigning benefits?
If your share membership begins on or after the 20 March 2000 will have the same rights as any other member including rights to vote on all issues. However, the declaration will have the effect that for the first 5 years of your membership any windfall conversion benefits to which you may become entitled would, automatically be passed over to Chelsea Building Society Charitable Foundation.
What is the Charitable Foundation?
Chelsea Building Society Charitable Foundation is a company registered as a charity which will itself make donations to various charitable causes. In addition to the possibility of windfall conversion benefits, Charitable Foundation will receive donations from Chelsea each year. Charitable Foundation, which will be the focus of Chelsea's charitable giving, will only make donations to charities registered with the Charities Commission.
What if, as a new customer for a share account, I am already a member?
Paragraph 8 of the declaration is included in all savings application forms. However, it is drafted in such a way that if you are already a member, through having a shareholding account or mortgage with Chelsea before 20 March 2000 then paragraph 8 of the declaration does not affect you at all.
How long will this arrangement last?
On or after 20 March 2000, a customer opening a new share account would not receive a windfall conversion benefit if a conversion took place at any time in the 5 years from the date of account opening. This is subject to certain exceptions. (see below). We expect that these arrangements will remain in force indefinitely, but Chelsea has the power to end the scheme if it decides that this is in the best interest of Chelsea. If that happened, customers who had already signed a declaration would continue to be bound by it but new customers would not be required to assign any windfall conversion benefits to which they may become entitled.
If I want to transfer my savings account to a new savings product offered by Chelsea will I lose continuity of membership?
Provided that the transfer of funds from one savings product to another is made simultaneously then no loss of continuity of membership will occur. However, if there is a break between the closure and reinvestment then you will lose your continuity of membership and, on opening a new account, your membership history will run from the date the new account is opened.
On a transfer of my savings account will I be required to agree to assign my windfall conversion benefits for a further 5 year period?
You will be required to sign a new declaration form (which will include part 8) but, provided you have continuity of membership, the relevant charitable assignment period will run from the date you opened your earlier share account. The same principles will apply if you open a second, or another share account.
If my share account is in my sole name and I want to change the account into the joint names of myself and someone else will the incoming account holder be required to agree to assign any windfall conversion benefit (s)he may become entitled to if Chelsea converts?
Yes, unless the new account holder is already a member. You are reminded however that, in respect of a joint shareholding, only the representative joint shareholder will be entitled to receive any windfall conversion benefits. Your rights will be unaffected by the transfer of the account into joint names.
If I transfer my account to someone else will that person benefit from my period of membership?
No. In respect of membership history each account holder is treated separately. It may be that the person to whom you transfer your account has their own membership history with us. If not part 8 of the declaration form will apply to them, unless the transfer of the account satisfies one of the exceptions to the charitable assignment scheme mentioned below.
What are the exceptions?
Existing members at 20 March 2000 are excluded from the scheme. On or after 20 March 2000 new mortgage customers would still be entitled to any windfall conversion benefit coming to them as borrowing members. (Valid applications to open accounts received but not processed before 20 March 2000 will not be affected). In order that customers whose accounts are held by others on trust are not unfairly treated, the following applications for transfer of an account will result in the existing account holder's history being transferred to the new account holder:
- transfer of account from a deceased member to a personal representative, widow(er) or child under 18 years old
- transfer of a trust account held for a named beneficiary when the trustee changes but the beneficiary remains the same
- death of first named account holder where a second named account holder becomes the first named
- transfer of a designated child's trust account into the child's name when (s)he attains sufficient age
