BUILDING SOCIETIES.—This is the term now applied to societies formed for the purpose of raising by the subscription of the members a stock or fund for making advances to members out of the funds of the society, upon security of freehold, copyhold, or leasehold estate by way of mortgage. The difference behs cell building societies and joint-stock companies is found in their respective leading ideas; that of the former being membership, that of the latter, capital. In the building society the capital is never fixed; the number of shares is always indefinite, and the share has no permanence; the capital is constantly increasing by the addition of new shares, or decreasing by the withdrawal of old ones. Its membership, says the Report of a Royal Commission, remains always open, it knows no share jobbing, fattens no brokers, and needs no settling clay on the Stock Exchange. Building societies are, in fact, an investment peculiarly available to small capitalists. The shares may be purchased by instalments of from £1 upwards, and are held by investors and borrowers alike, and the profits of the society go to all the shareholders.
Building societies, as such, have not necessarily any concern with building operations. A case, however, that came before the Courts in the year 1812, would show that in those days the term was more descriptive of the objects of such societies than it is at present, for in that society the object was really to build for its members. There was then no statute law regulat inn building societies, and it was even doubtful whether the societies wery legal ; but this case having established their legality, the result was an immediate increase in their number—an increase which has been maintained limit the present day. In 1836 was passed the first statute regulating building societies, but this Act was repealed by the Act of 1874, which was itself the result of a Royal Commission issued in 1871 to inquire into and report upon the state of the law as to both friendly and building societies.
The Act of 1874 is now the principal Act affecting building societies, but it must be react with a number of subsequent amending Acts, end ing with the Building Societies Act, 1894. Apart from these Acts, building societies may be formed under the provisions of the Industrial Friendly Societies Acts, such societies operating upon somewhat differ ent lines. The term "Co-operative," when forming part of the title of a building society, is not necessarily indicative of its real method of working, for a society with such a name may be formed under the Build ing Societies Acts as well as under those more applicable to co-operative societies.
There are also building societies still in existence which were established and certified prior to the year 183G. These societies now form an un important class, and not being incorporated under the Building Societies Acts, are known as unincorporated societies. Except in matters of detail, they are governed by the same statutory requirements as other building societies. The original form of building society would be known to-day as a terminating society, as distinguished from the other class comprising the permanent societies. The modern building society has no concern with actual buildit, and merely makes advances, upon security, to its members .tccording to its rule.
A terminating society has been defined by Act of Parliament as a society Ns hich by its rules is to terminate at a fixed dale, or when a result specified in its rules is attained. In such a society the members subscribe monthly sums, which are accumulated until the fund is sufficient to give a btielialCd bill:I to each member, and then the whole is divided among them.
Take, for example, a society in which the sum to be raised for each member is £100. If this were all it would be a very simple transaction, mere accumulation, and the only question would be, how to invest sums subscribed to the greatest advantage. But this is not all ; one main object is to enable members to obtain their £100 by anticipation on their allowing a large discount. For this purpose, when a sufficient sum is in the hands of the treasurer, the members who desire to get their shares in advance, bid by a sort of auction the sum which they are ready to allow as discount, and the highest bidder obtains the advance. Thus, if at the end of the year a sum of £500 is in the hands of the treasurer arising from the monthly sub scriptions, and the holder of ten shares is willing to allow a discount of 50 per cent. (no one offering more), the £500 is, or may he, advanced to him, being £50 in satisfaction of each of his £100 shares. For this accommodation he is bound to pay monthly, until a fund is raised sufficient to give £100 per share to all the other slumbers, not only the original monthly subscription, but also a monthly um called "redemption money." The amount of the monthly subscriptions and redemption money is fixed by the rules of each society—say, the monthly subscription on each share is 8s. Gd., and the monthly redemption money 3s. 6d., so that the monthly pay ment of each member who has not received his share in advance is 8s. 6d., and the similar payment by those who have been advanced, 12s.