If, after such an advance as the above, no further advance were made, the natural course of the society would be that the members, other than the holder of the ten shares, would continue their monthly subscriptions, and the owner of the ten shares would his monthly subscription and redemption money, until the fund thus xaised should be sufficient to pay £100 per share to every member other than the holder of the ten satisfied shares. Thus, if there were one hundred shares, and at the end of the first year there was V500 in hand, the condition of each shareholder, before any advance had been made, would be that he would be bound to pay 8s. Gd. per month, say 1'5 per annum, until by the payments and the £500 in hand the requisite amount, that is, £10,000, being 1100 for each £100 share, should have been raised by accumulation. After the advance, the condition of every shareholder, other than the holder of the ten advanced shares, is that he is to contribute his monthly payments until they, together with the monthly payments and redemption money contributed by the holder of the advanced shares, are sufficient to realise not 10,000, but £9000, that is, £100 for each share other than the ten shares of the advanced member, whose shares will have been already satisfied by the 1'500. He loses his interest in the £500 advanced to the holder of the ten shares; but, on the other hand, the sum to be raised is only £9000 instead of £10,000, and the monthly contribution is increased by the amount of the redemption money paid by the member who has received his ten shares in advance. Further advances are made from time to time, as funds are accumulated, and as members are inclined to give high discount in order to obtain payment of their shares by anticipation, the gain to the sociely arising mainly from the high rate of discount which members in want of money arc ready to give. In fact, the whole scheme is but an elaborate contrivance for enabling persons having sums for which they have no immediate want, to lend them to others at a very high rate of interest. In order to secure the due payment of the monthly subscriptions and redemption money by the members who have received their shares in advance, they are obliged to give satisfactory real security to the trustees of the society.
A member of such a society may withdraw upon the terms laid down in the rules. The principle of these terms is that he is to pay a small sum by way of fine or penalty, if he withdraws at any early date after the formation of the society ; but if he withdraws after having been a member, and so having paid his subscriptions for several years, then upon withdrawing he is to receive back the full amount of the subscriptions, and also to take, if the society thinks fit, a further sum, to be from time to time fixed by them, by way of bonus upon what are called the profits of the society. It is obvious that this is an arrangement which may, if the calculations are properly made, be carried into effect without injury to the society. When the member withdraws, the society thenceforth loses the benefit of his monthly subscriptions; but then the other members are relieved from the obligation of making up the £100 to which, on the above lines, he would eventually become entitled. If the member upon withdrawing merely took back the amount of his subscriptions, the society would clearly benefit to the extent of the interest made by means of those subscriptions previous to the member withdrawing; and it is plain that out of the interest so realised an allowance may be made to the withdrawing member, still leaving to the society some benefit from his past contributions. The sums subscribed by
a member who withdraws have contributed to make up the fund out of which the shares of those members who have been advanced (that is, have taken a smaller sum at once, allowing a large discount, in lieu of the full sum of £100) have been made good ; they, therefore, enable the society to obtain a larger monthly payment, that is, 12s. instead of 8s. fid. upon each share, and to reduce, on favourable terms, the number of shares eventually to be provided for. This is, in truth, substantially an investment at a high rate of interest; and the benefits thereby accruing may not inaptly be designated by the name of " profits." What is the precise amount of benefit which from these different causes may have resulted to the society from the sub scriptions of each member would be a very difficult problem to solve. Though an absolutely accurate solution may lie perhaps impossible, yet in a rough way the amount payable as profit to a withdrawing member may be ascertained. Where an advanced member desires to withdraw, the fair course would be for the society to ascertain, as nearly as may be, the period of time during which the monthly payments will have to be continued, and allow such a member to relieve himself from the obligation of continuing his monthly payments on paying down at once a sum equivalent to their present value. Thus, if the monthly payment is 12s., and it is ascertained that the payments must probably continue to be made for twelve years, it would seem to be a reasonable arrangement that the advanced member, who was liable to pay Ns. per month for twelve years, should be free from his liability on paying down at once a sum which an actuary would say is equivalent, in present money, to such continued prospective paymentr, But this principle is not always the one upon which a society bases its plan of redemption.
Another form of terminating society much in vogue until the last few years was that known as a Starr-Bowkett Society, the leading features of which were that the advances to members, or " appropriations " as they were called by such societies, were made by ballot, and the fortunate re cipient had not to pay any discount or increase his subscriptions. The Act of 1894 has, however, prevented the subsequent establishment of societies of this nature, or indeed any society in which the principle of chance or lot is adopted.
A permanent society is one which, by its rules, has no fixed date whereon to terminate, nor any determining result to be attained. Such a society is much simpler, safer, and more equitable than a terminating society. The essential characteristics of a permanent society, and its advantages in relation to terminating societies are so clearly and succinctly set forth in the last edition of Davi,y's Law of Building Societies, that we cannot do better than take a short extract from that work :— " In this form of society (the permanent society) the amount of each share is specified, but no limit is placed on the number to be issued. The investing members make their payments, either in one sum, when the share is said to be paid up,' or by periodical or other sums, the interest in either case being allowed to accumulate until the share has reached the full value pre scribed by the rules, or else paid out yearly to the member, as be may prder. Members who obtain advances from the society are deemed to hold shares equal to the amount of their loans. Repayment is generally made by fixed instalments spread over a specified number of years : the instalments being made up of principal and interest, and ,sometimes, in addition, of a sum charged as a premium on the loan.