THE VM Group and associated companies are considering a process of demutualisation and the consolidation of entities under one new mutual and two new holding companies (one financial and the other non-financial), a scheme initiated to satisfy the Banking Services Act (BSA).

VMBS is currently registered as a mutual building society and carries on business under the regulatory control of the Bank of Jamaica (BOJ through the supervisory committee under the Act.

However, under a new Supreme Court-approved scheme of arrangement, The Victoria Mutual Building Society, as well as Victoria Mutual Investments Limited, Victoria Mutual Pensions Management Limited, VMBS Money Transfer Services Limited, British Caribbean Insurance Company Limited, and VM Innovations Limited are proposed for reorganisation as mandated by the BSA for regulatory purposes.

Shareholder agreement

The scheme now being considered shall become effective contingent upon the members of the society passing a special resolution. The meeting will be held on August 10, 2022 at the company’s 73-75 Half-Way-Tree Road, St Andrew, location at 3:00 pm.

By an order of the Supreme Court of Judicature made on July 5, 2022, the court directed that the meeting of shareholders of VMBS be held to consider and possibly approve the scheme of arrangement leading to consolidation. Under the scheme the society shall be converted from a mutual building society to a proprietary building society.

The company has published the scheme of arrangement presented to the court. In it, the VM proposes that the liability on its balance sheet represented by 15-year-old dormant accounts in the approximate amount of $1.2 billion will be extinguished and the revenue reserve arising therefore will be constituted as part of the capital base of the society in the form of retained reserved earnings.

The published scheme clarifies that such accounts would have not seen any customer activity from 16 and a half years prior to the effective date of the arrangement.

Scheme of arrangement

Under the scheme, the membership rights of all society members shall be cancelled and extinguished.

Further it was noted that $7.45 billion in the permanent capital fund will be capitalised and allotted and issued to the new financial holding company (FHC) as fully paid up shares, free from encumbrances at the issue price of $1 each.

The FHC in consideration for these shares issued to the mutual holding company a similar number of shares. In turn the mutual holding company will issue and allot these shares to former members of the mutual holding company, including those overseas and only excluding members whose accounts are dormant.

It was noted that where members with 15-year dormant accounts or their representatives make contact and activate savings, they will be accorded full rights under the new scheme of arrangement.

VMBS has 1.134 million members in Jamaica; 70,441 in the United Kingdom; 92,562 in the United States of America; 19, 213 in Canada; 14,919 in countries classified as others for a total membership of 1,331,814.

At the meeting of shareholders, the vote will be held on resolutions including that the society to be demutualised, and that financial and regulated entities under it be reorganised under a FHC to conform with the requirements of the BSA.

Non-financial companies owned by the society will also be reorganised under a non-financial holding company. Both holding companies will be held under a mutual holding company in which members will be granted rights similar to their rights in the existing society.

Company growth

Earlier this year, Group CEO Courtney Campbell said that a new structure, in compliance with the BSA, will allow VMBS to raise capital and further enhance its resilience through a new business model.

He said then that the company submitted a formal application to the BOJ in mid-March this year and expects to receive a positive response by mid-year.

Campbell said, “As we look to the future in pursuing a triple bottom line, we’re focused on purpose…in transforming the lives of our members, of our clients, of the communities in which we live and serve, and of our people who work for this organisation.”

The scheme of arrangement proposes that the consolidated holding company and mutual would each have total assests of $16.67 billion. Group assets reported at year end September 2020 were $139.36 billion.

Campbell clarified, “The $16 billion total assets on page 134 [of the scheme of arrangement] represents the total assets for the financial holding company limited [FHC] on a stand-alone basis and not the financial holding company limited on a consolidated basis. The total assets of $165 billion on page 133 is reflective of the FHC consolidated position.”

For the financial year ended December 31, 2020, the group achieved a net surplus of $2.64 billion — a 23.68 per cent increase when compared to the year prior.

The group’s revenue grew by 39.51 per cent to $12.55 billion, mainly driven by a one-off boost in income associated with the net gain from the purchase of loan receivables under the National Housing Trust’s Joint Financing Mortgage Programme.