Thousands of First National customers whose accounts are held in trust for them - usually by solicitors - will lose out on their entitlement to free shares, if the building society flotation goes ahead this autumn.

Where these accounts qualify under the society's conversion criteria for free shares or financial payments, they will be automatically issued to the solicitor named on the qualifying account, who is deemed to be its legal owner. In these cases, a solicitor will be entitled to a single allocation of free shares, irrespective of how many client accounts held with the society. The solicitor will also have the right to vote on the flotation.

First National group secretary, Mr Robert Bergin, said the society holds around 2,000 of these accounts. "As far as First National is concerned, the named account holder is the owner of that account. Legally, there is nothing we can do about that." He added however, that the society does point out in its conversion documentation to qualifying members that certain people who get free shares many have obligations to distribute that gain to others, where - for instance - they act as trustees.

Solicitors will usually set up client accounts with a financial institution where they are acting as an executor of a will, where they are appointed as a trustee over certain funds, or where they are holding funds on behalf of a client. In many cases, the beneficiaries of these accounts are people with mental and physical disabilities, or minors.

Accounts operated by solicitors will often contain funds for up to 30 or 40 clients, who are effectively by-passed by the conversion benefits, because the First National is not legally obliged to recognise them as beneficiaries.

A similar problem arose last year when thousands of policyholders with Norwich Union lost out on their flotation entitlements because their policies were effectively owned by banks and building societies. Most were customers who had taken out mortgage protection policies with the company which were assigned to the financial institution with which they have a mortgage.

Dublin-based solicitor, Mr Brian Gallagher, yesterday criticised the society's flotation arrangements, which, he said, disenfranchised thousands of its account holders. The arrangements also pose a conflict of interest for solicitors, who will legally be entitled to receive a single allocation of free shares, and will have to decide what to do with the windfall. This difficulty was highlighted in Britain following a number of flotations, and has since been partially resolved through legislation. The 1997 UK Building Society Distribution Act recognises the rights of beneficiaries with mental and physical disabilities, who are now entitled to receive any free shares or other entitlements.

Under Irish Building Society legislation, the society must issue shares to the person whose name appears first on a qualifying account for two years before the flotation date.

Some 220,000 of the society's account-holders will qualify for free shares if the flotation is approved at its annual general meeting on May 18th next. A further 100,000 customers will also qualify to receive a one-off cash payment, based on the balance in their account at certain specified dates.