142.80-86

House of Commons

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Lords Amendments to the Financial Services (Banking Reform) Bill

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(2)
Where an FMI administrator is appointed in relation to a company

designated under subsection (4) of section (Interpretation: infrastructure

companies), the objective of the FMI administration is—

(a)
to ensure that services falling within that subsection continue to be

provided, and

(b)
to ensure by one or both of the specified means that it becomes

unnecessary for the FMI administration order to remain in force for

that purpose.

(3)
The protected activities referred to in subsection (1)(b) are such activities as

the Bank of England may from time to time direct, which must be—

(a)
regulated activities falling within section 285(3)(a) or (b) of FSMA

2000, or

(b)
related activities which are necessary for the efficient carrying on of

any of those regulated activities.

(4)
The specified means are—

(a)
the rescue as a going concern of the company subject to the FMI

administration order, and

(b)
transfers falling within subsection (5).

(5)
A transfer falls within this subsection if it is a transfer as a going concern—

(a)
to another company, or

(b)
as respects different parts of the undertaking of the company

subject to the FMI administration order, to two or more different

companies,


of so much of that undertaking as it is appropriate to transfer for the

purpose of achieving the objective of the FMI administration.

(6)
The means by which transfers falling within subsection (5) may be effected

include, in particular—

(a)
a transfer of the undertaking of the company subject to the FMI

administration order, or of part of its undertaking, to a wholly-

owned subsidiary of that company, and

(b)
the transfer to a company of securities of a wholly-owned

subsidiary to which there has been a transfer falling within

paragraph (a).

(7)
The objective of the FMI administration may be achieved by transfers

falling within subsection (5) only to the extent that—

(a)
the rescue as a going concern of the company subject to the FMI

administration order is not reasonably practicable or is not

reasonably practicable without such transfers,

(b)
the rescue of that company as a going concern will not achieve that

objective or will not do so without such transfers, or

(c)
such transfers would produce a result for the company’s creditors

as a whole that is better than the result that would be produced

without them.”
140
Insert the following new Clause—


“Application for FMI administration order

(1)
An application for an FMI administration order may be made to the court

by the Bank of England.

81

(2)
An application must nominate a person to be appointed as the FMI

administrator.

(3)
The infrastructure company must be given notice of an application, in

accordance with rules under section 411 of the 1986 Act (as applied in

relation to FMI administration).”
141
Insert the following new Clause—


“Powers of court

(1)
The court may make an FMI administration order in relation to an

infrastructure company if satisfied—

(a)
that the company is unable to pay its debts,

(b)
that the company is likely to be unable to pay its debts, or

(c)
that, on a petition presented by the Secretary of State under section

124A of the 1986 Act (petition for winding up on grounds of public

interest), it would be just and equitable (disregarding the objective

of the FMI administration) to wind up the company.

(2)
The court may not make an FMI administration order on the ground set out

in subsection (1)(c) unless the Secretary of State has certified to the court

that the case is one in which the Secretary of State considers (disregarding

the objective of the FMI administration) that it would be appropriate to

petition under section 124A of the 1986 Act.

(3)
On an application for an FMI administration order, the court may—

(a)
grant the application;

(b)
dismiss the application;

(c)
adjourn the application (generally or to a specified date);

(d)
make an interim order;

(e)
treat the application as a winding-up petition and make any order

which the court could make under section 125 of the 1986 Act;

(f)
make any other order which the court thinks appropriate.

(4)
An interim order under subsection (3)(d) may, in particular—

(a)
restrict the exercise of a power of the company or of its directors;

(b)
make provision conferring a discretion on the court or on a person

qualified to act as an insolvency practitioner in relation to the

company.

(5)
For the purposes of this section a company is unable to pay its debts if it is

treated as being so unable under section 123 of the 1986 Act (definition of

inability to pay debts).”
142
Insert the following new Clause—


“FMI administrators

(1)
The FMI administrator of a company—

(a)
is an officer of the court, and

(b)
in exercising and performing powers and duties in relation to the

company, is the company’s agent.

(2)
The management by the FMI administrator of a company of any of its

affairs, business or property must be carried out for the purpose of

82

achieving the objective of the FMI administration as quickly and efficiently

as is reasonably practicable.

(3)
The FMI administrator of a company must exercise and perform powers

and duties in the way which, so far as it is consistent with the objective of

the FMI administration to do so, best protects—

(a)
the interests of the company’s creditors as a whole, and

(b)
subject to those interests, the interests of the company’s members as

a whole.”
143
Insert the following new Clause—


“Continuity of supply

(1)
This section applies where, before the commencement of FMI

administration, the infrastructure company had entered into arrangements

with a supplier for the provision of a supply to the infrastructure company.

(2)
After the commencement of FMI administration, the supplier—

(a)
must not terminate a supply unless—

(i)
any charges in respect of the supply which relate to a supply

given after the commencement of FMI administration

remain unpaid for more than 28 days,

(ii)
the FMI administrator consents to the termination, or

(iii)
the supplier has the permission of the court, which may be

given if the supplier can show that the continued provision

of the supply would cause the supplier to suffer hardship,

(b)
must not make it a condition of a supply that any charges in respect

of the supply which relate to a supply given before the

commencement of FMI administration are paid, and

(c)
must not do anything which has the effect of making it a condition

of the giving of a supply that any charges within paragraph (b) are

paid.

(3)
Where, before the commencement of FMI administration, a contractual

right to terminate a supply has arisen but has not been exercised, then, for

the purposes of this section, the commencement of FMI administration

causes that right to lapse and the supply is only to be terminated if a

ground in subsection (2)(a) applies.

(4)
Any provision in a contract between the infrastructure company and the

supplier that purports to terminate the agreement if any action is taken to

put the infrastructure company in FMI administration is void.

(5)
Any expenses incurred by the infrastructure company on the provision of

a supply after the commencement of FMI administration are to be treated

as necessary disbursements in the course of the FMI administration.

(6)
In this section—

“commencement of FMI administration” means the making of the FMI

administration order;

“supplier” means the person controlling the provision of a supply to

the infrastructure company, and includes a company that is a group

undertaking (as defined by section 1161(5) of the Companies Act

2006) in respect of the infrastructure company;

“supply” means a supply of any of the following—

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(a)
computer hardware or software used by the infrastructure

company in connection with the operation of the relevant

system;

(b)
financial data;

(c)
infrastructure permitting electronic communication

services;

(d)
data processing;

(e)
access to secure data networks used by the infrastructure

company in connection with the operation of the relevant

system;

(f)
staff.”
144
Insert the following new Clause—


“Power to direct FMI administrator

(1)
If the Bank of England considers it necessary to do so for the purpose of

achieving the objective of an FMI administration, the Bank may direct the

FMI administrator to take, or refrain from taking, specified action.

(2)
In deciding whether to give a direction under this section, the Bank of

England must have regard to the public interest in—

(a)
the protection and enhancement of the stability of the financial

system of the United Kingdom, and

(b)
the maintenance of public confidence in that system.

(3)
A direction under this section must not be incompatible with a direction of

the court that is in force under Schedule B1 to the 1986 Act.

(4)
The Bank of England must, within a reasonable time of giving the direction,

give the FMI administrator a statement of its reasons for giving the

direction.

(5)
A person listed in subsection (6) has immunity from liability in damages in

respect of action or inaction in accordance with a direction under this

section.

(6)
Those persons are—

(a)
the FMI administrator;

(b)
the company in FMI administration;

(c)
the officers or staff of the company.

(7)
Immunity conferred by this section does not extend to action or inaction—

(a)
in bad faith, or

(b)
in contravention of section 6(1) of the Human Rights Act 1998.

(8)
This section does not limit the powers conferred on the Bank of England by

section 191 of the Banking Act 2009 (directions) in relation to a recognised

inter-bank payment system.”
145
Insert the following new Clause—


“Conduct of administration, transfer schemes etc.

(1)
Schedule (Conduct of FMI administration) (which applies the provisions of

Schedule B1 to the 1986 Act about ordinary administration orders and

certain other enactments to FMI administration orders) has effect.

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(2)
Schedule (Financial market infrastructure transfer schemes) (which makes

provision for transfer schemes to achieve the objective of an FMI

administration) has effect.

(3)
The power to make rules conferred by section 411(1B) of the 1986 Act (rules

relating to bank administration) is to apply for the purpose of giving effect

to this Part as it applies for the purposes of giving effect to Part 3 of the

Banking Act 2009 (and, accordingly, as if the reference in section 411(1B) to

that Part included a reference to this Part).”
146
Insert the following new Clause—

“Restrictions on other insolvency procedures


Restriction on winding-up orders and voluntary winding up

(1)
A petition by a person other than the Bank of England for a winding up

order in respect of an infrastructure company may not be determined

unless—

(a)
the petitioner has notified the Bank of England that the petition has

been presented, and

(b)
the period of 14 days beginning with the day on which the notice is

received by the Bank has ended.

(2)
A resolution for the voluntary winding up of an infrastructure company

may not be made unless—

(a)
the infrastructure company has applied to the court under this

section,

(b)
the company has notified the Bank of England that the application

has been made, and

(c)
after the end of the period of 14 days beginning with the day on

which the notice is received by the Bank, the court gives permission

for the resolution to be made.”
147
Insert the following new Clause—


“Restriction on making of ordinary administration orders

(1)
This section applies where an ordinary administration application is made

in relation to an infrastructure company by a person other than the Bank of

England.

(2)
The court must dismiss the application if—

(a)
an FMI administration order is in force in relation to the company,

or

(b)
an FMI administration order has been made in relation to the

company but is not yet in force.

(3)
Where subsection (2) does not apply, the court, on hearing the application,

must not exercise its powers under paragraph 13 of Schedule B1 to the 1986

Act (other than its power of adjournment) unless—

(a)
the applicant has notified the Bank of England that the application

has been made, and

(b)
the period of 14 days beginning with the day on which the notice is

received by the Bank has ended.

85

(4)
On the making of an FMI administration order in relation to an

infrastructure company, the court must dismiss any ordinary

administration application made in relation to the company which is

outstanding.

(5)
“Ordinary administration application” means an application under

paragraph 12 of Schedule B1 to the 1986 Act.”
148
Insert the following new Clause—


“Restriction on enforcement of security

A person may not take any step to enforce a security over property of an

infrastructure company unless—

(a)
notice of the intention to do so has been given to the Bank of

England, and

(b)
the period of 14 days beginning with the day on which the notice

was received by the Bank has ended.”
149
Insert the following new Clause—

“Financial support for companies in FMI administration


Loans

(1)
This section applies where an FMI administration order has been made in

relation to an infrastructure company.

(2)
The Treasury may, out of money provided by Parliament, make loans to

the company for achieving the objective in section (Objective of FMI

administration).

(3)
A loan under this section may be made on such terms as the Treasury think

fit.

(4)
The Treasury must pay into the Consolidated Fund sums received by them

as a result of this section.”
150
Insert the following new Clause—


“Indemnities

(1)
This section applies where an FMI administration order has been made in

relation to an infrastructure company.

(2)
The Treasury may agree to indemnify persons in respect of one or both of

the following—

(a)
liabilities incurred in connection with the exercise of powers and

duties by the FMI administrator;

(b)
loss or damage sustained in that connection.

(3)
The agreement may be made in whatever manner, and on whatever terms,

the Treasury think fit.

(4)
As soon as practicable after agreeing to indemnify persons under this

section, the Treasury must lay before Parliament a statement of the

agreement.

86

(5)
If sums are paid by the Treasury in consequence of an indemnity agreed to

under this section, the infrastructure company must pay the Treasury—

(a)
such amounts in or towards the repayment to them of those sums

as the Treasury may direct, and

(b)
interest, at such rates as they may direct, on amounts outstanding

under this subsection.

(6)
Subsection (5) does not apply in the case of a sum paid by the Treasury for

indemnifying a person in respect of a liability to the infrastructure

company.

(7)
Where a sum has been paid out by the Treasury in consequence of an

indemnity agreed to under this section, the Treasury must lay a statement

relating to that sum before Parliament—

(a)
as soon as practicable after the end of the financial year in which

that sum is paid out, and

(b)
(except where subsection (5) does not apply in the case of the sum)

as soon as practicable after the end of each subsequent relevant

financial year.

(8)
In relation to a sum paid out in consequence of an indemnity, a financial

year is a relevant financial year for the purposes of subsection (7) unless—

(a)
before the beginning of that year, the whole of that sum has been

repaid to the Treasury under subsection (5), and

(b)
the infrastructure company is not at any time during that year

subject to liability to pay interest on amounts that became due

under that subsection in respect of that sum.

(9)
The power of the Treasury to agree to indemnify persons—

(a)
is confined to a power to agree to indemnify persons in respect of

liabilities, loss and damage incurred or sustained by them as

relevant persons, but

(b)
includes power to agree to indemnify persons (whether or not they

are identified or identifiable at the time of the agreement) who

subsequently become relevant persons.

(10)
For the purposes of this section each of the following is a relevant person—

(a)
the FMI administrator;

(b)
an employee of the FMI administrator;

(c)
a member or employee of a firm of which the FMI administrator is

a member;

(d)
a member or employee of a firm of which the FMI administrator is

an employee;

(e)
a member or employee of a firm of which the FMI administrator

was an employee or member at a time when the order was in force;

(f)
a body corporate which is the employer of the FMI administrator;

(g)
an officer, employee or member of such a body corporate.

(11)
For the purposes of subsection (10)—

(a)
the references to the FMI administrator are to be read, where two or

more persons are appointed to act as the FMI administrator, as

references to any one or more of them, and

(b)
the references to a firm of which a person was a member or

employee at a particular time include references to a firm which