Banking Bill

House of Commons

Session 2007 - 08
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Other Bills before Parliament

Banking Bill

Banking Bill
Part 2 — Bank Insolvency
53

Termination of process, &c.
100
Company voluntary arrangement
(1)
A bank liquidator may make a proposal in accordance with section 1 of the
Insolvency Act 1986 (company voluntary arrangement).
(2)
Before making a proposal the bank liquidator—
5
(a)
shall present a final report on the bank liquidation to the liquidation
committee,
(b)
shall send a copy of the report to—
(i)
the FSA,
(ii)
the FSCS,
10
(iii)
the Bank of England,
(iv)
the Treasury, and
(v)
the registrar of companies, and
(c)
shall make the report available to members, creditors and
contributories on request.
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(3)
A proposal may be made only with the consent of the liquidation committee.
(4)
The liquidation committee may consent only if—
(a)
it has passed a full payment resolution, and
(b)
the bank liquidator is satisfied, as a result of arrangements made with
the FSCS, that any depositor still eligible for compensation under the
20
scheme will be dealt with in accordance with section 86(2)(a) or (b).
(5)
The bank liquidator must be the nominee (see section 1(2) of the 1986 Act).
(6)
Part 1 of the 1986 Act shall apply to a proposal made by a bank liquidator, with
the following modifications.
(7)
In section 3 (summoning of meetings) subsection (2) (and not (1)) applies.
25
(8)
The action that may be taken by the court under section 5(3) (effect of approval)
includes suspension of the bank insolvency order.
(9)
On the termination of a company voluntary arrangement the bank liquidator
may apply to the court to lift the suspension of the bank insolvency order.
101
Administration
30
(1)
A bank liquidator who thinks that administration would achieve a better result
for the bank’s creditors as a whole than bank insolvency may apply to the court
for an administration order (under paragraph 38 of Schedule B1 to the
Insolvency Act 1986).
(2)
An application may be made only if the following conditions are satisfied.
35
(3)
Condition 1 is that the liquidation committee has passed a full payment
resolution.
(4)
Condition 2 is that the liquidation committee has resolved that moving to
administration might enable the rescue of the bank as a going concern.

Banking Bill
Part 2 — Bank Insolvency
54

(5)
Condition 3 is that the bank liquidator is satisfied, as a result of arrangements
made with the FSCS, that any depositors still eligible for compensation under
the scheme will receive their payments during administration.
102
Dissolution
(1)
A bank liquidator who thinks that the winding up of the bank is for practical
5
purposes complete shall summon a final meeting of the liquidation committee.
(2)
The bank liquidator—
(a)
shall present a final report on the bank insolvency to the meeting,
(b)
shall send a copy of the report to—
(i)
the FSA,
10
(ii)
the FSCS,
(iii)
the Bank of England,
(iv)
the Treasury, and
(v)
the registrar of companies, and
(c)
shall make the report available to members, creditors and
15
contributories on request.
(3)
At the meeting the liquidation committee shall—
(a)
consider the report, and
(b)
decide whether to release the bank liquidator.
(4)
If the liquidation committee decides to release the bank liquidator, the bank
20
liquidator—
(a)
shall notify the court and the registrar of companies, and
(b)
vacates office, and has release, when the court is notified.
(5)
If the liquidation committee decides not to release the bank liquidator, the bank
liquidator may apply to the Secretary of State for release; if the application is
25
granted, the bank liquidator—
(a)
vacates office when the application is granted, and
(b)
has release from a time determined by the Secretary of State.
(6)
In the case of a bank liquidator in Scotland, a reference in subsection (5) to the
Secretary of State is a reference to the Accountant of Court.
30
(7)
On receipt of a notice under subsection (4)(a) the registrar of companies shall
register it.
(8)
At the end of the period of 3 months beginning with the day of the registration
of the notice, the bank is dissolved (subject to deferral under section 103).
103
Dissolution: supplemental
35
(1)
The Secretary of State may by direction defer the date of dissolution under
section 102, on the application of a person who appears to the Secretary of State
to be interested.
(2)
An appeal to the court lies from any decision of the Secretary of State on an
application for a direction under subsection (1).
40
(3)
Subsection (1) does not apply where the bank insolvency order was made by
the court in Scotland; but the court may by direction defer the date of

Banking Bill
Part 2 — Bank Insolvency
55

dissolution on an application by a person appearing to the court to have an
interest.
(4)
A person who obtains deferral under subsection (1) or (3) shall, within 7 days
after the giving of the deferral direction, deliver a copy of the direction to the
registrar of companies for registration.
5
(5)
A person who without reasonable excuse fails to comply with subsection (4) is
liable to a fine and, for continued contravention, to a daily default fine, in each
case of the same amount as for a contravention of section 205(6) of the
Insolvency Act 1986 (dissolution).
(6)
The bank liquidator may give the notice summoning the final meeting under
10
section 102 above at the same time as giving notice of any final distribution of
the bank’s property; but, if summoned for an earlier date the meeting shall be
adjourned (and, if necessary, further adjourned) until a date on which the bank
liquidator is able to report to the meeting that the winding up of the bank is for
practical purposes complete.
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(7)
A bank liquidator must retain sufficient sums to cover the expenses of the final
meeting under section 102 above.
Other processes
104
Bank insolvency as alternative order
(1)
On a petition for a winding up order or an application for an administration
20
order in respect of a bank the court may, instead, make a bank insolvency
order.
(2)
A bank insolvency order may be made under subsection (1) only—
(a)
on the application of the FSA made with the consent of the Bank of
England, or
25
(b)
on the application of the Bank of England.
105
Voluntary winding-up
A resolution for voluntary winding up of a bank under section 84 of the
Insolvency Act 1986 shall have no effect without the prior approval of the
court.
30
106
Exclusion of other procedures
(1)
The following paragraphs of Schedule B1 to the Insolvency Act 1986
(administration) apply to a bank insolvency order as to an administration
order.
(2)
Those paragraphs are—
35
(a)
paragraph 40 (dismissal of pending winding-up petition), and
(b)
paragraph 42 (moratorium on insolvency proceedings).
(3)
For that purpose—
(a)
a reference to an administration order is a reference to a bank
insolvency order,
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Banking Bill
Part 2 — Bank Insolvency
56

(b)
a reference to a company being in administration is a reference to a
bank being in bank insolvency, and
(c)
a reference to an administrator is a reference to a bank liquidator.
107
Notice to FSA of preliminary steps
(1)
An application for an administration order in respect of a bank may not be
5
determined unless the conditions below are satisfied.
(2)
A petition for a winding up order in respect of a bank may not be determined
unless the conditions below are satisfied.
(3)
A resolution for voluntary winding up of a bank may not be made unless the
conditions below are satisfied.
10
(4)
An administrator of a bank may not be appointed unless the conditions below
are satisfied.
(5)
Condition 1 is that the FSA has been notified—
(a)
by the applicant for an administration order, that the application has
been made,
15
(b)
by the petitioner for a winding up order, that the petition has been
presented,
(c)
by the bank, that a resolution for voluntary winding up may be made,
or
(d)
by the person proposing to appoint an administrator, of the proposed
20
appointment.
(6)
Condition 2 is that a copy of the notice complying with Condition 1 has been
filed with the court (and made available for public inspection by the court).
(7)
Condition 3 is that—
(a)
the period of 2 weeks, beginning with the day on which the notice is
25
received, has ended, or
(b)
both—
(i)
the FSA has informed the person who gave the notice that it
does not intend to apply for a bank insolvency order, and
(ii)
the Bank of England has informed the person who gave the
30
notice that it does not intend to apply for a bank insolvency
order or to exercise a stabilisation power under Part 1.
(8)
Condition 4 is that no application for a bank insolvency order is pending.
(9)
Arranging for the giving of notice in order to satisfy Condition 1 can be a step
with a view to minimising the potential loss to a bank’s creditors for the
35
purpose of section 214 of the Insolvency Act 1986 (wrongful trading).
(10)
Where the FSA receives notice under Condition 1—
(a)
the FSA shall inform the Bank of England,
(b)
the FSA shall inform the person who gave the notice, within the period
in Condition 3(a), whether it intends to apply for a bank insolvency
40
order, and
(c)
if the Bank of England decides to apply for a bank insolvency order or
to exercise a stabilisation power under Part 1, the Bank shall inform the
person who gave the notice, within the period in Condition 3(a).