Banking Bill

House of Commons

Session 2007 - 08
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Other Bills before Parliament

Banking Bill

Banking Bill
Part 3 — Bank Administration
64

(b)
achieve a better result for the residual bank’s creditors as a whole than
would be likely if the residual bank were wound up without first being
in bank administration (“Objective 2(b)”).
(2)
In pursuing Objective 2 a bank administrator must aim to achieve Objective
2(a) unless of the opinion either—
5
(a)
that it is not reasonably practicable to achieve it, or
(b)
that Objective 2(b) would achieve a better result for the residual bank’s
creditors as a whole.
(3)
In pursuing Objective 2(b) in bank administration following transfer to a
bridge bank, the bank administrator may not realise any asset unless—
10
(a)
the asset is on a list of realisable assets agreed between the bank
administrator and the Bank of England, or
(b)
the Bank of England has given an Objective 1 Achievement Notice.
Process
128
Bank administration order
15
(1)
A bank administration order is an order appointing a person as the bank
administrator of a bank.
(2)
A person is eligible for appointment as a bank administrator if qualified to act
as an insolvency practitioner.
(3)
An appointment may be made only if the person has consented to act.
20
(4)
A bank administration order takes effect in accordance with its terms; and—
(a)
the process of a bank administration order having effect may be
described as “bank administration” in relation to the bank, and
(b)
while the order has effect the bank may be described as being “in bank
administration”.
25
129
Application
(1)
An application for a bank administration order may be made to the court by
the Bank of England.
(2)
An application must nominate a person to be appointed as the bank
administrator.
30
(3)
The bank must be given notice of an application, in accordance with rules
under section 411 of the Insolvency Act 1986 (as applied by section 147 below).
130
Grounds for applying
(1)
The Bank of England may apply for a bank administration order in respect of
a bank if the following conditions are met.
35
(2)
Condition 1 is that the Bank of England has made or intends to make a property
transfer instrument in respect of the bank in accordance with section 10(2) or
11(2).
(3)
Condition 2 is that the Bank of England is satisfied that the residual bank —
(a)
is unable to pay its debts, or
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Banking Bill
Part 3 — Bank Administration
65

(b)
is likely to become unable to pay its debts as a result of the property
transfer instrument which the Bank intends to make.
131
Grounds for making
(1)
The court may make a bank administration order if satisfied that the conditions
in section 130 were met.
5
(2)
On an application for a bank administration order the court may—
(a)
grant the application,
(b)
adjourn the application (generally or to a specified date), or
(c)
dismiss the application.
132
General powers, duties and effect
10
(1)
A bank administrator may do anything necessary or expedient for the pursuit
of the Objectives in section 124.
(2)
The following provisions of this section provide for—
(a)
general powers and duties of bank administrators (by application of
provisions about administrators), and
15
(b)
the general process and effects of bank administration (by application
of provisions about administration).
(3)
The provisions set out in the Tables apply in relation to bank administration as
in relation to administration, with—
(a)
the modifications set out in subsection (4),
20
(b)
any other modification specified in the Tables, and
(c)
any other necessary modification.
(4)
The modifications are that—
(a)
a reference to the administrator is a reference to the bank administrator,
(b)
a reference to administration is a reference to bank administration,
25
(c)
a reference to an administration order is a reference to a bank
administration order,
(d)
a reference to a company is a reference to the bank,
(e)
a reference to the purpose of administration is a reference to the
Objectives in section 124, and
30
(f)
in relation to provisions of the Insolvency Act 1986 other than Schedule
B1, the modifications in section 90 above apply (but converting
references into references to bank administration rather than to bank
insolvency).
(5)
Powers conferred by this Act, by the Insolvency Act 1986 (as applied) and the
35
Companies Acts are in addition to, and not in restriction of, any existing
powers of instituting proceedings against a contributory or debtor of a bank,
or the estate of any contributory or debtor, for the recovery of any call or other
sum.
(6)
A reference in an enactment or other document to anything done under a
40
provision applied by this Part includes a reference to the provision as applied.

Banking Bill
Part 3 — Bank Administration
66

TABLE 1 OF APPLIED PROVISIONS
SCHEDULE B1 TO THE INSOLVENCY ACT 1986

Provision of
Subject
Modification or comment

Schedule B1

Para.
Dismissal of pending winding-

5

40(1)(a)
up petition

Para. 41
Dismissal of administrative or

other receiver

Para. 42
Moratorium on insolvency
Ignore sub-paras. (4) and (5).

proceedings

10

Para. 43
Moratorium on other legal
(a)
In the case of bank administration

process
following transfer to a bridge bank,

unless the Bank of England has

given an Objective 1 Achievement

Notice consent of the bank

15

administrator may not be given for

the purposes of para. 43 without the

approval of the Bank of England.

(b)
In the case of bank administration

following transfer to a bridge bank,

20

unless the Bank of England has

given an Objective 1 Achievement

Notice, in considering whether to

give permission under sub-para. (6)

to a winding-up the court must have

25

regard to the Objectives in section

124.

(c)
In considering whether to give

permission for the purposes of para.

43 the court must have regard to the

30

Objectives in section 124.

Para.
Interim moratorium

44(1)(a) and

(5)

Para. 46
Announcement of appointment
Ignore sub-para. (6)(b) and (c).

35

Paras. 47 &
Statement of affairs

48

Banking Bill
Part 3 — Bank Administration
67

Provision of
Subject
Modification or comment

Schedule B1

Para. 49
Administrator’s proposals
(a)
Para. 49 does not apply unless the

Bank of England has given an

Objective 1 Achievement Notice; for

5

bank administrator’s proposals before

the Bank of England has given an

Objective 1 Achievement Notice, see

section 134.

(b)
Treat the reference in sub-para. (1) to

10

the purpose of administration as a

reference to Objective 2.

(c)
Before making proposals under sub-

para. (1) in the case of bank

administration following transfer to

15

a bridge bank, the bank

administrator must consult the Bank

of England about the chances of a

payment to the residual bank from a

scheme established by resolution

20

fund order under section 44(3).

(d)
Treat the reference in sub-para.

(2)(b) to the objective mentioned in

para. 3(1)(a) or (b) as a reference to

Objective 2(a).

25

(e)
Ignore sub-para.(3)(b).

(f)
Treat references in sub-para. (5) to

the company’s entering

administration as references to

satisfaction of the condition in para.

30

(a) above.

Paras. 50 -
Creditors’ meeting
(a)
Treat references in para. 51(2) to the

58

company’s entering administration

as references to the giving of an

Objective 1 Achievement Notice.

35

(b)
The bank administrator may comply

with a request under para. 56(1)(a)

only if satisfied that it will not

prejudice pursuit of Objective 1 in

section 124.

40

(c)
A creditors’ meeting may not

establish a creditors’ committee in

reliance on para. 57 until the Bank of

England has given an Objective 1

Achievement Notice.

45

(d)
Until that time the Bank of England

shall have the functions of the

creditors’ committee.

Para. 59
General powers
A bank administrator may not rely on para.

59 (or subsection (1) above) for the purpose of

50

recovering property transferred by property

transfer instrument.

Para. 60 and
General powers
(a)
The exercise of powers under

Schedule 1

Schedule 1 is subject to section

124(2).

55

(b)
In the case of bank administration

following transfer to a bridge bank,

until the Bank of England has given

an Objective 1 Achievement Notice

powers under the following

60

paragraphs of Schedule 1 may be

exercised only with the Bank of

England’s consent: 2, 3, 11, 14, 15,

16, 17, 18 and 21.

Banking Bill
Part 3 — Bank Administration
68

Provision of
Subject
Modification or comment

Schedule B1

Para. 61
Directors

Para. 62
Power to call meetings of

creditors

5

Para. 63
Application to court for
(a)
Before the Bank of England has

directions
given an Objective 1 Achievement

Notice, the bank administrator may

apply for directions if unsure

whether a proposed action would

10

prejudice the pursuit of Objective 1;

and before making an application in

reliance on this paragraph the bank

administrator must give notice to

the Bank of England, which shall be

15

entitled to participate in the

proceedings.

(b)
In making directions the court must

have regard to the Objectives in

section 124.

20

Para. 64.
Management powers.

Para. 65
Distribution to creditors
In the case of administration following

transfer to a bridge bank, until the Bank of

England has given an Objective 1

Achievement Notice a bank administrator

25

may make a distribution only with the Bank

of England’s consent.

Para. 66
Payments

Para. 67
Taking custody of property

Para. 68
Management
Before the approval of proposals under para.

30

53 a bank administrator shall manage the

bank’s affairs, business and property in

accordance with principles agreed between

the bank administrator and the Bank of

England.

35

Para. 69
Agency

Para. 70
Floating charges
The bank administrator may take action only

if satisfied that it will not prejudice pursuit of

Objective 1 in section 124.

Para. 71
Fixed charges
The court may make an order only if satisfied

40

that it will not prejudice pursuit of Objective

1 in section 124.

Para. 72
Hire-purchase property
In the case of administration following

transfer to a bridge bank, until the Bank of

England has given an Objective 1

45

Achievement Notice an application may be

made only with the Bank of England’s

consent.

Para. 73
Protection for secured and
(a)
Treat a reference to proposals as

preferential creditors
including a reference to the

50

principles specified in the

modification of para. 68 set out

above.

(b)
Para. 73(1)(a) does not apply until

the Bank of England has given an

55

Objective 1 Achievement Notice.

Banking Bill
Part 3 — Bank Administration
69

Provision of
Subject
Modification or comment

Schedule B1

Para. 74
Challenge to administrator’s
(a)
The Bank of England may make an

conduct
application to the court, on any

grounds, including grounds of

5

insufficient pursuit of Objective 1 in

section 124 (in addition to

applications that may anyway be

made under para. 74).

(b)
Until the Bank of England has given

10

an Objective 1 Achievement Notice,

an order may be made on the

application of a creditor only if the

court is satisfied that it would not

prejudice pursuit of Objective 1 in

15

section 124.

Para. 75
Misfeasance
In addition to applications that may anyway

be made under para. 75, an application may

be made by the bank administrator or the

Bank of England.

20

Para. 80
Termination: successful rescue
See section 140.

Para. 84
Termination: no more assets for
See section 141.

distribution

Para. 85
Discharge of administration

order

25

Para. 86
Notice to Companies Registrar
See section 140.

of end of administration

Para. 87
Resignation
A bank administrator may resign only by

notice in writing—

(a)
to the court, copied to the Bank of

30

England, or

(b)
in the case of a bank administrator

appointed by the creditors’

committee under para. 90, to the

creditors’ committee.

35

Para. 88
Removal
Until the Bank of England has given an

Objective 1 Achievement Notice, an

application for an order may be made only

with the Bank of England’s consent.

Para. 89
Disqualification
The notice under sub-para. (2) must be given

40

to the Bank of England.

Paras. 90 &
Replacement
(a)
Until an Objective 1 Notice has been

91

given, the Bank of England, and

nobody else, may make an

application under para. 91(1).

45

(b)
After that, either the Bank of

England or a creditors’ committee

may apply.

(c)
Ignore para. 91(1)(b) to (e) and (2).

Para. 96
Substitution of floating charge-
Para. 96 applies to a bank administrator,

50

holder
but—

(a)
only after an Objective 1

Achievement Notice has been given,

and

(b)
ignoring references to priority of

55

charges.

Banking Bill
Part 3 — Bank Administration
70

Provision of
Subject
Modification or comment

Schedule B1

Para. 98
Discharge
Discharge takes effect—

(a)
where the person ceases to be bank

administrator before an Objective 1

5

Achievement Notice has been given,

at a time determined by the Bank of

England, and

(b)
otherwise, at a time determined by

resolution of the creditors’

10

committee (for which purpose

ignore sub-para. (3)).

Para. 99
Vacation of office: charges and
In the application of sub-para. (3), payments

liabilities
may be made only—

(a)
in accordance with directions of the

15

Bank of England, and

(b)
if the Bank is satisfied that they will

not prejudice Objective 1 in section

124.

Paras. 100-
Joint administrators
Until an Objective 1 Achievement Notice has

20

103

been given, an application under para. 103

may be made only by the Bank of England.

Para. 104
Validity

Para. 106
Fines

(and section

25

430 and

Schedule 10)

Paras. 107 -
Extension of time limits
(a)
Until an Objective 1 Achievement

109

Notice has been given, an

application under para. 107 may be

30

made only with the Bank of

England’s consent.

(b)
In considering an application under

para. 107 the court must have regard

to Objective 1 in section 124.

35

(c)
In para. 108(1) “consent” means

consent of the Bank of England.

Para. 110
Amendment of provisions about
An order under para. 110 may amend a provision

time
of the Schedule as it applies by virtue of this

section (whether or not in the same way as it

40

amends the provision as it applies otherwise).

Para. 111
Interpretation

Paras. 112 -
Scotland

116