Banking Bill

House of Commons

Session 2007 - 08
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Banking Bill

Banking Bill
Part 3 — Bank Administration
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TABLE 2 OF APPLIED PROVISIONS
OTHER PROVISIONS OF THE INSOLVENCY ACT 1986

Section
Subject
Modification or comment

Section
Discretion in managing and
In the case of bank administration following

168(4) (and
distributing assets
transfer to a bridge bank, until the Bank of

5

para. 13 of

England has given an Objective 1

Schedule 4)

Achievement Notice distribution may be

made only—

(a)
with the Bank of England’s consent,

or

10

(b)
out of assets which have been

designated as realisable by

agreement between the bank

administrator and the Bank of

England.

15

Section
Unsecured creditors
In the case of bank administration following

176A

transfer to a bridge bank, until the Bank of

England has given an Objective 1

Achievement Notice distribution may be

made in reliance on s. 176A only—

20

(a)
with the Bank of England’s consent,

or

(b)
out of assets which have been

designated as realisable by

agreement between the bank

25

administrator and the Bank of

England.

Section 178
Disclaimer of onerous property
In the case of bank administration following

transfer to a bridge bank, until the Bank of

England has given an Objective 1

30

Achievement Notice notice of disclaimer may

be given only with the Bank of England’s

consent.

Section 188
Publicity

Section 213
Fraudulent trading

35

Section 214
Wrongful trading
Ignore subsection (6).

Section 233
Utilities

Section 234
Getting in company’s property

Section 235
Co-operation with liquidator

Section 236
Inquiry into company’s dealings

40

Section 237
Section 236: enforcement by

court

Section 238
Transactions at undervalue

(England and Wales)

Section 239
Preferences (England and

45

Wales)

Section 240
Ss. 238 & 239: relevant time

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Section
Subject
Modification or comment

Section 241
Orders under ss. 238 & 239
(a)
In considering making an order in

reliance on section 241 the court

must have regard to Objective 1 of

section 124.

5

(b)
Ignore subsections (2A)(a) and (3) to

(3C)).

Section 242
Gratuitous alienations

(Scotland)

Section 243
Unfair preferences (Scotland)
In considering the grant of a decree under

10

subsection (5) the court must have regard to

Objective 1 of section 124.

Section 244
Extortionate credit transactions

Section 245
Avoidance of floating charges

Section 246
Unenforceability of liens

15

Sections 386
Preferential debts

& 387, and

Schedule 6

(and

Schedule 4

20

to the

Pension

Schemes Act

1993)

Section 389
Offence of acting without being
Treat references to acting as an insolvency

25

qualified
practitioner as references to acting as a bank

administrator.

Section 390
Persons not qualified to act
Treat references to acting as an insolvency

practitioner as references to acting as a bank

administrator.

30

Section 391
Recognised professional bodies
An order under section 391 has effect in

relation to any provision applied for the

purposes of bank administration.

Sections 423
Transactions defrauding
(a)
In considering granting leave under

- 425
creditors
section 424(1) the court must have

35

regard to Objective 1 of section 124.

(b)
In considering making an order in

reliance on section 425 the court

must have regard to Objective 1 of

section 124.

40

Sections 430
Offences

- 432 &

Schedule 10

Section 433
Statements: admissibility
For section 433(1)(a) and (b) substitute a

reference to a statement prepared for the

45

purposes of a provision of this Part.

133
Status of bank administrator
A bank administrator is an officer of the court.

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134
Administrator’s proposals
(1)
This section applies before the giving of an Objective 1 Achievement Notice (at
which point paragraph 49 of Schedule B1 to the Insolvency Act 1986 applies in
accordance with section 132).
(2)
The bank administrator must as soon as is reasonably practicable after
5
appointment make a statement setting out proposals for achieving the
Objectives in section 124.
(3)
The statement must say whether the bank administrator proposes to pursue
Objective 2(a) or 2(b) in section 127.
(4)
The statement must have been agreed with the Bank of England.
10
(5)
But a bank administrator who is unable to agree a statement with the Bank of
England may apply to the court for directions under paragraph 63 of Schedule
B1 to the Insolvency Act 1986 (as applied by section 132); and the court may
make any order, including dispensing with the need for the Bank of England’s
agreement.
15
(6)
The bank administrator must send the statement to the FSA.
(7)
The bank administrator may revise the statement (and subsections (4) to (6)
apply to a revised statement as to the original).
(8)
The statement shall be treated in the same way (subject to this section) as a
statement under paragraph 49 of Schedule B1 to the Insolvency Act 1986.
20
135
Sharing information
(1)
This section applies to bank administration following transfer to a bridge bank.
(2)
Within the period of 5 days beginning with the day on which the bank
administrator is appointed, the Bank of England must give the bank
administrator information about the financial positions of the residual bank
25
and the bridge bank.
(3)
While the residual bank is in bank administration the bridge bank must give
the bank administrator on request information about the financial position of
the bridge bank that the bank administrator requires for the purposes of
pursuing Objective 1 in section 124.
30
(4)
Until the Bank of England has given an Objective 1 Achievement Notice, the
bank administrator must—
(a)
give the Bank of England information on request,
(b)
allow the Bank of England access to records on request,
(c)
give the bridge bank information on request,
35
(d)
allow the bridge bank access to records on request,
(e)
keep the Bank of England informed about, and allow the Bank to
participate in, any discussions between the bank administrator and
another person which relate to, or are likely to affect, pursuit of
Objective 1 in section 124, and
40
(f)
keep the bridge bank informed about, and allow the bridge bank to
participate in, any discussions between the bank administrator and
another person which relate to, or are likely to affect, pursuit of
Objective 1 in section 124.

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(5)
The Treasury shall by regulations prescribe—
(a)
the classes of information that must be provided under subsections (2)
to (4), and
(b)
the classes of record to which access must be allowed under subsection
(4).
5
(6)
Regulations under subsection (5)—
(a)
shall be made by statutory instrument, and
(b)
shall be subject to annulment in pursuance of a resolution of either
House of Parliament.
Multiple transfers
10
136
General application of this Part
(1)
This section applies where more than one property transfer instrument is made
in respect of a bank.
(2)
For that purpose “property transfer instrument” includes—
(a)
supplemental instruments under section 39,
15
(b)
onward property transfer instruments under section 40, and
(c)
property transfer orders under section 41).
(3)
This Part applies to the bank with any modifications specified by the Treasury
in regulations.
(4)
The regulations—
20
(a)
shall be made by statutory instrument, and
(b)
may not be made unless a draft has been laid before and approved by
resolution of each House of Parliament.
137
Bridge bank to private purchaser
(1)
This section applies where the Bank of England gives a bank administrator —
25
(a)
an Objective 1 Achievement Notice in respect of a bridge bank, and
(b)
notice that Objective 1 is still required to be pursued in respect of a
commercial purchaser who has acquired all or part of the business of
the bridge bank.
(2)
An Objective 1 Achievement Notice accompanied by a notice under subsection
30
(1)(b) is referred to in this Part as an Objective 1 Interim Achievement Notice.
(3)
Where an Objective 1 Interim Achievement Notice is given, Objective 1
continues to apply—
(a)
in accordance with section 125(3), and
(b)
with the commercial purchaser being treated as the “private sector
35
purchaser”.
(4)
An Objective 1 Interim Achievement Notice in respect of the bridge bank—
(a)
has effect as between the bank administrator and the bridge bank, but
(b)
has no other effect for the purposes of provisions of this Part which
refer to the giving of an Objective 1 Achievement Notice.
40

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(5)
When the Bank of England gives the bank administrator an Objective 1
Achievement Notice in respect of the commercial purchaser, section 126 and
other provisions of this Part which refer to the giving of an Objective 1
Achievement Notice shall have effect.
138
Property transfer from bridge bank
5
(1)
This section applies where the Bank of England —
(a)
transfers all or part of the business of a bank to a bridge bank by making
a property transfer instrument in accordance with section 11(2), and
(b)
later makes or proposes to make an onward property transfer
instrument under section 40(2) from the bridge bank.
10
(2)
If the transferee under the onward property transfer instrument is a company
which is wholly owned by the Bank of England—
(a)
the transferee is treated as a bridge bank for the purposes of this Part,
and
(b)
the bridge bank under the original property transfer instrument is
15
treated as a residual bank for the purposes of this Part.
(3)
In any other case, section 137 shall apply as if the Bank of England had given—
(a)
an Objective 1 Interim Achievement Notice in respect of the bridge
bank under the original property transfer instrument, and
(b)
a notice under section 137(1)(b) in respect of the transferee under the
20
onward property transfer instrument.
(4)
Where a bank is put into bank administration in reliance on this section, the
Bank of England may not give an Objective 1 Interim Achievement Notice.
139
Property transfer from temporary public ownership
(1)
This section applies where the Treasury—
25
(a)
make a share transfer order, in respect of securities issued by a bank, in
accordance with section 12(2), and
(b)
later make a property transfer order from the bank under section 41(2).
(2)
This Part applies to the transferor under the property transfer order as to the
transferor under a property transfer instrument.
30
(3)
For that purpose this Part applies with any modifications specified by the
Treasury in regulations; and the regulations—
(a)
shall be made by statutory instrument, and
(b)
may not be made unless a draft has been laid before and approved by
resolution of each House of Parliament.
35
Termination
140
Successful rescue
(1)
This section applies if—
(a)
the Bank of England has given an Objective 1 Achievement Notice, and
(b)
the bank administrator has pursued Objective 2(a) in section 127 and
40
believes that it has been achieved.

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(2)
The bank administrator may give a notice under paragraph 80 of Schedule B1
to the Insolvency Act 1986 (notice bringing administrator’s appointment to an
end on achievement of objectives).
(3)
A bank administrator who gives a notice in accordance with subsection (2)
must send a copy to the FSA.
5
(4)
Failure without reasonable excuse to comply with subsection (3) is an offence.
141
Winding-up or voluntary arrangement
(1)
This section applies if—
(a)
the Bank of England has given an Objective 1 Achievement Notice, and
(b)
the bank administrator pursues Objective 2(b) in section 127.
10
(2)
The bank administrator may—
(a)
give a notice under paragraph 84 of Schedule B1 to the Insolvency Act
1986 (no more assets for distribution), or
(b)
make a proposal in accordance with section 1 of that Act (company
voluntary arrangement).
15
(3)
Part 1 of that Act shall apply to a proposal made by a bank administrator, with
the following modifications.
(4)
In section 3 (summoning of meetings) subsection (2) (and not (1)) applies.
(5)
The action that may be taken by the court under section 5(3) (effect of approval)
includes suspension of the bank administration order.
20
(6)
On the termination of a company voluntary arrangement the bank
administrator may apply to the court to lift the suspension of the bank
administration order.
(7)
The bank administrator may not act under subsection (2) above unless satisfied
that the bank has received any funds it is likely to receive from any scheme
25
under a resolution fund order under section 46.
Miscellaneous
142
Disqualification of directors
(1)
In this section “the Disqualification Act” means the Company Directors
Disqualification Act 1986.
30
(2)
In the Disqualification Act—
(a)
a reference to liquidation includes a reference to bank administration,
(b)
a reference to winding up includes a reference to making or being
subject to a bank administration order,
(c)
a reference to becoming insolvent includes a reference to becoming
35
subject to a bank administration order, and
(d)
a reference to a liquidator includes a reference to a bank administrator.
(3)
For the purposes of the application of section 7(3) of the Disqualification Act
(disqualification order or undertaking) to a bank which is subject to a bank
administration order, the responsible office-holder is the bank administrator.
40
(4)
After section 21A of the Disqualification Act (bank insolvency - inserted by

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section 108 above) insert—
“21B
Bank administration
Section 142 of the Banking Act 2008 provides for this Act to apply in
relation to bank administration as it applies in relation to liquidation.”
143
Application of other law
5
(1)
The Secretary of State and the Treasury may by order made jointly—
(a)
provide for an enactment about insolvency or administration to apply
to bank administration (with or without specified modifications);
(b)
amend, or modify the application of, an enactment about insolvency or
administration in consequence of this Part.
10
(2)
In subsection (1) “enactment” includes—
(a)
subordinate legislation,
(b)
an Act of the Scottish Parliament and an instrument under an Act of the
Scottish Parliament, and
(c)
Northern Ireland legislation.
15
(3)
An order under subsection (1)—
(a)
shall be made by statutory instrument, and
(b)
may not be made unless a draft has been laid before and approved by
resolution of each House of Parliament.
144
Other processes
20
(1)
Before exercising an insolvency power in respect of a residual bank the FSA
must give notice to the Bank of England, which may participate in any
proceedings arising out of the exercise of the power.
(2)
In subsection (1)—
(a)
“residual bank” means a bank all or part of whose business has been
25
transferred to a commercial purchaser in accordance with section 10 or
to a bridge bank in accordance with section 11, and
(b)
“insolvency power” means—
(i)
section 359 of the Financial Services and Markets Act 2000
(application for administration order), and
30
(ii)
section 367 of that Act (winding-up petition).
145
Building societies
(1)
The Treasury may by order provide for this Part to apply to building societies
(within the meaning of section 119 of the Building Societies Act 1986) as it
applies to banks, subject to modifications set out in the order.
35
(2)
An order may—
(a)
amend the Building Societies Act 1986 or any other enactment which
relates, or in so far as it relates, to building societies;
(b)
amend an enactment amended by this Part;
(c)
replicate, with or without modifications, a provision of this Part;
40
(d)
apply a provision made under or by virtue of this Part, with or without
modifications, to this Part as it applies to building societies.