Clause 18: Conversion and delisting

54.     This clause allows for the conversion and delisting of securities (the power applies to all of a specified bank’s securities, whether transferred or not).

55.     A share transfer instrument or order may make provision for the conversion of transferred securities from one form to another (to deal, for example, with the conversion of uncertificated or bearer securities into certificated securities or the conversion of a special class of shares into ordinary shares).

56.     Subsection (2) provides that a share transfer instrument or order may make provision for discontinuing the listing of securities issued by the specified bank on a UK regulated market.

Clause 19: Directors

57.     Subsections (1) and (2) allow for the Bank of England, in relation to a share transfer instrument, and the Treasury, in relation to a share transfer order, to take various actions with regard to directors including appointment and removal, termination and variation of service contracts.

58.     Appointments made by the Treasury and Bank of England are made on terms and conditions agreed by the institution making the appointment. Provision is also made for the Bank and Treasury to vary or terminate service contracts of directors.

Clause 20: Ancillary instruments: production, registration, &c.

59.     This clause makes various provisions for share transfer instruments and orders concerning instruments and registration.

60.     It provides that the transfer has effect irrespective of production, delivery, transfer or other dealing with an instrument and irrespective of registration.

61.     Subsection (1) allows for an instrument or order to make provision in relation to an instrument: a share transfer instrument or order may permit or require the execution, issue or delivery of an instrument. Subsection (4) allows for an instrument to be modified or annulled by a share transfer instrument or order.

62.     Subsection (2) specifies that a share transfer instrument or order may have immediate effect, regardless of registration (of the share transfer instrument or order) or the status of an instrument. Subsection (3) provides that a share transfer instrument or order may make provision for the effect of an instrument executed or issued in accordance with the provision of the share transfer instrument or order.

63.     Subsection (5) provides for how a share transfer instrument or order may entitle a transferee to be registered or require a person to effect registration in respect of the transferred securities of the specified bank.

Clause 21: Termination rights, &c.

64.     This clause sets out certain provisions in relation to default event provisions. A default event is a provision of a contract or other agreement where a specified event occurs which gives a party to that contract a certain right or rights. The rights include a right to terminate the agreement together with other types of right as set out in subsection (1). Subsection (3) allows for default event provisions not to be triggered in relation to a share transfer order or instrument. Subsection (4) provides default event provisions can be disapplied but with exceptions.

65.     Subsection (5) means that default event provisions will be disapplied when they relate to the making of an order or instrument, anything that is to be done or may be done under or by virtue of the instrument or order and any action or decision taken or made under the Banking Bill or another enactment which resulted in or was connected to the making of the order or instrument.

Clause 22: Incidental provision

66.     This clause provides for a share transfer instrument or order to include incidental, consequential or transitional provision. Such provision may be made generally or for a specified purpose or purposes.

Clause 23: Procedure: instruments

67.     This clause provides the procedure for making a share transfer instrument. The Bank of England must send a copy of a share transfer instrument, as soon as reasonably practicable, to the specified bank, the Treasury, the FSA and any other persons specified in the code of practice. The Bank of England should also publish the share transfer instrument in line with the provisions of subsection (2).

Clause 24: Procedure: orders

68.     This clause provides the procedure for making a share transfer order. Share transfer orders are made by statutory instrument by the Treasury subject to the negative procedure. The Treasury should send a copy of a share transfer order, as soon as reasonably practicable, to the specified bank, the Bank of England, the FSA and any other persons specified in the code of practice. The Treasury should also publish the share transfer instrument in line with the provisions of subsection (3).

Clause 25: Supplemental instruments

69.     Where the Bank of England has made a share transfer instrument to a private sector purchaser, it may make additional supplemental share transfer instruments. These may provide for anything that a share transfer instrument may generally provide for (apart from a further transfer of securities).

70.     The general and specific conditions (clauses 7 and 8 respectively) do not apply to supplemental transfers. The Bank must consult the FSA and the Treasury before making the instrument.

Clause 26: Supplemental orders

71.     Where the Treasury has made a share transfer order to take a bank into temporary public ownership, it may make additional supplemental share transfer orders. These may provide for two things: first, for the transfer securities issued by the transferred bank; and, second, for anything that a share transfer order may otherwise provide for.

72.     The general and specific conditions (clauses 7 and 9, respectively) do not apply to supplemental transfers. The Treasury must consult the Bank of England and the FSA before making the order.

Clause 27: Onward transfer

73.     Where the Treasury has made a share transfer order to bring a bank into temporary public ownership, it may make onward share transfer orders. These may provide for two things: first, for the transfer of securities issued by the transferred; and, second, for any provision in relation to the relevant securities. Subsection (4) stipulates that the transferee may not be the transferor under the original order.

74.     The general and specific conditions (clauses 7 and 9, respectively) do not apply to onward transfers. Subsection (6) provides that the Treasury must consult the Bank of England and the FSA before making the order.

75.     Subsection (7) states that the Treasury may make a supplemental share transfer order (as described in clause 26) following the making of an onward share transfer order.

Clause 28: Bridge bank: share transfers

76.     Where the Bank of England has made a property transfer instrument to effect the bridge bank stabilisation option, it may make bridge bank share transfer instruments. These may provide for two things: first, for securities issued by the bridge bank to be transferred; and, second, for other provision in relation to the securities of the bridge bank. Thus the Bank of England may undertake a share transfer from a bridge bank.

77.     The general and specific conditions (clauses 7 and 8, respectively) do not apply to onward transfers.

78.     Subsection (5) provides that the Bank of England must consult the Treasury and the FSA before making the order.

79.     Subsection (6) states that the Bank of England may make a supplemental share transfer instrument (as described in clause 25) following the making of a bridge bank share transfer instrument.

Clause 29: Interpretation: general

80.     This clause defines references to “pension scheme”, “service contract” and “transfer date”.

Transfer of property

Clause 30: Property transfer instrument

81.     Property transfer instruments may be made by the Bank of England to effect a transfer to a private sector purchaser or to a bridge bank (clauses 10 and 11). This clause describes the provision that a property transfer instrument may make. The instrument may transfer some or all of the property, rights or liabilities of a specified bank. The instrument may relate to specified combinations of the specified bank’s property, rights or liabilities, although this is subject to restrictions which may be imposed by the exercise of order making powers under clause 43.

Clause 31: Effect

82.     A transfer of property, rights or liabilities is effected through a property transfer instrument (see clause 30). Subsections (3) and (4) make provision for the transfer to take effect regardless of any legislative or contractual restriction, including requirements for consent (or any other restrictions which might render property not transferable).

Clause 32: Transferable property

83.     This clause makes provision for a property transfer instrument to transfer any property, rights or liabilities. Such property, rights and liabilities are expressed to include those acquired or arising between the making of the instrument and the transfer date, and any rights and liabilities arising on or after the transfer date in respect of matters occurring before that date. Paragraphs (c) and (d) set out examples of foreign property that may be transferred. Paragraph (e) provides that rights and liabilities under enactments may be the subject of a transfer.

Clause 33: Continuity

84.     This clause states that, when a property transfer instrument is made, provision can be made to ensure the continuity of arrangements operating in respect of a bank.

85.     Subsection (1) enables the property transfer instrument to include provision that the transferee can be treated as the same person as the transferor for any purpose connected with the transfer and for the transfer to be treated as a succession.

86.     Subsection (2) enables the property transfer instrument to include provision that agreements made or other things done by or in relation to a transferor are treated as made or done by or in relation to the transferee. This provision would enable, for example, the transferred deposit taker to continue to benefit from arrangements entered into by the transferor, notwithstanding any rights triggered on the transfer.

87.     Subsection (3) allows for transitional provision about things relating to things transferred to be continued. This can include continuation of legal proceedings by or in relation to the transferee.

88.     Subsection (4) allows for provision to be included in a property transfer instrument about continuity of employment.

89.     Subsection (5) allows for the modification of references to the transferor in instruments or documents.

90.     Subsection (6) provides that in so far as rights and liabilities in respect of anything transferred are enforceable after a transfer date, a property transfer instrument can apportion them as between the transferor and the transferee. Subsection (7) specifies that the property transfer instrument may apportion liability for tax between the transferor and the transferee.

91.     Subsection (8) provides that the transferor and the transferee may, by agreement, modify a provision of the instrument. However such a modification must achieve a result that could have been achieved by the instrument, and may not transfer (or arrange the transfer of) property rights or liabilities.

92.     Subsection (9) allows for provision of information and assistance to be required or permitted between the transferor and the transferee under a property transfer instrument.

Clause 34: Licences

93.     This clause makes provision in relation to licences.

94.     Subsection (1) provides that a licence in respect of property transferred by property instrument shall continue to have effect notwithstanding the transfer. Subsection (2) provides that the Bank of England may disapply subsection (1), so that a licence may be discontinued. Subsection (3) specifies that where a licence imposed rights or obligations, a property transfer instrument may apportion responsibility for exercise or compliances between the transferor and transferee.

Clause 35: Termination rights, &c.

95.     This clause makes similar provision in relation to default event provisions for property transfers as that made for share transfers by clause 21.

Clause 36: Foreign property

96.     This clause describes how a property transfer instrument may make provision for the transfer of property situated outside the United Kingdom and rights and liabilities governed by foreign law.

97.     Subsection (3) states that both the transferor and the transferee must take any necessary steps to ensure that the transfer is effective as a matter of foreign law.

98.     Subsection (4) makes provision for the period before a transfer may be fully effective as a matter of foreign law. For this period, the transferor must act on behalf of the transferee by holding any property or right for its benefit and discharging any liability on its behalf. Expenses incurred by the transferor in relation to these acts must be met by the transferee.

99.     Subsections (6) and (7) relate to obligations imposed by the operation of this clause. Such obligations are enforceable as contracts and the Bank of England may give directions in relation to those obligations, with which the transferor must comply.

Clause 37: Incidental provision

100.     This clause provides for a property transfer instrument to include incidental, consequential or transitional provision. Such provision may be made generally or for a specified purpose or purposes.

Clause 38: Procedure

101.     This clause requires the Bank of England to send a copy of a property transfer instrument, as soon as reasonably practicable, to the specified bank, the Treasury, the FSA and any other persons specified in the code of practice. The Bank of England must also publish the property transfer instrument in line with the provisions of subsection (2).

Clause 39: Supplemental instruments

102.     Where the Bank of England has made a property transfer instrument it may make additional supplemental property transfer instruments. These may provide for two things: first, for property, rights and liabilities to be transferred from the original transferor; and, second, for anything that a property transfer instrument may otherwise provide for.

103.     Subsection (4) provides that the general and specific conditions (clauses 7 and 8, respectively) do not apply to supplemental transfers.

104.     Subsection (5) establishes that if the original property transfer instrument transfers property, rights or liabilities to a private sector purchaser, a supplemental property transfer instrument may not effect a further transfer or property rights or liabilities. Thus a private sector purchaser may not ‘receive’ additional property &c. as a result of a supplemental instrument.

105.     Subsection (6) provides that the Bank of England must consult the FSA and the Treasury before making the instrument.

Clause 40: Onward transfer

106.     Where the Bank of England has made a property transfer instrument to effect the bridge bank stabilisation option, it may make onward property transfer instruments. These may provide for two things: first, for the property, rights or liabilities of the bridge bank to be transferred; and, second, for anything that a property transfer instrument may otherwise provide for. Subsection (5) provides that the Bank of England may not transfer property, rights or liabilities to the transferor under the original instrument.

107.     Under subsection (6), the general and specific conditions (clauses 7 and 8) do not apply to onward transfers. Subsection (7) requires the Bank of England to consult the Treasury and the FSA before making the instrument.

108.     Subsection (8) states that the Bank may make a supplemental property transfer instrument (as provided for in clause 39) following the making of an onward property transfer instrument.

Clause 41: Temporary public ownership: property transfer

109.     Where the Treasury has made a share transfer order to bring a bank into temporary public ownership, it may make property transfer orders. These may provide for two things: first, for the transfer of the property, rights or liabilities of the transferred bank; and, second, for anything that a property transfer instrument may otherwise provide for. Subsection (5) provides that the general and specific conditions (clauses 7, 8 and 9) do not apply to property transfers from temporary public ownership. The Treasury must consult the Bank of England and the FSA before making the order.

110.     Subsection (6) provides that a property transfer order should be treated, in procedural terms, as a share transfer order (see clause 15). In all other respects, however, it should be treated as a property transfer instrument (see clause 30).

111.     Subsection (8) states that the Treasury may make a supplemental property transfer order (as described in clause 39) following the making of temporary public ownership property transfer order.

Clause 42: Restriction of partial transfers

112.     This power enables restrictions to be placed on the making of partial transfers through the property transfer powers. A partial transfer is the transfer of some, but not all, of a bank’s property, rights or liabilities (as defined in subsections (1) and (5)).

113.     Subsection (2) provides that Treasury may, by order, impose restrictions on partial transfers in the ways which are set out in subsection (2), as supplemented by subsections (3) and (4). This enables restrictions to be imposed by reference to the nature of the property, rights and liabilities which may or may not form part of the transfer. It also permits conditions to be imposed before a partial transfer can be undertaken, and can require partial transfers to include particular provisions.

114.     The power is exercisable by the Treasury making an order by statutory instrument subject to the affirmative procedure (subsection (5)).

Clause 43: Power to protect certain interests

115.     This power enables certain private law rights to be protected when the property transfer powers are exercised to effect a partial transfer. A partial transfer is the transfer of some, but not all, of a bank’s property, rights or liabilities (as defined in subsections (1) and (5) of clause 42).

116.     Subsection (1) broadly defines the certain interests for which the power may provide protection. The characterisation and identification of such interests may be addressed in the order (in subsection (4)). This provision reflects the extremely broad range of relevant interests which exist in this field. The interests which the exercise of the power is intended to cover may include, for example, security interests (see subsection (1)(a)) and set-off and netting arrangements used in particular types of specialist markets.

117.     Under the power, such interests may be protected in the ways set out in subsection (2), as supplemented by subsection (3).

118.     The power is exercisable by the Treasury making an order by statutory instrument subject to the affirmative procedure (subsection (6)).

Compensation

Clause 44: Orders

119.     This clause describes three types of orders which may be made for the purposes of providing compensation in consequence of the exercise of the stabilisation powers.

120.     Subsection (2) describes a compensation scheme order, which may establish a scheme to determine whether compensation should be paid to transferors. The identity of the transferor or transferors depends on the stabilisation power exercised. In the case of share transfer powers, the transferors will be the holders of the securities which were transferred under the order. In the case of property transfer powers, the transferor will be the bank from whom property, rights or liabilities were transferred.

121.     Subsection (3) describes the resolution fund order, which establishes a scheme under which the transferors may become entitled to the proceeds of resolution of a bridge bank or of a bank in temporary public sector ownership.

122.     Subsection (4) describes a third party compensation order, which establishes a scheme for paying compensation to third parties (persons who are not transferors), for example counterparties of a bank whose property rights are interfered with in a compensatable way (under Article 1 of the First Protocol to the European Convention on Human Rights) as a result of the transfer.

Clause 45: Sale to private sector purchaser

123.     This clause requires the Treasury to make a compensation scheme order, on the exercise by the Bank of England of the private sector purchaser stabilisation option (clause 10) (a property or share transfer instrument to such a purchaser). Subsection (3) sets out that the order may include a third party compensation order.

Clause 46: Transfer to bridge bank

124.     This clause requires, on the exercise by the Bank of England of the bridge bank stabilisation option (clause 11), the Treasury to make a resolution fund order (further considered under clause 53 below). Subsection (3) provides that the order may include a compensation scheme order and a third party compensation order.

Clause 47: Transfer to temporary public ownership

125.     This clause requires, on the exercise by the Treasury of the temporary public ownership stabilisation option, the Treasury to make either make a resolution fund order (which may include a compensation scheme order) or a compensation scheme order. In either case, the order may include a third party compensation scheme order.

Clause 48: Onward transfers

126.     Where there is an onward transfer from either a bridge bank or a bank in temporary public sector ownership, this clause enables the Treasury with the power to make a compensation order or a third party compensation order.

Clause 49: Independent valuer

127.     Subsection (1) requires that a compensation scheme order and a third party compensation order (by virtue of subsection (6)) include provision for the amount of compensation to be determined by an independent valuer. Subsection (2) requires the Treasury to appoint a person to appoint the independent valuer, and in practice the Government anticipates that an appointments panel will be convened for this purpose. Two different methods for appointing the valuer are provided in subsection (3); namely, for the Treasury to arrange to identify candidates or provide that another person will arrange to appoint a valuer.

128.     Subsection (4) states that the independent valuer can be removed only on grounds of incapacity or serious misconduct. The removal must be made by a person specified by the Treasury in accordance with the order. Subsection (5) states that the order must include provision for resignation and replacement of the independent valuer.