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(1) | A bank insolvency order is an order appointing a person as the bank liquidator |
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(2) | A person is eligible for appointment as a bank liquidator if qualified to act as |
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an insolvency practitioner. |
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(3) | An appointment may be made only if the person has consented to act. |
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(4) | A bank insolvency order takes effect in accordance with section 92; and— |
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(a) | the process of a bank insolvency order having effect may be described |
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as “bank insolvency” in relation to the bank, and |
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(b) | while the order has effect the bank may be described as being “in bank |
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(1) | An application for a bank insolvency order may be made to the court by— |
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(c) | the Secretary of State. |
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(2) | An application must nominate a person to be appointed as the bank liquidator. |
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(3) | The bank must be given notice of an application, in accordance with rules |
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under section 411 of the Insolvency Act 1986 (as applied by section 119 below). |
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(a) | Ground A is that a bank is unable, or likely to become unable, to pay its |
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(b) | Ground B is that the winding up of a bank would be in the public |
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(c) | Ground C is that the winding up of a bank would be fair. |
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(2) | The Bank of England may apply for a bank insolvency order only if— |
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(a) | the FSA has informed the Bank of England that the FSA is satisfied that |
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Conditions 1 and 2 in section 7 are met, and |
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(b) | the Bank of England is satisfied— |
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(i) | that the bank has eligible depositors, and |
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(ii) | that Ground A or C applies. |
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(3) | The FSA may apply for a bank insolvency order only if— |
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(a) | the Bank of England consents, and |
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(b) | the FSA is satisfied— |
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(i) | that Conditions 1 and 2 in section 7 are met, |
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(ii) | that the bank has eligible depositors, and |
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(iii) | that Ground A or C applies. |
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(4) | The Secretary of State may apply for a bank insolvency order only if satisfied— |
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(a) | that the bank has eligible depositors, and |
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(b) | that Ground B applies. |
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(5) | The sources of information on the basis of which the Secretary of State may be |
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satisfied of the matters specified in subsection (4) include those listed in section |
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124A(1) of the Insolvency Act 1986 (petition for winding up on grounds of |
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(1) | The court may make a bank insolvency order on the application of the Bank of |
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England or the FSA if satisfied— |
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(a) | that the bank has eligible depositors, and |
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(b) | that Ground A or C of section 90 applies. |
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(2) | The court may make a bank insolvency order on the application of the |
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Secretary of State if satisfied— |
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(a) | that the bank has eligible depositors, and |
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(b) | that Grounds B and C of section 90 apply. |
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(3) | On an application for a bank insolvency order the court may— |
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(a) | grant the application in accordance with subsection (1) or (2), |
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(b) | adjourn the application (generally or to a specified date), or |
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(c) | dismiss the application. |
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(1) | A bank insolvency order shall be treated as having taken effect in accordance |
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(a) | notice has been given to the FSA under section 114 of an application for |
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an administration order or a petition for a winding up order, and |
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(b) | the FSA or the Bank of England applies for a bank insolvency order in |
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the period of 2 weeks specified in Condition 3 in that section, |
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| the bank insolvency order is treated as having taken effect when the |
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application or petition was made or presented. |
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(3) | In any other case, the bank insolvency order is treated as having taken effect |
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when the application for the order was made. |
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(4) | Unless the court directs otherwise on proof of fraud or mistake, proceedings |
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taken in the bank insolvency, during the period for which it is treated as having |
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had effect, are treated as having been taken validly. |
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Process of bank liquidation |
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(1) | A bank liquidator has two objectives. |
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(2) | Objective 1 is to work with the FSCS so as to ensure that as soon as is |
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reasonably practicable each eligible depositor— |
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(a) | has the relevant account transferred to another financial institution, or |
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(b) | receives payment from (or on behalf of) the FSCS. |
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(3) | Objective 2 is to wind up the affairs of the bank so as to achieve the best result |
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for the bank’s creditors as a whole. |
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(4) | Objective 1 takes precedence over Objective 2 (but the bank liquidator is |
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obliged to begin working towards both objectives immediately upon |
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(1) | Following a bank insolvency order a liquidation committee must be |
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established, for the purpose of ensuring that the bank liquidator properly |
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exercises the functions under this Part. |
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(2) | The liquidation committee shall consist initially of 3 individuals, one |
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(3) | The bank liquidator must report to the liquidation committee about any |
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(b) | which the bank liquidator thinks is likely to be of interest to the |
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(4) | In particular, the bank liquidator— |
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(a) | must keep the liquidation committee informed of progress towards |
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Objective 1 in section 93, and |
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(b) | must notify the liquidation committee when in the bank liquidator’s |
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opinion Objective 1 in section 93 has been achieved entirely or so far as |
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is reasonably practicable. |
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(5) | As soon as is reasonably practicable after receiving notice under subsection |
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(4)(b) the liquidation committee must either— |
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(a) | resolve that Objective 1 in section 93 has been achieved entirely or so |
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far as is reasonably practicable (a “full payment resolution”), or |
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(b) | apply to the court under section 168(5) of the Insolvency Act 1986 (as |
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applied by section 97 below). |
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(6) | Where a liquidation committee passes a full payment resolution— |
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(a) | the bank liquidator must summon a meeting of creditors, |
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(b) | the meeting may elect 2 or 4 individuals as new members of the |
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(c) | those individuals replace the members nominated by the Bank of |
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(d) | the FSCS may resign from the liquidation committee (in which case 3 or |
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5 new members may be elected under paragraph (b)), and |
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(e) | if no individuals are elected under paragraph (b), or the resulting |
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committee would have fewer than 3 members or an even number of |
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members, the liquidation committee ceases to exist at the end of the |
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(7) | Subject to provisions of this section, rules under section 411 of the Insolvency |
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Act 1986 (as amended by section 119 below) may make provision about— |
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(a) | the establishment of liquidation committees, |
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(b) | the membership of liquidation committees, |
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(c) | the functions of liquidation committees, and |
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(d) | the proceedings of liquidation committees. |
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95 | Liquidation committee: supplemental |
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(1) | A meeting of the liquidation committee may be summoned— |
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(a) | by any of the members, or |
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(b) | by the bank liquidator. |
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(2) | While the liquidation committee consists of the initial members (or their |
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nominated replacements) a meeting is quorate only if all the members are |
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(3) | A person aggrieved by any action of the liquidation committee before it has |
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passed a full payment resolution may apply to the court, which may make any |
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order (including an order for the repayment of money). |
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(4) | The court may (whether on an application under subsection (3), on the |
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application of a bank liquidator or otherwise) make an order that the |
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liquidation committee is to be treated as having passed a full payment |
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(5) | If a liquidation committee fails to comply with section 94(5) the bank liquidator |
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(a) | for an order under subsection (4) above, or |
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(b) | for directions under or by virtue of section 168(3) or 169(2) of the |
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Insolvency Act 1986 as applied by section 97 below. |
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(6) | A nominating body under section 94(2) may replace its nominee at any time. |
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(7) | After the removal of the nominated members under section 94(6)(c) the FSA |
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(a) | may attend meetings of the liquidation committee, |
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(b) | are entitled to copies of documents relating to the liquidation |
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(c) | may make representations to the liquidation committee, and |
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(d) | may participate in legal proceedings relating to the bank insolvency. |
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(8) | Where a liquidation committee ceases to exist by virtue of section 94(6)(e)— |
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(a) | it may be re-formed by a creditors’ meeting summoned by the bank |
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liquidator for the purpose, and |
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(b) | the bank liquidator must summon a meeting for the purpose if |
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requested to do so by one-tenth in value of the bank’s creditors. |
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(9) | Where a liquidation committee ceases to exist by virtue of section 94(6)(e) and |
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has not been re-formed under subsection (8) above— |
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(a) | ignore a reference in this Part to the liquidation committee, |
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(b) | for section 107(2) to (4) substitute requirements for the bank liquidator, |
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before making a proposal— |
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(i) | to produce a final report, |
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(ii) | to send copies in accordance with section 107(2)(b), |
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(iii) | to make it available in accordance with section 107(2)(c), and |
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(iv) | to be satisfied as specified in section 107(4)(b), |
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(c) | ignore Condition 2 in section 108, and |
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(d) | for section 109(1) to (5) substitute a power for the bank liquidator to |
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apply to the Secretary of State or Accountant of Court for release and |
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requirements that before making an application the bank liquidator |
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(i) | produce a final report, |
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(ii) | send copies in accordance with section 109(2)(b), |
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(iii) | make it available in accordance with section 109(2)(c), and |
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(iv) | notify the court and the registrar of companies of the intention |
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to vacate office and to apply for release. |
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96 | Objective 1: (a) or (b)? |
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(1) | As soon as is reasonably practicable, a liquidation committee must recommend |
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the bank liquidator to pursue— |
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(a) | Objective 1(a) in section 93, |
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(b) | Objective 1(b) in section 93, or |
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(c) | Objective 1(a) for one specified class of case and Objective 1(b) for |
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(2) | In making a recommendation the liquidation committee must consider— |
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(a) | the desirability of achieving Objective 1 as quickly as possible, and |
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(b) | Objective 2 in section 93. |
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(3) | If the liquidation committee thinks that the bank liquidator is failing to comply |
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with their recommendation, they must apply to the court for directions under |
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section 168(5) of the Insolvency Act 1986 (as applied by section 97 below). |
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(4) | Where the liquidation committee has not made a recommendation the bank |
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liquidator may apply to the court under section 95(3); and the court may, in |
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particular, make a direction in lieu of a recommendation if the liquidation |
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committee fail to make one within a period set by the court. |
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97 | General powers, duties and effect |
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(1) | A bank liquidator may do anything necessary or expedient for the pursuit of |
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the Objectives in section 93. |
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(2) | The following provisions of this section provide for— |
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(a) | general powers and duties of bank liquidators (by application of |
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provisions about liquidators), and |
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(b) | the general process and effects of bank insolvency (by application of |
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provisions about winding up). |
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(3) | The provisions set out in the Table apply in relation to bank insolvency as in |
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relation to winding up, with— |
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(a) | the modifications set out in subsection (4), |
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(b) | any other modification specified in the Table, and |
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(c) | any other necessary modification. |
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(4) | The modifications are that— |
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(a) | a reference to the liquidator is a reference to the bank liquidator, |
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(b) | a reference to winding up is a reference to bank insolvency, |
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(c) | a reference to winding up by the court is a reference to the imposition |
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of bank insolvency by order of the court, |
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(d) | a reference to being wound up under Part IV or V of the Insolvency Act |
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1986 is a reference to being made the subject of a bank insolvency order, |
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(e) | a reference to the commencement of winding up is a reference to the |
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commencement of bank insolvency, |
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(f) | a reference to going into liquidation is a reference to entering bank |
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(g) | a reference to a winding-up order is a reference to a bank insolvency |
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(h) | a reference to a company is a reference to the bank. |
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(5) | Powers conferred by this Act, by the Insolvency Act 1986 (as applied) and the |
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Companies Acts are in addition to, and not in restriction of, any existing |
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powers of instituting proceedings against a contributory or debtor of a bank, |
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or the estate of any contributory or debtor, for the recovery of any call or other |
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(6) | A reference in an enactment or other document to anything done under a |
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provision applied by this Part includes a reference to the provision as applied. |
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TABLE OF APPLIED PROVISIONS |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25 | | | Avoidance of attachment, &c. |
| | | | | | Consequences of winding-up |
| | | | | | | | | | | | Company’s statement of affairs |
| (a) | Treat references to the official |
| | | | | | receiver as references to the bank |
| | 30 | | | | | | | | | | (b) | A creditor or contributory of the |
| | | | | | bank is entitled to receive a copy of a |
| | | | | | statement under section 131 on |
| | | | | | request to the bank liquidator. |
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