Banking Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Banking Bill

Banking Bill
Part 2 — Bank Insolvency
59

108
Release
A bank liquidator who is released is discharged from all liability in respect of
acts or omissions in the bank insolvency and otherwise in relation to conduct
as bank liquidator (but without prejudice to the effect of section 212 of the
Insolvency Act 1986 as applied by section 100 above).
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109
Replacement
(1)
Where a bank liquidator vacates office the Bank of England must as soon as is
reasonably practicable appoint a replacement bank liquidator.
(2)
But where a bank liquidator is removed by resolution of a meeting of creditors
under section 106—
10
(a)
a replacement may be appointed by resolution of the meeting, and
(b)
failing that, subsection (1) above applies.
Termination of process, &c.
110
Company voluntary arrangement
(1)
A bank liquidator may make a proposal in accordance with section 1 of the
15
Insolvency Act 1986 (company voluntary arrangement).
(2)
Before making a proposal the bank liquidator—
(a)
shall present a final report on the bank liquidation to the liquidation
committee,
(b)
shall send a copy of the report to—
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(i)
the FSA,
(ii)
the FSCS,
(iii)
the Bank of England,
(iv)
the Treasury, and
(v)
the registrar of companies, and
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(c)
shall make the report available to members, creditors and
contributories on request.
(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
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(b)
the bank liquidator is satisfied, as a result of arrangements made with
the FSCS, that any depositor still eligible for compensation under the
scheme will be dealt with in accordance with section 96(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
35
the following modifications.
(7)
In section 3 (summoning of meetings) subsection (2) (and not (1)) applies.
(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
40
may apply to the court to lift the suspension of the bank insolvency order.

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Part 2 — Bank Insolvency
60

111
Administration
(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).
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(2)
An application may be made only if the following conditions are satisfied.
(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.
10
(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 or have their accounts transferred
during administration.
112
Dissolution
15
(1)
A bank liquidator who thinks that the winding up of the bank is for practical
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—
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(i)
the FSA,
(ii)
the FSCS,
(iii)
the Bank of England,
(iv)
the Treasury, and
(v)
the registrar of companies, and
25
(c)
shall make the report available to members, creditors and
contributories on request.
(3)
At the meeting the liquidation committee shall—
(a)
consider the report, and
(b)
decide whether to release the bank liquidator.
30
(4)
If the liquidation committee decides to release the bank liquidator, the bank
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
35
liquidator may apply to the Secretary of State for release; if the application is
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
40
Secretary of State is a reference to the Accountant of Court.
(7)
On receipt of a notice under subsection (4)(a) the registrar of companies shall
register it.

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Part 2 — Bank Insolvency
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(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 113).
113
Dissolution: supplemental
(1)
The Secretary of State may by direction defer the date of dissolution under
section 112, on the application of a person who appears to the Secretary of State
5
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).
(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
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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.
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(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
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section 112 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 112 above.
Other processes
114
Bank insolvency as alternative order
(1)
On a petition for a winding up order or an application for an administration
30
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
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(b)
on the application of the Bank of England.
115
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.
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Part 2 — Bank Insolvency
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116
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—
5
(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,
10
(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.
117
Notice to FSA of preliminary steps
(1)
An application for an administration order in respect of a bank may not be
15
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.
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(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,
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(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
30
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
35
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
40
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.

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(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
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,
5
(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
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
10
person who gave the notice, within the period in Condition 3(a).
118
Disqualification of directors
(1)
In this section “the Disqualification Act” means the Company Directors
Disqualification Act 1986.
(2)
In the Disqualification Act—
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(a)
a reference to liquidation includes a reference to bank insolvency,
(b)
a reference to winding up includes a reference to making or being
subject to a bank insolvency order,
(c)
a reference to becoming insolvent includes a reference to becoming
subject to a bank insolvency order, and
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(d)
a reference to a liquidator includes a reference to a bank liquidator.
(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
insolvency order, the responsible office-holder is the bank liquidator.
(4)
After section 21 of the Disqualification Act (interaction with Insolvency Act)
25
insert—
“21A
Bank insolvency
Section 118 of the Banking Act 2008 provides for this Act to apply in
relation to bank insolvency as it applies in relation to liquidation.”
119
Application of insolvency law
30
(1)
The Secretary of State and the Treasury may by order made jointly—
(a)
provide for an enactment about insolvency to apply to bank insolvency
(with or without specified modifications);
(b)
amend, or modify the application of, an enactment about insolvency in
consequence of this Part.
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(2)
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.