Clause 19: Conversion and delisting

56.     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).

57.     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).

58.     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 20: Directors

59.     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.

60.     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 of England and Treasury to vary or terminate service contracts of directors.

Clause 21: Ancillary instruments: production, registration, &c.

61.     This clause makes various provisions for share transfer instruments and orders concerning instruments and registration. It provides that the transfer has effect irrespective of production, delivery, transfer or other dealing with an instrument and irrespective of registration.

62.     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.

63.     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.

64.     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 22: Termination rights, &c.

65.     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.

66.     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 23: Incidental provision

67.     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 24: Procedure: instruments

68.     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 25: Procedure: orders

69.     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 order in line with the provisions of subsection (3).

Clause 26: Supplemental instruments

70.     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, including a further transfer of securities meeting the description specified in subsection (3)(a).

71.     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 27: Supplemental orders

72.     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 anything that a share transfer order may generally provide for, including a further transfer of securities meeting the description specified in subsection (3)(a).

73.     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 28: Onward transfer

74.     Where the Treasury has made a share transfer order to bring a bank into temporary public ownership in accordance with clause 13, it may make onward share transfer orders. These may provide for two things: first, for the transfer of securities meeting the description specified in subsection (3)(a); 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.

75.     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.

76.     Subsection (7) provides that the Treasury may make a supplemental share transfer order (as described in clause 27) following the making of an onward share transfer order.

Clause 29: Reverse share transfer

77.     Where the Treasury has made a share transfer order to bring a bank into temporary public ownership in accordance with clause 13, it may make reverse share transfer orders.

78.     A reverse share transfer order may transfer securities in temporary public ownership back to the original transferors (i.e. the holders of the shares and other securities before the bank was taken into temporary public ownership). Alternatively, where there has been an onward transfer to a particular type of onward transferee, the order may transfer securities back from that onward transferee into temporary public ownership. The reverse share transfer powers could only be used in the case of an onward transfer, however, where the onward transferee was a company wholly owned by the Bank of England, a company wholly owned by the Treasury or a nominee of the Treasury. This limitation is to prevent the reverse share transfer powers from being exercisable in relation to an onward transfer to a private sector party who wished to acquire the bank from temporary public ownership.

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

80.     Subsection (7) provides that the Treasury may make a supplemental share transfer order (as described in clause 27) following the making of a reverse share transfer order.

Clause 30: Bridge bank: share transfers

81.     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 transfer the securities of a bridge bank.

82.     The general and specific conditions (clauses 7 and 8, respectively) do not apply and subsection (5) provides that the Bank of England must consult the Treasury and the FSA before making the instrument.

83.     Subsection (6) provides that the Bank of England may make a supplemental share transfer instrument (as described in clause 26) following the making of a bridge bank share transfer instrument.

Clause 31: Bridge bank: reverse share transfers

84.     Where the Bank of England has made a bridge bank share transfer instrument to a company wholly owned by the Bank of England or the Treasury, or a nominee of the Treasury, the Bank of England may make bridge bank reverse share transfer instruments. A bridge bank reverse share transfer instrument provides for the transfer of securities of a bridge bank to be transferred back from such an onward transferee.

85.     The general and specific conditions (clauses 7 and 8, respectively) do not apply to reverse transfers and subsection (5) provides that the Bank of England must consult the Treasury and the FSA before making the instrument.

Clause 32: Interpretation: general

86.     This clause defines references to “service contract” and “transfer date”.

Transfer of property

Clause 33: Property transfer instrument

87.     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 11 and 12). 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 47.

Clause 34: Effect

88.     A transfer of property, rights or liabilities is effected through a property transfer instrument (clause 33). 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 35: Transferable property

89.     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) of subsection (1) provide that foreign property may be transferred. Paragraph (e) provides that rights and liabilities under enactments may be the subject of a transfer.

Clause 36: Continuity

90.     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.

91.     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.

92.     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.

93.     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.

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

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

96.     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.

97.     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.

98.     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 37: Licences

99.     This clause makes provision in relation to licences.

100.     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 38: Termination rights, &c.

101.     This clause makes similar provision in relation to default event provisions for property transfers as that made for share transfers by clause 22.

Clause 39: Foreign property

102.     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.

103.     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.

104.     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.

105.     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 40: Incidental provision

106.     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 41: Procedure

107.     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 42: Supplemental instruments

108.     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.

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

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

Clause 43: Onward transfer

111.     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.

112.     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.

113.     Subsection (8) states that the Bank may make a supplemental property transfer instrument (as provided for in clause 42) following the making of an onward property transfer instrument.

Clause 44: Reverse property transfer

114.     Where the Bank of England has made a property transfer instrument to effect the bridge bank stabilisation option, it may make reverse property transfer instruments.

115.     A reverse property transfer instrument may transfer property, rights or liabilities of a bridge bank back to the original transferor (i.e. the failing bank). Alternatively, where there has been an onward transfer to a particular type of onward transferee, the instrument may transfer property back from that onward transferee to the bridge bank. The reverse property transfer powers could only be used in this case, however, where the onward transferee was a company wholly owned by the Bank of England, a company wholly owned by the Treasury or a nominee of the Treasury. This limitation is to prevent the reverse property transfer powers from being exercisable following an onward transfer to a private sector party who wished to acquire the business of a bridge bank.

116.     The general and specific conditions (clauses 7 and 8, respectively) do not apply to reverse transfers. Subsection (6) provides that the Bank of England must consult the Treasury and the FSA before making the instrument.

117.     Subsection (7) states that the Bank of England may make a supplemental property transfer instrument (as described in clause 42) following the making of a reverse property transfer instrument.

Clause 45: Temporary public ownership: property transfer

118.     Where the Treasury have 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 bank in temporary public ownership; and, second, for anything that a property transfer instrument may otherwise provide for. Subsection (4) 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.

119.     Subsection (6) provides that a property transfer order should be treated, in procedural terms, as a share transfer order (see clause 16). In all other respects, however, it should be treated as a property transfer instrument (see clause 33).

120.     Subsection (8) states that the Treasury may make a supplemental property transfer order (as described in clause 42) following the making of temporary public ownership property transfer order.

Clause 46: Temporary public ownership: reverse property transfer

121.     Where the Treasury have made a property transfer to a company wholly owned by the Bank of England or the Treasury, or a nominee of the Treasury, the Treasury may make reverse property transfer orders.

122.     A reverse property transfer order provides for the transfer of property back from such an onward transferee.

123.     The general and specific conditions (clauses 7, 8 and 9, respectively) do not apply to onward transfers and subsection (7) provides that the Treasury must consult the Bank of England and the FSA before making the order.

Clause 47: Restriction of partial transfers

124.     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 subsection (1)).

125.     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.

126.     The power is exercisable by the Treasury making an order by statutory instrument subject to the affirmative procedure (subsection (5)), or in the first instance the 28 day procedure, as provided by clause 249.

Clause 48: Power to protect certain interests

127.     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 subsection (1) of clause 47).

128.     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.

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

130.     The power is exercisable by the Treasury making an order by statutory instrument subject to the affirmative procedure (subsection (6)), or in the first instance the 28 day procedure, as provided by clause 249.