Policyholders Protection Act 1975 (repealed)

16 Companies in financial difficulties: transfers of business, etc. U.K.

(1) An authorised insurance company, not being a company in liquidation, is a company in financial difficulties for the purposes of this section if—

(a) it is a company in provisional liquidation within the meaning of section 15 above;

(b) it has been proved, in any proceedings on a petition for the winding up of the company under the [F1 Insolvency Act 1986] or (as the case may be) the [F2 Insolvency (Northern Ireland) Order 1989], to be unable to pay its debts; or

(c) an application has been made to the court under [F3 section 425 of the Companies Act 1985] or [F4 Article 418 of the Companies (Northern Ireland) Order 1986]for the sanctioning of a compromise or arrangement proposed between the company and its creditors or any class of them (whether or not any of its members are also parties thereto) and the terms of the compromise or arrangement provide for reducing the liabilities or the benefits provided for under any of the company’s policies;

provided that, in a case falling within paragraph (b) above, the petition was presented after 29th October 1974, and in a case falling within paragraph (c) above, the application was made after that date.

(2) Subject to section 17 below and to the following provisions of this section, the Board may exercise any power conferred on them by subsection (3) or (4) below for the purpose of safeguarding [F5 those who are qualifying persons in relation to a company in financial difficulties], or any class or description of [F6 such persons], to any extent appearing to the Board to be appropriate in any case or in any class or description of case, against loss arising from the financial difficulties of the company.

(3) Subject to section 17 below and to the following provisions of this section, the Board may take any measures appearing to them to be appropriate for securing or facilitating the transfer of all or any part of the insurance business carried on by a company in financial difficulties to another authorised insurance company, on terms (including terms reducing [F7 any of the things to which any of those who are qualifying persons in relation to the company in financial difficulties are entitled in their capacity as such)] appearing to the Board to be appropriate in any case or in any class or description of case.

(4) Subject to section 17 below and to the following provisions of this section, in any case where it appears to the Board that it would be practicable to secure the purpose mentioned in subsection (2) above by giving assistance to the company in financial difficulties to enable it to continue to carry on insurance business, the Board may take such measures as appear to them to be appropriate for giving such assistance.

(5) Without prejudice to the generality of subsection (4) above, the Board may make the giving of any assistance to a company in financial difficulties under subsection (4) above conditional on the reduction of [F8 of the things to which any of those who are qualifying persons in relation to the company are entitled in their capacity as such] to any extent appearing to them to be appropriate in any case or in any class or description of case.

(6) The Board shall not exercise any power conferred on them by subsection (3) or (4) above for the purpose of safeguarding any policyholders of a company in financial difficulties in any case where it appears to the Board that—

(a) persons who were members of the company at the relevant time; or

(b) persons who had any responsibility for or who may have profited from the circumstances giving rise to the company’s financial difficulties;

would benefit to any material extent as a result of any measures the Board may take under either of those subsections.

In this subsection and in the following provisions of this section “the relevant time” means—

(a) in a case falling within subsection (1)(a) above, the time when the provisional liquidator was appointed;

(b) in a case falling within subsection (1)(b) above, the time when the winding up petition was presented; and

(c) in a case falling within subsection (1)(c) above, the time when the application was made under [F9 section 425 of the Companies Act 1985] or (as the case may be) under [F10 Article 418 of the Companies (Northern Ireland) Order 1986].

(7) The Board shall disregard for the purposes of subsection (6) above any benefit which may accrue to any such persons as are there mentioned who are policyholders of the company in financial difficulties in their capacity as such.

(8) The Board shall not take any measures in pursuance of subsection (3) or (4) above for the purpose of safeguarding [F11 any of those who are qualifying persons in relation to] a company in financial difficulties in any case where it appears to the Board that to take whatever measures may be required for the assistance of [F12 the persons] in question under sections 6 to 11 above in the event of the company’s going into liquidation would cost them less than to take the measures in question under subsection (3) or (4) above.

(9) A policyholder of a company in financial difficulties is eligible for protection under this section if he is a policyholder in respect of a general policy or a long term policy of the company which was a United Kingdom policy at the relevant time.

[F13 (9A) A security holder in respect of a security given by a company in financial difficulties is eligible for protection under this section if—

(a) it is a security to which section 6 above applies, and

(b) it would have been a United Kingdom policy at the relevant time if it had been an insurance policy and the contract governing the security had been a contract of insurance.]

Textual Amendments

F1 Words substituted by Insolvency Act 1986 (c. 45, SIF 66), s. 439(2), Sch. 14

F2 Words in s. 16(1)(b) substituted (1.10.1991) by virtue of S.I. 1989/2405 (N.I. 19), art. 381(2), Sch. 9 para. 28; S.R. 1991/411, art. 2.

F3 Words substituted by Companies Consolidation (Consequential Provisions) Act 1985 (c. 9, SIF 27), s. 30, Sch. 2

F4 Words substituted by S.I. 1986/1035, (N.I. 9), art. 23, Sch. 1 Pt. II

F5 Words in s. 16(2) substituted (5.4.2000) by 1997 c. 18, s. 3(1)(2)(a); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))

F6 Words in s. 16(2) substituted (5.4.2000) by 1997 c. 18, s. 3(1)(2)(b); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))

F7 Words in s. 16(3) substituted (5.4.2000) by 1997 c. 18, s. 3(1)(3); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))

F8 Words in s. 16(5) substituted (5.4.2000) by 1997 c. 18, s. 3(1)(4); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))

F9 Words substituted by Companies Consolidation (Consequential Provisions) Act 1985 (c. 9, SIF 27), s. 30, Sch. 2

F10 Words substituted by S.I. 1986/1035, (N.I. 9), art. 23, Sch. 1 Pt. II

F11 Words in s. 16(8) substituted (5.4.2000) by 1997 c. 18, s. 3(1)(5)(a); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))

F12 Words in s. 16(8) substituted (5.4.2000) by 1997 c. 18, s. 3(1)(5)(b); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))

F13 S. 16(9A) inserted (5.4.2000) by 1997 c. 18, s. 3(1)(7); S.I. 2000/971, arts. 2, 3(1) (subject to art. 3(2))