Building Societies Act 1986

28 Liability of insolvent society in respect of payments by Board

(1) This section applies where—

(a) a building society has become insolvent,

(b) the Board has determined under section 26 to levy contributions for the purpose of making insolvency payments to investors in the society, and

(c) the Board, by virtue of the determination, has made, or is under a liability to make, an insolvency payment to an investor in respect of his protected investment.

(2) Where this section applies—

(a) the insolvent society shall become liable to the Board, as in respect of a contractual debt incurred immediately before the society became insolvent, for an amount equal to the amount of the insolvency payment to the investor;

(b) the liability of the society to the investor, whether referable to deposits or referable to shares of his (in this section referred to as " the liability to the investor "), shall be reduced by an amount equal to the insolvency payment made or to be made to him by the Board; and

(c) the respective duties of the liquidator of the insolvent building society—

(i) to make payments to the Board on account of the liability imposed by paragraph (a) above and to the investor on account of the liability to the investor so far as that liability is referable to deposits of his (after taking account of paragraph (b) above), and

(ii) to make payments to the Board on account of the liability imposed by paragraph (a) above and to the investor on account of the liability to the investor so far as that liability is referable to shares of his (after taking account of paragraph (b) above),

shall be varied in accordance with subsection (4) and subsection (5) below; and in those subsections " the liability to the Board " means the liability imposed by paragraph (a) above on the society.

(3) Where the society's liability to the investor is referable to both shares and deposits, the amount equal to the insolvency payment to him shall, for the purposes of subsection (2) (b) above, be first applied in reduction of the liability referable to his shares then, if that amount exceeds that liability, in reduction of the liability referable to his deposits.

(4) The variation in the liquidator's duty where the liability to the investor is referable to deposits of his is as follows—

(a) in the first instance the liquidator shall pay to the Board instead of to the investor any amounts which, apart from this section, would be payable on account of the liability to the investor referable to deposits of his except in so far as that liability relates to a secured deposit; and

(b) if at any time the total amount paid to the Board by virtue of paragraph (a) above and in respect of the liability to the Board equals the amount of the insolvency payment referable to deposits of the investor, the liquidator shall thereafter pay to the investor instead of to the Board any amount which, apart from this section, would be payable to the Board in respect of the liability to the Board.

(5) The variation in the liquidator's duty where the liability to the investor is referable to shares of his is as follows—

(a) in the first instance the liquidator shall pay to the Board instead of to the investor any amounts which, apart from this section, would be payable on account of the liability to the investor referable to shares of his ; and

(b) if at any time the total amount paid to the Board by virtue of paragraph (a) above and in respect of the liability to the Board equals the amount of the insolvency payment referable to shares of the investor, the liquidator shall thereafter pay to the investor instead of to the Board any amount which, apart from this section, would be payable to the Board in respect of the liability to the Board.

(6) In the case of a protected investment which, for the purposes of Schedule 6 to this Act, is held on trust for a person absolutely entitled to it against the trustees or, as the case may be, for two or more persons so entitled jointly, any reference in the preceding provisions of this section to the liability to the investor shall be construed as a reference to the liability of the insolvent society to the trustees.

(7) The Board may by notice served on the liquidator of an insolvent building society require him, at such time or times and at such place as may be specified in the notice,—

(a) to furnish to the Board such information, and

(b) to produce to the Board such books or papers specified in the notice,

as the Board may reasonably require to enable it to carry out its functions under the protective scheme provisions of this Part.

(8) Where, as a result of a building society having become insolvent, any books or papers have come into the possession of—

(a) in England and Wales, the Official Receiver,

(b) in Scotland, the liquidator, or

(c) in Northern Ireland, the Official Assignee for company liquidations,

he shall permit any person duly authorised by the Board to inspect the books or papers for the purpose of establishing—

(i) the identity of those of the society's investors to whom the Board is liable to make an insolvency payment; and

(ii) the amount of the protected investment held by each of those investors.

(9) Rules may be made—

(a) for England and Wales and for Scotland, under section 411 of the [1986 c. 45.] Insolvency Act 1986, and

(b) for Northern Ireland, under Article 613 of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986 ;

for the purpose of integrating the procedure provided for in this section into the general procedure on winding up.