28 Liability of insolvent society in respect of payments by Board.U.K.
[F1(1)This section applies where—
(a)a participating institution becomes insolvent, and
(b)the Board, by reason of the insolvency, 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 [F2in respect of an institution that is being wound up]—
(a)the [F3institution] shall become liable to the Board, F4. . ., for an amount equal to the amount of the insolvency payment to the investor;
(b)the liability of [F5the institution] 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 [F6institution]—
(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 [F5the institution].
[F7(2A)The liability imposed by subsection (2)(a) above shall have effect—
(a)where the liability of the institution to the investor is referable to deposits, as a liability in respect of deposits received immediately before the time when the institution began to be wound up;
(b)where that liability is referable to shares, as a liability in respect of shares issued immediately before that time.]
(3)Where the [F8institution’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, [F9apart from this paragraph], 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, [F9apart from this paragraph], would be payable to the Board in respect of the liability to the Board.
[F10(5A)Where this section applies in respect of an institution that is not being wound up—
(a)the institution shall, at the time when the insolvency payment falls to be made by the Board, become liable to the Board for an amount equal to that payment; and
(b)the liability of the institution to the investor shall be reduced by an amount equal to that payment.
(5B)Where a participating institution is wound up after it has become insolvent subsections (2) to (5) above shall not apply to any insolvency payment to the extent to which the Board has received a payment in respect of it by virtue of subsection (5A)(a) above.]
[F11(6)Where by virtue of paragraph 3 of Schedule 6 to this Act the insolvency payment is or is to be made by the Board to a person other than the person to whom the institution is liable in respect of the protected investment, 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 institution to the person to whom that payment would fall to be made by the Board apart from that paragraph.]
F12(7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F12(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9)Rules may be made—
(a)for England and Wales and for Scotland, under section 411 of the M1Insolvency Act 1986, and
(b)for Northern Ireland, under [F13Article 359 of the Insolvency (Northern Ireland) Order 1989];
for the purpose of integrating the procedure provided for in this section [F14and section 29A(3) to (5)]into the general procedure on winding up.
Textual Amendments
F1S. 28(1) substituted (1.7.1995) by S.I. 1995/1442, reg. 41(1) (with transitional and transitory provisions in regs. 53(2), 54(2))
F2Words in s. 28(2) inserted (1.7.1995) by S.I. 1995/1442, reg. 41(2)(a) (with transitional and transitory provisions in regs. 53(2), 54(2))
F3Words in s. 28(2) substituted (1.7.1995) by S.I. 1995/1442, reg. 41(2)(b) (with transitional and transitory provisions in regs. 53(2), 54(2))
F4Words in s. 28(2)(a) ceased to have effect (9.6.1997) and repealed (1.12.1997) by 1997 c. 32, ss. 33(1), 46(2), Sch. 9; S.I. 1997/1427, art. 2(h); S.I. 1997/2668, art. 2(1), Sch. Pt. I
F5Words in s. 28(2) substituted (1.7.1995) by S.I. 1995/1442, reg. 41(2)(c) (with transitional and transitory provisions in regs. 53(2), 54(2))
F6Words in s. 28(2) substituted (1.7.1995) by S.I. 1995/1442, reg. 41(2)(e) (with transitional and transitory provisions in regs. 53(2), 54(2))
F7S. 28(2A) inserted (9.6.1997) by 1997 c. 32, s. 33(2); S.I. 1997/1427, art. 2(h)
F8Word in s. 28(3) substituted (1.7.1995) by S.I. 1995/1442, reg. 41(3) (with transitional and transitory provisions in regs. 53(2), 54(2))
F9Words in s. 28(4)(b)(5)(b) substituted (9.6.1997) by 1997 c. 32, s. 33(3); S.I. 1997/1427, art. 2(h)
F10S. 28(5A)(5B) inserted (1.7.1995) by S.I. 1995/1442, reg. 41(4) (with transitional and transitory provisions in regs. 53(2), 54(2))
F11S. 28(6) substituted (9.6.1997) by 1997 c. 32, s. 43, Sch. 7 para. 9; S.I. 1997/1427, art. 2(k)(n)(i)
F12S. 28(7)(8) omitted (1.7.1995) by virtue of S.I. 1995/1442, reg. 41(6) (with transitional and transitory provisions in regs. 53(2), 54(2))
F13Words in s. 28(9)(b) substituted (N.I.) (01.10.1991) by S.I. 1989/2405 (N.I. 19), arts. 2(1), 381, Sch. 9 Pt. II para. 43(b); S.R. 1991/411, art. 2
F14Words in s. 28(9) inserted (1.7.1995) by S.I. 1995/1442, reg. 41(7) (with transitional and transitory provisions in regs. 53(2), 54(2))
Modifications etc. (not altering text)
C1Ss. 27, 28: power to repeal conferred (9.6.1997) by 1997 c. 32, s. 32(5)(b)(ii); S.I. 1997/1427, art. 2(g)
Marginal Citations