Part VII Financial Markets and Insolvency

Recognised investment exchanges and clearing houses

163 Net sum payable on completion of default proceedings.

F1(1)

The following provisions apply with respect to a net sum certified by a recognised investment exchange or recognised clearing house under its default rules to be payable by or to a defaulter.

(2)

If, in England and Wales, a bankruptcyF2, winding-up or administration order has been made, or a resolution for voluntary winding-up has been passed, the debt—

(a)

is provable in the bankruptcyF3, winding up or administration or, as the case may be, is payable to the relevant office-holder, and

(b)

shall be taken into account, where appropriate, under section 323 of the Insolvency Act M11986 (mutual dealings and set-off) or the corresponding provision applicable in the case of winding up F4or administration,

in the same way as a debt before the commencement of the bankruptcy, the date on which the body corporate goes into liquidation (within the meaning of section 247 of the Insolvency Act 1986)F5, or enters administration or, in the case of a partnership, the date of the winding-up order F6or the date on which the partnership enters administration.

(3)

If, in Scotland, an award of sequestration or a winding-up F7or administration order has been made, or a resolution for voluntary winding up has been passed, the debt—

(a)

may be claimed in the sequestrationF8, winding up or administration or, as the case may be, is payable to the relevant office-holder, and

(b)

shall be taken into account for the purposes of any rule of law relating to set-off applicable in sequestrationF9, winding up or administration,

in the same way as a debt due before the date of sequestration (within the meaning of section 73(1) of the M2Bankruptcy (Scotland) Act 1985) or the commencement of the winding up (within the meaning of section 129 of the Insolvency Act 1986) F10or the date on which the body corporate enters administration.

F11(3A)

In subsections (2) and (3), a reference to the making of an administration order shall be taken to include a reference to the appointment of an administrator under—

(a)

paragraph 14 of Schedule B1 to the Insolvency Act 1986 (appointment by holder of qualifying floating charge); or

(b)

paragraph 22 of that Schedule (appointment by company or directors).

(4)

However, where (or to the extent that) a sum is taken into account by virtue of subsection (2)(b) or (3)(b) which arises from a contract entered into at a time when the creditor had notice—

(a)

that a bankruptcy petition or, in Scotland, a petition for sequestration was pending, F12...

(b)

that a meeting of creditors had been summoned under section 98 of the Insolvency Act M31986 or that a winding-up petition was pending, F13or

F14(c)

that an application for an administration order was pending or that any person had given notice of intention to appoint an administrator,

the value of any profit to him arising from the sum being so taken into account (or being so taken into account to that extent) is recoverable from him by the relevant office-holder unless the court directs otherwise.

(5)

Subsection (4) does not apply in relation to a sum arising from a contract effected under the default rules of a recognised investment exchange or recognised clearing house.

(6)

Any sum recoverable by virtue of subsection (4) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential or, in Scotland, preferred debts.