Companies in financial difficulties

I13 Persons qualifying for protection.

1

Section 16 of the 1975 Act (which enables the Board to take measures to protect policyholders of companies in financial difficulties) shall be amended as follows.

2

In subsection (2) (under which the Board’s powers are exercisable for the purpose of safeguarding policyholders of a company in financial difficulties who are eligible for protection under the section)—

a

for “policyholders of a company in financial difficulties who are eligible for protection under this section” there shall be substituted “ those who are qualifying persons in relation to a company in financial difficulties ”, and

b

for “such policyholders” there shall be substituted “ such persons ”.

3

In subsection (3) (power to secure or facilitate transfer of business of company in financial difficulties on terms including reducing liabilities or benefits under any policies), for the words from “the liabilities” to “policies)” there shall be substituted “ 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) ”.

4

In subsection (5) (power to assist company in financial difficulties conditionally on reduction of liabilities or benefits under any of its policies), for the words from “any liabilities” to “the company” there shall be substituted “ of the things to which any of those who are qualifying persons in relation to the company are entitled in their capacity as such ”.

5

In subsection (8) (restriction on exercise of powers)—

a

for “any policyholders of” there shall be substituted “ any of those who are qualifying persons in relation to ”, and

b

for “the policyholders” there shall be substituted “ the persons ”.

6

After subsection (8B) there shall be inserted—

8C

For the purposes of this section, a person is a qualifying person in relation to a company in financial difficulties if—

a

he is a policyholder of the company who is eligible for protection under this section,

b

he is a security holder in respect of a security given by the company who is eligible for protection under this section, or

c

he is a person to whom the company is liable to pay any sum in respect of his entitlement to the benefit of a judgment under the provisions mentioned in paragraphs (a) and (b) of section 7 above.

7

After subsection (9) there shall be inserted—

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.

4 Deferment of payment.

1

Section 16 of the 1975 Act shall be amended as follows.

2

In subsection (1) (definition of company in financial difficulties), in paragraph (c) (application made for sanctioning compromise or arrangement providing for reducing liabilities or benefits under company’s policies), after “reducing” there shall be inserted “ , or deferring payment of, ”.

3

In subsection (3) (power to secure or facilitate transfer of business of company in financial difficulties on terms including reducing entitlements of qualifying persons), after “reducing” there shall be inserted “ , or deferring payment of, ”.

4

In subsection (5) (power to assist company in financial difficulties conditionally on reduction of entitlements of qualifying persons), after “reduction of” there shall be inserted “ , or the deferment of the payment of, ”.

5 Operation of the “cost test”.

In section 16 of the 1975 Act, after subsection (8) (which prevents the Board taking measures under subsection (3) or (4) if it appears to them that it would cost them less if the company went into liquidation) there shall be inserted—

8A

In making any calculation for the purposes of subsection (8) above, the Board shall—

a

discount future costs to a present value using such rates of interest as appear to them to be appropriate, and

b

in evaluating contingent costs, make such assumptions, and use such statistical and other methods, as appear to them to be reasonable.

8B

If in pursuance of subsection (3) or (4) above the Board have entered into an obligation to do anything, subsection (8) above shall not apply in relation to anything done in pursuance of the obligation.

6 Schemes of arrangement, etc.: power of F1Treasury to intervene.

1

In the 1975 Act, after section 17 there shall be inserted—

17A Schemes of arrangement, etc.: power of F1Treasury to intervene.

C11

This section applies where a company is a company in financial difficulties for the purposes of section 16 above by virtue of subsection (1)(c) of that section.

2

The F1Treasury may, after consultation with the Board, exercise any power conferred on F2the Treasury by subsection (3) or (4) below for the purpose of safeguarding those who are qualifying persons in relation to the company, or any class or description of such persons, to any extent appearing to the F1Treasury to be appropriate, against relevant loss arising from the financial difficulties of the company.

3

The F1Treasury may by notice in writing direct the Board to take any measures appearing to F2the Treasury to be necessary for securing or facilitating the transfer of all or any part of the insurance business carried on by the company to another insurance company to which this Act applies or an authorised friendly society, on terms (including terms reducing, or deferring payment of, 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 F2the Treasury to be appropriate.

4

In any case where it appears to the F1Treasury that it would be practicable to secure the purpose mentioned in subsection (2) above by the Board giving assistance to the company to enable it to continue to carry on insurance business, the F1Treasury may by notice in writing direct the Board to take such measures as appear to the F1Treasury to be necessary for giving such assistance.

5

Without prejudice to the generality of subsection (4) above, a direction under that subsection may require the Board to make the giving of any assistance to the company conditional on the reduction of, or the deferment of the payment of, any 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 the F1Treasury to be appropriate.

6

The F1Treasury shall send a copy of any notice under subsection (3) or (4) above to the company.

7

A direction under subsection (3) or (4) above shall not have effect to require the Board to take any measures which, by virtue of section 16(6) or (8) or 17(1) above, they would be prevented from taking under section 16(3) or (4) above.

8

Where it appears to the Board that a direction under subsection (3) or (4) above is affected by subsection (7) above, they shall—

a

notify the F1Treasury in writing of that fact and of the reasons for their opinion, and

b

send a copy of the notice to the company.

9

In subsection (2) above, “relevant loss” means loss in connection with a matter by virtue of which a person is a qualifying person in relation to the company.

10

Subsection (8C) of section 16 above shall apply for the purposes of this section as it applies for the purposes of that.

2

Schedule 3 to this Act (consequential amendments of the 1975 Act) shall have effect.

Companies in financial difficulties

6 Schemes of arrangement, etc.: power of Treasury to intervene.

1

In the 1975 Act, after section 17 there shall be inserted—

17A Schemes of arrangement, etc.: power of Treasury to intervene.

C11

This section applies where a company is a company in financial difficulties for the purposes of section 16 above by virtue of subsection (1)(c) of that section.

2

The Treasury may, after consultation with the Board, exercise any power conferred on the Treasury by subsection (3) or (4) below for the purpose of safeguarding those who are qualifying persons in relation to the company, or any class or description of such persons, to any extent appearing to the Treasury to be appropriate, against relevant loss arising from the financial difficulties of the company.

3

The Treasury may by notice in writing direct the Board to take any measures appearing to the Treasury to be necessary for securing or facilitating the transfer of all or any part of the insurance business carried on by the company to another insurance company to which this Act applies or an authorised friendly society, on terms (including terms reducing, or deferring payment of, 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 Treasury to be appropriate.

4

In any case where it appears to the Treasury that it would be practicable to secure the purpose mentioned in subsection (2) above by the Board giving assistance to the company to enable it to continue to carry on insurance business, the Treasury may by notice in writing direct the Board to take such measures as appear to the Treasury to be necessary for giving such assistance.

5

Without prejudice to the generality of subsection (4) above, a direction under that subsection may require the Board to make the giving of any assistance to the company conditional on the reduction of, or the deferment of the payment of, any 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 the Treasury to be appropriate.

6

The Treasury shall send a copy of any notice under subsection (3) or (4) above to the company.

7

A direction under subsection (3) or (4) above shall not have effect to require the Board to take any measures which, by virtue of section 16(6) or (8) or 17(1) above, they would be prevented from taking under section 16(3) or (4) above.

8

Where it appears to the Board that a direction under subsection (3) or (4) above is affected by subsection (7) above, they shall—

a

notify the Treasury in writing of that fact and of the reasons for their opinion, and

b

send a copy of the notice to the company.

9

In subsection (2) above, “relevant loss” means loss in connection with a matter by virtue of which a person is a qualifying person in relation to the company.

10

Subsection (8C) of section 16 above shall apply for the purposes of this section as it applies for the purposes of that.

2

Schedule 3 to this Act (consequential amendments of the 1975 Act) shall have effect.