The Credit Institutions (Reorganisation and Winding up) Regulations 2004

PART 4 U.K. Reorganisation or Winding up of UK Credit Institutions: Recognition of EEA Rights

Application of this Part U.K.

19.—(1) This Part applies as follows—

(a) where a decision with respect to the approval of a proposed voluntary arrangement having a qualifying purpose is made under section 4A of the 1986 Act or Article 17A of the 1989 Order on or after 5th May 2004 in relation to a UK credit institution;

(b) where an administration order made under paragraph 13 of Schedule B1 to the 1986 Act[F1 , paragraph 14 of Schedule B1 to the 1989 Order,] section 8(1) of the 1986 Act [F2 or Article 21(1) of the 1989 Order] on or after 5th May 2004 is in force in relation to a UK credit institution;

(c) where a UK credit institution is subject to a relevant winding up; F3 ...

(d) where a provisional liquidator is appointed in relation to a UK credit institution on or after 5th May 2004; [F4 or

(e) where a stabilisation instrument is made in respect of a UK credit institution.]

(2) For the purposes of paragraph (1)(a), a voluntary arrangement has a qualifying purpose if it—

(a) varies the rights of the creditors as against the credit institution and is intended to enable the credit institution, and the whole or any part of its undertaking, to survive as a going concern; or

(b) includes a realisation of some or all of the assets of the credit institution to which the compromise or arrangement relates, with a view to terminating the whole or any part of the business of that credit institution.

(3) For the purposes of paragraph (1)(c), a winding up is a relevant winding up if—

(a) in the case of a winding up by the court, the winding-up order is made on or after 5th May 2004; or

(b) in the case of a creditors' voluntary winding up, the liquidator is appointed in accordance with section 100 of the 1986 Act, Article 86 of the 1989 Order or paragraph 83 of Schedule B1 to the 1986 Act [F5 or paragraph 84 of Schedule B1 to the 1989 Order] on or after 5th May 2004.

Textual Amendments

F1 Words in reg. 19(1)(b) substituted (6.4.2007) by The Credit Institutions (Reorganisation and Winding Up) (Amendment) Regulations 2007 (S.I. 2007/830), regs. 1, 2(14)(a)

F2 Words in reg. 19(1)(b) inserted (6.4.2007) by The Credit Institutions (Reorganisation and Winding Up) (Amendment) Regulations 2007 (S.I. 2007/830), regs. 1, 2(14)(b)

F3 Word in reg. 19(1) deleted (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(6)(a)

F4 Reg. 19(1)(e) and word added (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(6)(b)

F5 Words in reg. 19(3)(b) inserted (6.4.2007) by The Credit Institutions (Reorganisation and Winding Up) (Amendment) Regulations 2007 (S.I. 2007/830), regs. 1, 2(15)

Application of this Part: [F6 certain assets excluded from insolvent estate of UK credit institution] U.K.

20.—(1) For the purposes of this Part, the insolvent estate of a UK credit institution shall not include any assets which at the commencement date are subject to [F7 a relevant compromise or arrangement].

(2) In this regulation—

(a) “assets” has the same meaning as “property” in section 436 of the 1986 Act or Article 2(2) of the 1989 Order;

(b) “commencement date” means the date when a UK credit institution goes into liquidation within the meaning given by section 247(2) of the 1986 Act or Article 6(2) of the 1989 Order;

(c) “insolvent estate” has the meaning given by rule 13.8 of the Insolvency Rules or Rule 0.2 of the Insolvency Rules (Northern Ireland) and in Scotland means the company’s assets;

[F8 (d) “relevant compromise or arrangement” means—

(i) a compromise or arrangement sanctioned by the court before 5th May 2004 under—

(aa) section 425 of the Companies Act 1985 (excluding a compromise or arrangement falling within section 427 or 427A of that Act), or

(bb) Article 418 of the Companies (Northern Ireland) Order 1986 (excluding a compromise or arrangement falling within Article 420 or 420A of that Order); or

(ii) any subsequent compromise or arrangement sanctioned by the court to amend or replace a compromise or arrangement of a kind mentioned in paragraph (i) which is—

(aa) itself of a kind mentioned in sub-paragraph (aa) or (bb) of paragraph (i) (whether sanctioned before, on or after 5th May 2004), or

(bb) a section 899 compromise or arrangement.]

Textual Amendments

F6 Words in reg. 20 heading substituted (12.5.2011) by The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (S.I. 2011/1265), arts. 1(2), 24(4)

F7 Words in reg. 20(1) substituted (12.5.2011) by The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (S.I. 2011/1265), arts. 1(2), 24(5)(a)

F8 Reg. 20(2)(d) substituted (12.5.2011) by The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011 (S.I. 2011/1265), arts. 1(2), 24(5)(b)

Interpretation of this Part U.K.

21.—(1) For the purposes of this Part—

(a) “affected credit institution” means a UK credit institution which is the subject of a relevant reorganisation or winding up;

(b) “relevant reorganisation” or “relevant winding up” means any voluntary arrangement, administration, winding up, [F9 making of a stabilisation instrument] or order referred to in regulation 19(1) to which this Part applies; and

(c) “relevant time” means the date of the opening of a relevant reorganisation or a relevant winding up;

(2) In this Part, references to the opening of a relevant reorganisation or a relevant winding up mean—

(a) in the case of winding-up proceedings—

(i) in the case of a winding up by the court, the date on which the winding-up order is made, or

(ii) in the case of a creditors' voluntary winding up, the date on which the liquidator is appointed in accordance with section 100 of the 1986 Act, Article 86 of the 1989 Order or paragraph 83 of Schedule B1 to the 1986 Act [F10 or paragraph 84 of Schedule B1 to the 1989 Order];

(b) in the case of a voluntary arrangement, the date when a decision with respect to the approval of that voluntary arrangement has effect in accordance with section 4A(2) of the 1986 Act or Article 17A(2) of the 1989 Order;

(c) in a case where an administration order under paragraph 13 of Schedule B1 to the 1986 Act[F11 , paragraph 14 of Schedule B1 to the 1989 Order,] section 8(1) of the 1986 Act [F12 or Article 21(1) of the 1989 Order] is in force, the date of the making of that order; F13 ...

(d) in a case where a provisional liquidator has been appointed, the date of that appointment, [F14 and

(e) in a case where a stabilisation instrument is made, the date on which that instrument is made,]

and references to the time of an opening must be construed accordingly.

Textual Amendments

F9 Words in reg. 21(1)(b) inserted (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(7)(a)

F10 Words in reg. 21(2)(a)(ii) inserted (6.4.2007) by The Credit Institutions (Reorganisation and Winding Up) (Amendment) Regulations 2007 (S.I. 2007/830), regs. 1, 2(16)(a)

F11 Words in reg. 21(2)(c) substituted (6.4.2007) by The Credit Institutions (Reorganisation and Winding Up) (Amendment) Regulations 2007 (S.I. 2007/830), regs. 1, 2(16)(b)

F12 Words in reg. 21(2)(c) inserted (6.4.2007) by The Credit Institutions (Reorganisation and Winding Up) (Amendment) Regulations 2007 (S.I. 2007/830), regs. 1, 2(16)(c)

F13 Word in reg. 21(2) omitted (10.1.2015) by virtue of The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(7)(b)

F14 Reg. 21(2)(e) and word inserted (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(7)(c)

EEA rights: applicable law in the winding up of a UK credit institution U.K.

22.—(1) This regulation is subject to the provisions of regulations 23 to 35.

(2) In a relevant winding up, the matters mentioned in paragraph (3) are to be determined in accordance with the general law of insolvency of the United Kingdom.

(3) Those matters are—

(a) the assets which form part of the estate of the affected credit institution;

(b) the treatment of assets acquired by the affected credit institution after the opening of the relevant winding up;

(c) the respective powers of the affected credit institution and the liquidator or provisional liquidator;

(d) the conditions under which set-off may be invoked;

(e) the effects of the relevant winding up on current contracts to which the affected credit institution is a party;

(f) the effects of the relevant winding up on proceedings brought by creditors;

(g) the claims which are to be lodged against the estate of the affected credit institution;

(h) the treatment of claims against the affected credit institution arising after the opening of the relevant winding up;

(i) the rules governing—

(i) the lodging, verification and admission of claims,

(ii) the distribution of proceeds from the realisation of assets,

(iii) the ranking of claims,

(iv) the rights of creditors who have obtained partial satisfaction after the opening of the relevant winding up by virtue of a right in rem or through set-off;

(j) the conditions for and the effects of the closure of the relevant winding up, in particular by composition;

(k) the rights of creditors after the closure of the relevant winding up;

(1) who is to bear the cost and expenses incurred in the relevant winding up;

(m) the rules relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors.

Employment contracts and relationships U.K.

23.—(1) The effects of a relevant reorganisation or a relevant winding up on EEA employment contracts and EEA employment relationships are to be determined in accordance with the law of the EEA State to which that contract or that relationship is subject.

(2) In this regulation, an employment contract is an EEA employment contract, and an employment relationship is an EEA employment relationship if it is subject to the law of an EEA State.

Contracts in connection with immovable property U.K.

24.—(1) The effects of a relevant reorganisation or a relevant winding up on a contract conferring the right to make use of or acquire immovable property situated within the territory of an EEA State shall be determined in accordance with the law of that State.

(2) The law of the EEA State in whose territory the property is situated shall determine whether the property is movable or immovable.

Registrable rights U.K.

25.  The effects of a relevant reorganisation or a relevant winding up on rights of the affected UK credit institution with respect to—

(a) immovable property,

(b) a ship, or

(c) an aircraft

which is subject to registration in a public register kept under the authority of an EEA State are to be determined in accordance with the law of that State.

Third parties' rights in rem U.K.

26.—(1) A relevant reorganisation or a relevant winding up shall not affect the rights in rem of creditors or third parties in respect of tangible or intangible, movable or immovable assets (including both specific assets and collections of indefinite assets as a whole which change from time to time) belonging to the affected credit institution which are situated within the territory of an EEA State at the relevant time.

(2) The rights in rem referred to in paragraph (1) shall mean—

(a) the right to dispose of assets or have them disposed of and to obtain satisfaction from the proceeds of or the income from those assets, in particular by virtue of a lien or a mortgage;

(b) the exclusive right to have a claim met, in particular a right guaranteed by a lien in respect of the claim or by assignment of the claim by way of guarantee;

(c) the right to demand the assets from, or to require restitution by, any person having possession or use of them contrary to the wishes of the party so entitled;

(d) a right in rem to the beneficial use of assets.

(3) A right, recorded in a public register and enforceable against third parties, under which a right in rem within the meaning of paragraph (1) may be obtained, is also to be treated as a right in rem for the purposes of this regulation.

(4) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom.

Reservation of title agreements etc. U.K.

27.—(1) The adoption of a relevant reorganisation or opening of a relevant winding up in relation to a credit institution purchasing an asset shall not affect the seller’s rights based on a reservation of title where at the time of that adoption or opening the asset is situated within the territory of an EEA State.

(2) The adoption of a relevant reorganisation or opening of a relevant winding up in relation to a credit institution selling an asset, after delivery of the asset, shall not constitute grounds for rescinding or terminating the sale and shall not prevent the purchaser from acquiring title where at the time of that adoption or opening the asset sold is situated within the territory of an EEA State.

(3) Paragraphs (1) and (2) do not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom.

Creditors' rights to set off U.K.

28.—(1) A relevant reorganisation or a relevant winding up shall not affect the right of creditors to demand the set-off of their claims against the claims of the affected credit institution, where such a set-off is permitted by the law applicable to the affected credit institution’s claim.

(2) Paragraph (1) does not preclude actions for voidness, voidability or unenforceability of legal acts detrimental to creditors under the general law of insolvency of the United Kingdom.

Regulated markets U.K.

29.—(1) Subject to regulation 33, the effects of a relevant reorganisation or winding up on transactions carried out in the context of a regulated market operating in an EEA State must be determined in accordance with the law applicable to those transactions.

[F15 (2) For the purposes of this regulation “regulated market” has the meaning given by point (21) of Article 4(1) of Directive 2014/65/EU of the European Parliament and of the Council on markets in financial instruments.]

Textual Amendments

F15 Reg. 29(2) substituted (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(8)

Detrimental acts pursuant to the law of an EEA State U.K.

30.—(1) In a relevant reorganisation or a relevant winding up, the rules relating to detrimental transactions shall not apply where a person who has benefited from a legal act detrimental to all the creditors provides proof that—

(a) the said act is subject to the law of an EEA State; and

(b) that law does not allow any means of challenging that act in the relevant case.

(2) For the purposes of paragraph (1), “the rules relating to detrimental transactions” means any provision of the general law of insolvency relating to the voidness, voidability or unenforceability of legal acts detrimental to all the creditors.

Protection of third party purchasers U.K.

31.—(1) This regulation applies where, by an act concluded after the adoption of a relevant reorganisation or opening of a relevant winding up, an affected credit institution disposes for a consideration of—

(a) an immovable asset situated within the territory of an EEA State;

(b) a ship or an aircraft subject to registration in a public register kept under the authority of an EEA State;

(c) relevant instruments or rights in relevant instruments whose existence or transfer presupposes entry into a register or account laid down by the law of an EEA State or which are placed in a central deposit system governed by the law of an EEA State.

(2) The validity of that act is to be determined in accordance with the law of the EEA State within whose territory the immoveable asset is situated or under whose authority the register, account or system is kept, as the case may be.

(3) In this regulation, “relevant instruments” means the instruments referred to in [F16 Section C of Annex I to Directive [F17 2014/65/EU] of the European Parliament and of the Council of [F18 15 May 2014] on markets in financial instruments].

Textual Amendments

F16 Words in reg. 31(3) substituted (1.11.2007) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2007 (S.I. 2007/126), reg. 1(2), Sch. 6 para. 18(3)

F17 Word in reg. 31(3) substituted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 5 para. 5(a) (with reg. 7)

F18 Words in reg. 31(3) substituted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 5 para. 5(b) (with reg. 7)

Lawsuits pending U.K.

32.—(1) The effects of a relevant reorganisation or a relevant winding up on a relevant lawsuit pending in an EEA State shall be determined solely in accordance with the law of that EEA State.

(2) In paragraph (1), “relevant lawsuit” means a lawsuit concerning an asset or right of which the affected credit institution has been divested.

Lex rei sitae U.K.

33.—(1) The effects of a relevant reorganisation or a relevant winding up on the enforcement of a relevant proprietary right shall be determined by the law of the relevant EEA State.

(2) In this regulation—

“relevant proprietary right” means proprietary rights in relevant instruments or other rights in relevant instruments the existence or transfer of which is recorded in a register, an account or a centralised deposit system held or located in an EEA state;

“relevant EEA State” means the Member State where the register, account or centralised deposit system in which the relevant proprietary right is recorded is held or located;

“relevant instrument” has the meaning given by regulation 31(3).

Netting agreements U.K.

[F19 34.— (1) The effects of a relevant reorganisation or a relevant winding up on a netting agreement shall be determined in accordance with the law applicable to that agreement.

(2) Nothing in paragraph (1) affects the application of—

(a) section 48Z of the Banking Act 2009 ;

(b) section 70C of the Banking Act 2009 ;

(c) Articles 68 and 71 of the recovery and resolution directive or the law of any EEA State (other than the United Kingdom) transposing these provisions; or

(d) any instrument made under the provisions referred to in sub-paragraph (a) or (b).]

Textual Amendments

F19 Reg. 34 substituted (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(9)

Repurchase agreements U.K.

[F20 35.— (1) Subject to regulation 33, the effects of a relevant reorganisation or a relevant winding up on a repurchase agreement shall be determined in accordance with the law applicable to that agreement.

(2) Nothing in paragraph (1) affects the application of—

(a) section 48Z of the Banking Act 2009;

(b) section 70C of the Banking Act 2009;

(c) Articles 68 and 71 of the recovery and resolution directive or the law of any EEA State (other than the United Kingdom) transposing these provisions; or

(d) any instrument made under the provisions referred to in sub-paragraph (a) or (b).]

Textual Amendments

F20 Reg. 35 substituted (10.1.2015) by The Bank Recovery and Resolution (No. 2) Order 2014 (S.I. 2014/3348), art. 1(2), Sch. 3 para. 10(10)