The Building Society Insolvency (England and Wales) Rules 2010

EXPLANATORY NOTE

(This note is not part of the Rules)

These Rules set out the procedure for the building society insolvency process under Part 2 of the Banking Act 2009 (c. 1).

The main features of building society insolvency are as follows. In the event of a building society becoming insolvent, it enables those depositors who are eligible for compensation under the Financial Services Compensation Scheme (FSCS) to either –

(d) receive compensation for their unpaid deposits as soon as possible after the building society goes into building society insolvency; or

(e) have their accounts transferred to a different building society or bank.

This is the first objective of the insolvency process.

The procedure can only be initiated by the Bank of England or the Financial Services Authority by application to the court. The court then makes a building society insolvency order, appointing a building society liquidator. In the initial stages, the building society liquidator is accountable to a liquidation committee comprising the FSA, the Bank of England and the FSCS.

Once the building society liquidator considers that the first objective is achieved, the liquidation committee will pass a resolution to that effect and the building society insolvency will move to the second objective which is to wind up the affairs of the building society so as to achieve the best results for the creditors as a whole.

The Rules are based on, and follow the same order as, the Insolvency Rules 1986 (S.I. 1986/1925) (“the 1986 Rules”) and certain provisions of the 1986 Rules are applied to these Rules, subject to a number of general and specific modifications.

Part 1 contains general provisions.

Part 2 of the Rules sets out the application process for a building society insolvency order.

Part 3 sets out the procedure for appointing a provisional building society liquidator.

Parts 4 to 8 set out the procedure concerning the statement of affairs, creditors and contributories.

Part 9 sets out provisions concerning the building society liquidator.

Part 10 sets out provisions concerning the liquidation committee.

Parts 11- 17 set out provisions relating to the building society’s assets and other miscellaneous provisions.

Part 18 sets out court procedure and practice.

Part 19 sets out provisions on proxies.

Part 20 sets out provisions concerning the examination of persons concerned in building society insolvency.

Part 21 sets out provisions relating to the declaration and payment of dividend.

Parts 22 and 23 set out miscellaneous and general provisions relating to the procedure.

An Impact Assessment relating to the rules for building society insolvency and special administration has been prepared and may be obtained from the Financial Regulatory Strategy Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ. It is also available on HM Treasury’s website (www.hm-treasury.gov.uk).