The Payment and Electronic Money Institution Insolvency Regulations 2021

Safeguarding failures: costs of the administration

42.—(1) Where the administrator considers that failure-related costs have been incurred in consequence of a failure by the institution to safeguard relevant funds (“a default”), the administrator—

(a) must seek the agreement of the creditors’ committee established under paragraph 57 of Schedule B1 as applied and modified by these Regulations to the amount incurred in consequence of the default, or

(b) if there is no creditors’ committee or the administrator is unable to agree that amount with the creditors’ committee, must apply to the court for an order fixing the amount.

(2) In paragraph (1) “failure” includes where—

(a) a small payment institution, or

(b) in the case of funds received for the execution of payment transactions that are not related to the issuance of electronic money, a small electronic money institution,

held itself out to be one which voluntarily safeguarded relevant funds but failed to do so.

(3) On an application under paragraph (1)(b), the court may fix the amount incurred in consequence of the default or dismiss the application on the ground that there was no default or that no failure-related costs have been incurred in consequence of the default.

(4) Paragraph (5) applies where the creditors’ committee agree an amount incurred in consequence of the default or the court fixes an amount by order.

(5) Responsibility for the failure-related costs amount is assigned to the institution and the amount is to be paid out of the institution’s assets.

(6) Where the institution’s assets are insufficient to enable the failure-related costs amount to be met out of those assets, paragraph (5) has effect only in relation to that part of the amount which can be met out of those assets.

(7) In this regulation—

“failure-related costs” means costs incurred by the administrator in applying the procedure set out in Schedule B1 as applied and modified by these Regulations for ascertaining particulars of the relevant funds held by the institution, and in taking custody and control of and distributing those funds;

“failure-related costs amount” means the amount of failure-related costs incurred in consequence of the default as agreed by the creditors’ committee or fixed by the court.