Office of Public Sector Information
PART 2 continued
(1) The Treasury may by order make provision in consequence of this Part.
(2) An order may, in particular, amend or modify the effect of an enactment (including a fiscal enactment) passed before the commencement of this Part.
(3) An order—
(a) shall be made by statutory instrument, and
(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.
(1) This Part provides for a procedure to be known as bank administration.
(2) The main features of bank administration are that—
(a) it is used where part of the business of a bank is sold to a commercial purchaser in accordance with section 11 or transferred to a bridge bank in accordance with section 12 (and it can also be used in certain cases of multiple transfers under Part 1),
(b) the court appoints a bank administrator on the application of the Bank of England,
(c) the bank administrator is able and required to ensure that the non-sold or non-transferred part of the bank (“the residual bank”) provides services or facilities required to enable the commercial purchaser (“the private sector purchaser”) or the transferee (“the bridge bank”) to operate effectively, and
(d) in other respects the process is the same as for normal administration under the Insolvency Act 1986, subject to specified modifications.
(3) The Table describes the provisions of this Part.
| Sections | Topic |
|---|---|
| Sections 136 to 140 | Introduction |
| Sections 141 to 148 | Process |
| Sections 149 to 152 | Multiple transfers |
| Sections 153 and 154 | Termination |
| Sections 155 to 168 | Miscellaneous |
(1) A bank administrator has two objectives—
(a) Objective 1: support for commercial purchaser or bridge bank (see section 138), and
(b) Objective 2: “normal” administration (see section 140).
(2) Objective 1 takes priority over Objective 2 (but a bank administrator is obliged to begin working towards both objectives immediately upon appointment).
(1) Objective 1 is to ensure the supply to the private sector purchaser or bridge bank of such services and facilities as are required to enable it, in the opinion of the Bank of England, to operate effectively.
(2) For the purposes of Objective 1—
(a) the reference to services and facilities includes a reference to acting as transferor or transferee under a supplemental or reverse property transfer instrument, and
(b) the reference to “supply” includes a reference to supply by persons other than the residual bank.
(3) In the case of bank administration following a private sector purchase the bank administrator must co-operate with any request of the Bank of England to enter into an agreement for the residual bank to provide services or facilities to the private sector purchaser; and—
(a) in pursuing Objective 1 the bank administrator must have regard to the terms of that or any other agreement entered into between the residual bank and the private sector purchaser,
(b) in particular, the bank administrator must avoid action that is likely to prejudice performance by the residual bank of its obligations in accordance with those terms,
(c) if in doubt about the effect of those terms the bank administrator may apply to the court for directions under paragraph 63 of Schedule B1 to the Insolvency Act 1986 (applied by section 145 below), and
(d) the private sector purchaser may refer to the court a dispute about any agreement with the residual bank, by applying for directions under paragraph 63 of Schedule B1.
(4) In the case of bank administration following transfer to a bridge bank, the bank administrator must co-operate with any request of the Bank of England to enter into an agreement for the residual bank to provide services or facilities to the bridge bank; and—
(a) the bank administrator must avoid action that is likely to prejudice performance by the residual bank of its obligations in accordance with an agreement,
(b) the bank administrator must ensure that so far as is reasonably practicable an agreement entered into includes provision for consideration at market rate,
(c) paragraph (b) does not prevent the bank administrator from entering into an agreement on any terms that the bank administrator thinks necessary in pursuit of Objective 1, and
(d) this subsection does not apply after Objective 1 ceases.
(5) Where a bank administrator requires the Bank of England’s consent or approval to any action in accordance with this Part, the Bank may withhold consent or approval only on the grounds that the action might prejudice the achievement of Objective 1.
(1) Objective 1 ceases if the Bank of England notifies the bank administrator that the residual bank is no longer required in connection with the private sector purchaser or bridge bank.
(2) A bank administrator who thinks that Objective 1 is no longer required may apply to the court for directions under paragraph 63 of Schedule B1 to the Insolvency Act 1986 (applied by section 145 below); and the court may direct the Bank of England to consider whether to give notice under subsection (1) above.
(3) If immediately upon the making of a bank administration order the Bank of England thinks that the residual bank is not required in connection with the private sector purchaser or bridge bank, the Bank of England may give a notice under subsection (1).
(4) A notice under subsection (1) is referred to in this Part as an “Objective 1 Achievement Notice”.
(1) Objective 2 is to—
(a) rescue the residual bank as a going concern (“Objective 2(a)”), or
(b) achieve a better result for the residual bank’s creditors as a whole than would be likely if the residual bank were wound up without first being in bank administration (“Objective 2(b)”).
(2) In pursuing Objective 2 a bank administrator must aim to achieve Objective 2(a) unless of the opinion either—
(a) that it is not reasonably practicable to achieve it, or
(b) that Objective 2(b) would achieve a better result for the residual bank’s creditors as a whole.
(3) In pursuing Objective 2(b) in bank administration following transfer to a bridge bank, the bank administrator may not realise any asset unless—
(a) the asset is on a list of realisable assets agreed between the bank administrator and the Bank of England, or
(b) the Bank of England has given an Objective 1 Achievement Notice.
(1) A bank administration order is an order appointing a person as the bank administrator of a bank.
(2) A person is eligible for appointment as a bank administrator if qualified to act as an insolvency practitioner.
(3) An appointment may be made only if the person has consented to act.
(4) A bank administration order takes effect in accordance with its terms; and—
(a) the process of a bank administration order having effect may be described as “bank administration” in relation to the bank, and
(b) while the order has effect the bank may be described as being “in bank administration”.
(1) An application for a bank administration order may be made to the court by the Bank of England.
(2) An application must nominate a person to be appointed as the bank administrator.
(3) The bank must be given notice of an application, in accordance with rules under section 411 of the Insolvency Act 1986 (as applied by section 160 below).
(1) The Bank of England may apply for a bank administration order in respect of a bank if the following conditions are met.
(2) Condition 1 is that the Bank of England has made or intends to make a property transfer instrument in respect of the bank in accordance with section 11(2) or 12(2).
(3) Condition 2 is that the Bank of England is satisfied that the residual bank—
(a) is unable to pay its debts, or
(b) is likely to become unable to pay its debts as a result of the property transfer instrument which the Bank intends to make.
(1) The court may make a bank administration order if satisfied that the conditions in section 143 were met.
(2) On an application for a bank administration order the court may—
(a) grant the application,
(b) adjourn the application (generally or to a specified date), or
(c) dismiss the application.
(1) A bank administrator may do anything necessary or expedient for the pursuit of the Objectives in section 137.
(2) The following provisions of this section provide for—
(a) general powers and duties of bank administrators (by application of provisions about administrators), and
(b) the general process and effects of bank administration (by application of provisions about administration).
(3) The provisions set out in the Tables apply in relation to bank administration as in relation to administration, with—
(a) the modifications set out in subsection (4),
(b) any other modification specified in the Tables, and
(c) any other necessary modification.
(4) The modifications are that—
(a) a reference to the administrator is a reference to the bank administrator,
(b) a reference to administration is a reference to bank administration,
(c) a reference to an administration order is a reference to a bank administration order,
(d) a reference to a company is a reference to the bank,
(e) a reference to the purpose of administration is a reference to the Objectives in section 137, and
(f) in relation to provisions of the Insolvency Act 1986 other than Schedule B1, the modifications in section 103 above apply (but converting references into references to bank administration or administrators rather than to bank insolvency or liquidators).
(5) Powers conferred by this Act, by the Insolvency Act 1986 (as applied) and the Companies Acts are in addition to, and not in restriction of, any existing powers of instituting proceedings against a contributory or debtor of a bank, or the estate of any contributory or debtor, for the recovery of any call or other sum.
(6) A reference in an enactment or other document to anything done under a provision applied by this Part includes a reference to the provision as applied.
| Provision of Schedule B1 | Subject | Modification or comment |
|---|---|---|
| Para. 40(1)(a) | Dismissal of pending winding-up petition | |
| Para. 41 | Dismissal of administrative or other receiver | |
| Para. 42 | Moratorium on insolvency proceedings | Ignore sub-paras. (4) and (5). |
| Para. 43 | Moratorium on other legal process | (a)
In the case of bank administration following transfer to a bridge bank, unless the Bank of England has given an Objective 1 Achievement Notice consent of the bank administrator may not be given for the purposes of para. 43 without the approval of the Bank of England. (b)
In the case of bank administration following transfer to a bridge bank, unless the Bank of England has given an Objective 1 Achievement Notice, in considering whether to give permission under sub-para. (6) to a winding-up the court must have regard to the Objectives in section 137. (c)
In considering whether to give permission for the purposes of para. 43 the court must have regard to the Objectives in section 137. |
| Para. 44(1)(a) and (5) | Interim moratorium | |
| Para. 46 | Announcement of appointment | Ignore sub-para. (6)(b) and (c). |
| Paras. 47 & 48 | Statement of affairs | |
| Para. 49 | Administrator’s proposals | (a)
Para. 49 does not apply unless the Bank of England has given an Objective 1 Achievement Notice; for bank administrator’s proposals before the Bank of England has given an Objective 1 Achievement Notice, see section 147. (b)
Treat the reference in sub-para. (1) to the purpose of administration as a reference to Objective 2. (c)
Before making proposals under sub-para. (1) in the case of bank administration following transfer to a bridge bank, the bank administrator must consult the Bank of England about the chances of a payment to the residual bank from a scheme established by resolution fund order under section 49(3). (d)
Treat the reference in sub-para. (2)(b) to the objective mentioned in para. 3(1)(a) or (b) as a reference to Objective 2(a). (e)
Ignore sub-para.(3)(b). (f)
Treat references in sub-para. (5) to the company’s entering administration as references to satisfaction of the condition in para. (a) above. |
| Paras. 50–58 | Creditors' meeting | (a)
Treat references in para. 51(2) to the company’s entering administration as references to the giving of an Objective 1 Achievement Notice. (b)
The bank administrator may comply with a request under para. 56(1)(a) only if satisfied that it will not prejudice pursuit of Objective 1 in section 137. (c)
A creditors' meeting may not establish a creditors' committee in reliance on para. 57 until the Bank of England has given an Objective 1 Achievement Notice. (d)
Until that time the Bank of England shall have the functions of the creditors' committee. |
| Para. 59 | General powers | A bank administrator may not rely on para. 59 (or subsection (1) above) for the purpose of recovering property transferred by property transfer instrument. |
| Para. 60 and Schedule 1 | General powers | (a)
The exercise of powers under Schedule 1 is subject to section 137(2). (b)
In the case of bank administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice powers under the following paragraphs of Schedule 1 may be exercised only with the Bank of England’s consent: 2, 3, 11, 14, 15, 16, 17, 18 and 21. |
| Para. 61 | Directors | |
| Para. 62 | Power to call meetings of creditors | |
| Para. 63 | Application to court for directions | (a)
Before the Bank of England has given an Objective 1 Achievement Notice, the bank administrator may apply for directions if unsure whether a proposed action would prejudice the pursuit of Objective 1; and before making an application in reliance on this paragraph the bank administrator must give notice to the Bank of England, which shall be entitled to participate in the proceedings. (b)
In making directions the court must have regard to the Objectives in section 137. |
| Para. 64. | Management powers. | |
| Para. 65 | Distribution to creditors | (a)
In the case of bank administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice a bank administrator may make a distribution only with the Bank of England’s consent. (b)
Ignore sub para. (3). |
| Para. 66 | Payments | |
| Para. 67 | Taking custody of property | |
| Para. 68 | Management | Before the approval of proposals under para. 53 a bank administrator shall manage the bank’s affairs, business and property in accordance with principles agreed between the bank administrator and the Bank of England. |
| Para. 69 | Agency | |
| Para. 70 | Floating charges | The bank administrator may take action only if satisfied that it will not prejudice pursuit of Objective 1 in section 137. |
| Para. 71 | Fixed charges | The court may make an order only if satisfied that it will not prejudice pursuit of Objective 1 in section 137. |
| Para. 72 | Hire-purchase property | In the case of administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice an application may be made only with the Bank of England’s consent. |
| Para. 73 | Protection for secured and preferential creditors | (a)
Treat a reference to proposals as including a reference to the principles specified in the modification of para. 68 set out above. (b)
Para. 73(1)(a) does not apply until the Bank of England has given an Objective 1 Achievement Notice. |
| Para. 74 | Challenge to administrator’s conduct | (a)
The Bank of England may make an application to the court, on any grounds, including grounds of insufficient pursuit of Objective 1 in section 137 (in addition to applications that may anyway be made under para. 74). (b)
Until the Bank of England has given an Objective 1 Achievement Notice, an order may be made on the application of a creditor only if the court is satisfied that it would not prejudice pursuit of Objective 1 in section 137. |
| Para. 75 | Misfeasance | In addition to applications that may anyway be made under para. 75, an application may be made by the bank administrator or the Bank of England. |
| Para. 80 | Termination: successful rescue | See section 153. |
| Para. 84 | Termination: no more assets for distribution | See section 154. |
| Para. 85 | Discharge of administration order | |
| Para. 86 | Notice to Companies Registrar of end of administration | See section 153. |
| Para. 87 | Resignation | A bank administrator may resign only by notice in writing— (a)
to the court, copied to the Bank of England, or (b)
in the case of a bank administrator appointed by the creditors' committee under para. 90, to the creditors' committee. |
| Para. 88 | Removal | Until the Bank of England has given an Objective 1 Achievement Notice, an application for an order may be made only with the Bank of England’s consent. |
| Para. 89 | Disqualification | The notice under sub-para. (2) must be given to the Bank of England. |
| Paras. 90 & 91 | Replacement | (a)
Until an Objective 1 Notice has been given, the Bank of England, and nobody else, may make an application under para. 91(1). (b)
After that, either the Bank of England or a creditors' committee may apply. (c)
Ignore para. 91(1)(b) to (e) and (2). |
| Para. 96 | Substitution of floating charge-holder | Para. 96 applies to a bank administrator, but— (a)
only after an Objective 1 Achievement Notice has been given, and (b)
ignoring references to priority of charges. |
| Para. 98 | Discharge | Discharge takes effect— (a)
where the person ceases to be bank administrator before an Objective 1 Achievement Notice has been given, at a time determined by the Bank of England, and (b)
otherwise, at a time determined by resolution of the creditors' committee (for which purpose ignore sub-para. (3)). |
| Para. 99 | Vacation of office: charges and liabilities | In the application of sub-para. (3), payments may be made only— (a)
in accordance with directions of the Bank of England, and (b)
if the Bank is satisfied that they will not prejudice Objective 1 in section 137. |
| Paras. 100-103 | Joint administrators | Until an Objective 1 Achievement Notice has been given, an application under para. 103 may be made only by the Bank of England. |
| Para. 104 | Validity | |
| Para. 106 (and section 430 and Schedule 10) | Fines | |
| Paras. 107–109 | Extension of time limits | (a)
Until an Objective 1 Achievement Notice has been given, an application under para. 107 may be made only with the Bank of England’s consent. (b)
In considering an application under para. 107 the court must have regard to Objective 1 in section 137. (c)
In para. 108(1) “consent” means consent of the Bank of England. |
| Para. 110 | Amendment of provisions about time | An order under para. 110 may amend a provision of the Schedule as it applies by virtue of this section (whether or not in the same way as it amends the provision as it applies otherwise). |
| Para. 111 | Interpretation | |
| Paras. 112–116 | Scotland |
| Section | Subject | Modification or comment |
|---|---|---|
| Section 135 | Provisional appointment | (a)
Treat the reference to the presentation of a winding-up petition as a reference to the making of an application for a bank administration order. (b)
Subsection (2) applies in relation to England and Wales and Scotland (and subsection (3) does not apply). (c)
Ignore the reference to the official receiver. (d)
Only a person who is qualified to act as an insolvency practitioner and who consents to act may be appointed. (e)
The court may only confer on a provisional bank administrator functions in connection with the pursuance of Objective 1; and section 138(2)(a) does not apply before a bank administration order is made. (f)
A provisional bank administrator may not pursue Objective 2. (g)
The appointment of a provisional bank administrator lapses on the appointment of a bank administrator. (h)
Section 172(1), (2) and (5) apply to a provisional bank administrator. |
| Section 168(4) (and para. 13 of Schedule 4) | Discretion in managing and distributing assets | In the case of bank administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice distribution may be made only— (a)
with the Bank of England’s consent, or (b)
out of assets which have been designated as realisable by agreement between the bank administrator and the Bank of England. |
| Section 176A | Unsecured creditors | In the case of bank administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice distribution may be made in reliance on s. 176A only— (a)
with the Bank of England’s consent, or (b)
out of assets which have been designated as realisable by agreement between the bank administrator and the Bank of England. |
| Section 178 | Disclaimer of onerous property | In the case of bank administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice notice of disclaimer may be given only with the Bank of England’s consent. |
| Section 179 | Disclaimer of leaseholds | |
| Section 180 | Land subject to rentcharge | |
| Section 181 | Disclaimer: powers of court | |
| Section 182 | Leaseholds | |
| Section 188 | Publicity | |
| Section 213 | Fraudulent trading | |
| Section 214 | Wrongful trading | Ignore subsection (6). |
| Section 233 | Utilities | |
| Section 234 | Getting in company’s property | |
| Section 235 | Co-operation with liquidator | |
| Section 236 | Inquiry into company’s dealings | |
| Section 237 | Section 236: enforcement by court | |
| Section 238 | Transactions at undervalue (England and Wales) | |
| Section 239 | Preferences (England and Wales) | |
| Section 240 | Ss. 238 & 239: relevant time | |
| Section 241 | Orders under ss. 238 & 239 | (a)
In considering making an order in reliance on section 241 the court must have regard to Objective 1 of section 137. (b)
Ignore subsections (2A)(a) and (3) to (3C). |
| Section 242 | Gratuitous alienations (Scotland) | |
| Section 243 | Unfair preferences (Scotland) | In considering the grant of a decree under subsection (5) the court must have regard to Objective 1 of section 137. |
| Section 244 | Extortionate credit transactions | |
| Section 245 | Avoidance of floating charges | |
| Section 246 | Unenforceability of liens | |
| Sections 386 & 387, and Schedule 6 (and Schedule 4 to the Pension Schemes Act 1993) | Preferential debts | |
| Section 389 | Offence of acting without being qualified | Treat references to acting as an insolvency practitioner as references to acting as a bank administrator. |
| Section 390 | Persons not qualified to act | Treat references to acting as an insolvency practitioner as references to acting as a bank administrator. |
| Section 391 | Recognised professional bodies | An order under section 391 has effect in relation to any provision applied for the purposes of bank administration. |
| Sections 423–425 | Transactions defrauding creditors | (a)
In considering granting leave under section 424(1) the court must have regard to Objective 1 of section 137. (b)
In considering making an order in reliance on section 425 the court must have regard to Objective 1 of section 137. |
| Sections 430–432 & Schedule 10 | Offences | |
| Section 433 | Statements: admissibility | For section 433(1)(a) and (b) substitute a reference to a statement prepared for the purposes of a provision of this Part. |
Banking Act 2009