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The Investment Bank Special Administration (Scotland) Rules 2011

Type Statutory-Instrument

Publication 2011-09-12

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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(4) Without prejudice to paragraph (2), where the chair becomes aware during the course of the meeting that there is an excluded person, the chair may, in the chair’s discretion and without an adjournment, declare the meeting suspended for any period up to 1 hour.

Indication to excluded person

78

(1) A person who claims to be an excluded person may request an indication of what occurred during the period of that person’s claimed exclusion (an “indication”).

(2) A request under paragraph (1) must be made as soon as reasonably practicable and, in any event, no later than 16.00 hours on the business day following the day on which the exclusion is claimed to have occurred.

(3) A request under paragraph (1) must be made to—

(a) the chair, where it is made during the course of the business of the meeting; or

(b) the administrator where it is made after the conclusion of the business of the meeting.

(4) Where satisfied that the person making the request is an excluded person, the person to whom the request is made under paragraph (3) must give the indication as soon as reasonably practicable and, in any event, no later than 16.00 hours on the business day following the day on which the request was made under paragraph (1).

Complaint

79

(1) Any person who—

(a) is, or claims to be, an excluded person; or

(b) attends the meeting (in person or by proxy) and considers that they have been adversely affected by a person’s actual, apparent or claimed exclusion,

(“the complainant”) may make a complaint.

(2) The person to whom the complaint must be made (“the relevant person”) is—

(a) the chair, where it is made during the course of the meeting; or

(b) the administrator, where it is made after the meeting.

(3) The relevant person must—

(a) consider whether there is an excluded person; and

(b) where satisfied that there is an excluded person, consider the complaint,

and, where satisfied that there has been prejudice, take such action as the relevant person considers fit to remedy the prejudice.

(4) Paragraph (5) applies where—

(a) the relevant person is satisfied that the complainant is an excluded person;

(b) during the period of the person’s exclusion, a resolution was put to the meeting and was voted on; and

(5) Subject to paragraph (6), where satisfied that the effect of the intended vote in paragraph (4), if cast, would have changed the result of the resolution, the relevant person must—

(a) count the intended vote as being cast in accordance with the complainant’s stated intention;

(b) amend the record of the result of the resolution; and

(c) where those entitled to attend the meeting have been notified of the result of the resolution, notify them of the change.

(6) Where satisfied that more than one complainant in paragraph (4) is an excluded person, the relevant person must have regard to the combined effect of the intended votes.

(7) The relevant person must notify the complainant in writing of any decision.

(8) A complaint must be made as soon as reasonably practicable and, in any event, no later than 16.00 hours on the business day following—

(a) the day on which the person was, appeared or claimed to be excluded; or

(b) where an indication is sought under rule 78, the day on which the complainant received the indication.

(9) A complainant who is not satisfied by the action of the relevant person may apply to the court for directions and any application must be made within 2 business days of the date of receiving the decision of the relevant person.

CHAPTER 7 — Report of meeting

Report of meeting

80

(1) The chair at any meeting shall cause a report to be made of the proceedings at the meeting and shall sign the report.

(2) The report of the meeting shall include—

(a) a list of all the creditors, clients or contributories, as the case may be, who attended the meeting, either in person or by proxy;

(b) a copy of every resolution passed; and

(c) if the meeting established a creditors’ committee, a list of the names and addresses of those elected to be members of the committee.

(3) The chair shall keep a copy of the report of the meeting as part of the sederunt book in the special administration.

CHAPTER 8 — The creditors’ committee

Constitution of committee

81

(1) Where it is resolved by a creditors and clients’ meeting to establish a creditors’ committee for the purposes of the special administration, the committee shall consist of at least 3 and not more than 5 persons elected at the meeting.

(2) In a special administration (bank insolvency), the FSCS shall be a member of the creditors’ committee unless it informs the administrator prior to the meeting referred to in paragraph (1) that it does not wish to be a member.

(3) Where paragraph (1) applies, before receiving nominations for members of the committee, the administrator will set out the maximum number of members to be elected onto the committee by each class of voter so as to ensure that, subject to paragraph (2), the make-up of the committee is a reflection of all parties with an interest in the achievement of the special administration objectives.

(4) The classes of voters mentioned in paragraph (3) are—

(a) creditors; and

(b) clients.

(5) A person claiming to be a creditor is entitled to be a member of the committee provided that—

(a) that person’s claim has neither been wholly disallowed for voting purposes, nor wholly rejected for the purpose of distribution or dividend; and

(b) the claim mentioned in sub-paragraph (a) is not fully secured.

(6) A person claiming to be a client is entitled to be a member of the committee provided that that person’s claim in respect of client assets has neither been wholly disallowed for voting purposes, nor wholly rejected for the purpose of returning client assets.

(7) A body corporate may be a member of the committee, but it cannot act as such otherwise than by a representative appointed under rule 107.

Formalities of establishment

82

(1) The creditors’ committee does not come into being and accordingly cannot act until the administrator has issued a certificate of its due constitution.

(2) The certificate shall state that the creditors’ committee of the investment bank has been duly constituted and shall include the following—

(a) a statement that the proceedings are being held in the court and the court reference number;

(b) the full name, registered address and registered number of the investment bank;

(d) the full name and address of each member of the committee.

(3) If the chair of the creditors’ meeting which resolves to establish the committee is not the administrator, the chair must as soon as reasonably practicable give notice of the resolution to the administrator and inform the administrator of the names and addresses of the persons elected to be members of the committee.

(4) No person may act as a member of the committee unless and until they have agreed to do so and, unless the relevant proxy or authorisation contains a statement to the contrary, such agreement may be given by their proxy-holder present at the meeting establishing the committee or, in the case of a corporation, by its duly appointed representative.

(5) The administrator’s certificate of the committee’s due constitution shall not be issued before the persons elected to be members of the committee in accordance with rule 81 have agreed to act and shall be issued as soon as reasonably practicable thereafter.

(6) If any further members are elected onto the committee at a later date, the administrator shall issue an amended certificate as and when those persons have agreed to act.

(7) The certificate shall be sent to the registrar of companies by the administrator, as soon as reasonably practicable.

(8) If after the establishment of the committee there is any change in its membership, the administrator shall as soon as reasonably practicable report the change to the registrar of companies by filing an amended certificate.

Functions and meetings of the committee

83

(1) In addition to any functions conferred on the creditors’ committee by any provision of the Regulations, the creditors’ committee shall assist the administrator in discharging the administrator’s functions, and act in relation to the administrator in such manner as may be agreed from time to time.

(2) Subject as follows, meetings of the committee shall be held at a time and place determined by the administrator.

(3) The administrator must call a first meeting of the committee to take place within 6 weeks of the committee’s establishment.

(4) After the calling of the first meeting, the administrator must call a meeting—

(a) if so requested by a member of the committee or the member’s representative (the meeting then to be held within 21 days of the request being received by the administrator); and

(b) for a specified date, if the committee has previously resolved that a meeting be held on that date.

(5) Subject to paragraph (8), the administrator shall give 5 business days’ written notice of the venue of any meeting to every member of the committee (or their representative designated for that purpose) unless in any case the requirement of notice has been waived by or on behalf of any member. Waiver may be signified either at or before the meeting.

(6) The FSA shall also be given the notice in paragraph (5).

(7) In a special administration (bank administration), if the meeting is to be held before the Bank of England has given the Objective A Achievement Notice, the Bank of England shall be given the notice in paragraph (5).

(8) Where the administrator has determined that a meeting should be conducted and held in the manner referred to in rule 92, the notice period mentioned in paragraph (5) is 7 business days.

The chair at meetings

84

(1) The chair at any meeting of the creditors’ committee must be the administrator, or a person appointed by the administrator in writing to act.

(2) A person so appointed must be either—

(a) one who is qualified to act as an insolvency practitioner in relation to the investment bank; or

(b) an employee of the administrator or the administrator’s firm who is experienced in insolvency matters.

Quorum

85

A meeting of the creditors’ committee is duly constituted if due notice of it has been given to all the members, and at least 2 members are present or represented.

Committee members’ representatives

86

(1) A member of the creditors’ committee may, in relation to the business of the committee, be represented by another person duly authorised by the member for that purpose.

(2) A person acting as a committee member’s representative must hold a mandate entitling that person so to act (either generally or specially) and authenticated by or on behalf of the committee member, and for this purpose any proxy in relation to any meeting of creditors, clients or creditors and clients of the investment bank shall, unless it contains a statement to the contrary, be treated as such a mandate to act generally authenticated by or on behalf of the committee member.

(3) The chair at any meeting of the committee may call on a person claiming to act as a committee member’s representative to produce a mandate and may exclude that person if it appears that the mandate is deficient.

(4) No member may be represented by—

(a) another member of the committee;

(b) a person who is at the same time representing another committee member;

(d) a partnership;

(e) a person whose estate is currently sequestrated;

(f) an undischarged bankrupt;

(g) a person who is subject to a bankruptcy restrictions order, bankruptcy restrictions undertaking or interim bankruptcy restrictions order; or

(h) a disqualified director.

(5) Where a member’s representative authenticates any document on the member’s behalf, the fact that the representative so authenticates must be stated below the representative’s signature.

Resignation

87

A member of the creditors’ committee may resign by notice in writing delivered to the administrator.

Termination of membership

88

(1) A person’s membership of the creditors’ committee is automatically terminated if—

(a) the member’s estate is sequestrated or the member becomes bankrupt or grants a trust deed for the benefit of, or makes a composition with, creditors;

(b) at 3 consecutive meetings of the committee, the member is neither present nor represented (unless at the third of those meetings it is resolved that this rule is not to apply in the member’s case);

(c) subject to paragraph (2), the member, having been voted onto the committee under rule 81 by the creditors of the investment bank, ceases to be a creditor and a period of 3 months has elapsed from the date the member ceased to be a creditor, or is found never to have been a creditor; or

(d) subject to paragraph (3), the member, having been voted onto the committee under rule 81 by the clients of the investment bank, has had all client assets claimed for under Part 5 returned to them (subject to there being an identified shortfall in the assets to be returned to them or any assets being retained by the administrator under rule 120(2)(e)), or is found never to have been a client.

(2) A person to whom paragraph (1)(c) applies shall not have their membership terminated if—

(a) they are also a client of the investment bank; and

(b) they have not had all client assets claimed for under Part 5 returned to them (subject to there being an identified shortfall in the assets to be returned to them or any of their assets being retained by the administrator under rule 120(2)(e)),

but the administrator may require them to resign if the administrator thinks that the make-up of the committee does not reflect all parties with an interest in the achievement of the special administration objectives.

(3) A person to whom paragraph (1)(d) applies shall not have their membership terminated if they are also a creditor of the investment bank; but the administrator may require them to resign if the administrator thinks that the make-up of the committee does not reflect all parties with an interest in the achievement of the special administration objectives.

Removal

89

(1) A member of the creditors’ committee may be removed by resolution at a meeting of creditors and clients, at least 14 days’ notice having been given of the intention to move that resolution.

(2) The resolution in paragraph (1) will be voted on only by the relevant class of voter under rule 81(4) in respect of the member to be removed.

Vacancies

90

(1) The following applies if there is a vacancy in the membership of the creditors’ committee.

(2) The vacancy need not be filled if the administrator and a majority of the remaining members of the committee so agree, provided that—

(a) the total number of members does not fall below 3; and

(b) the administrator thinks that the make-up of the committee will continue to reflect all parties with an interest in the achievement of the special administration objectives.

(3) The administrator may appoint a person (being qualified under these Rules to be a member of the committee) from the same class of voters as the previous member to fill the vacancy, if—

(a) a majority of the other members of the committee agree to the appointment; and

(b) the person concerned consents to act.

Voting rights and resolutions

91

(1) At any meeting of the creditors’ committee, each member of it (whether present or represented) has one vote, and a resolution is passed when a majority of the members present or represented have voted in favour of it.

(2) Every resolution passed must be recorded in writing and authenticated by the chair, either separately or as part of the minutes of the meeting, and the record must be kept as part of the sederunt book.

Remote attendance at meetings of creditors’ committee

92

(1) This rule applies to any meeting of a creditors’ committee held under these Rules.

(2) Where the administrator considers it appropriate, the meeting may be conducted and held in such a way that persons who are not present together at the same place may attend it.

(3) Where a meeting is conducted and held in the manner referred to in paragraph (2), a person attends the meeting if that person is able to exercise any rights which that person may have to speak and vote at the meeting.

(4) For the purposes of this rule—

(a) a person is able to exercise the right to speak at a meeting when that person is in a position to communicate to all those attending the meeting, during the meeting, any information or opinions which that person has on the business of the meeting; and

(b) a person is able to exercise the right to vote at a meeting when—

(i) that person is able to vote, during the meeting, on resolutions or determinations put to the vote at the meeting, and

(ii) that person’s vote can be taken into account in determining whether or not such resolutions or determinations are passed at the same time as the votes of all the other persons attending the meeting.

(5) Where a meeting is to be conducted and held in the manner referred to in paragraph (2), the administrator must make whatever arrangements the administrator considers appropriate to—

(a) enable those attending the meeting to exercise their rights to speak or vote; and

(b) ensure the identification of those attending the meeting and the security of any electronic means used to enable attendance.

(6) Where in the reasonable opinion of the administrator—

(a) a meeting will be attended by persons who will not be present together at the same place; and

(b) it is unnecessary or inexpedient to specify a place for the meeting,

any requirement under these Rules to specify a place for the meeting may be satisfied by specifying the arrangements the administrator proposes to enable persons to exercise their rights to speak or vote.

(7) In making the arrangements referred to in paragraph (5) and in forming the opinion referred to in paragraph (6)(b), the administrator must have regard to the legitimate interests of the committee members or their representatives attending the meeting in the efficient despatch of the business of the meeting.

(8) If—

(a) the notice of a meeting does not specify a place for the meeting;

(b) the administrator is requested in accordance with rule 93 to specify a place for the meeting; and

the administrator must specify a place for the meeting.

Procedure for requests that a place for a meeting should be specified

93

(1) This rule applies to a request to the administrator of a meeting under rule 92 to specify a place for the meeting.

(2) The request must be made within 5 business days of the date on which the administrator sent the notice of the meeting in question.

(3) Where the administrator considers that the request has been properly made in accordance with this rule, the administrator must—

(a) give notice to all those previously given notice of the meeting—

(i) that it is to be held at a specified place, and

(ii) as to whether the date and time are to remain the same or not;

(b) specify a time, date and place for the meeting, the date of which must be not later than 7 business days after the original date for the meeting; and

and the notices required by sub-paragraphs (a) and (c) may be given at the same or different times.

(4) Where the administrator has specified a place for the meeting in response to a request to which this rule applies, the chair of the meeting must attend the meeting by being present in person at that place.

Resolutions otherwise than at a meeting

94

(1) In accordance with this rule, the administrator may seek to obtain the agreement of members of the creditors’ committee to a resolution by sending to every member (or a member’s representative designated for the purpose) a copy of the proposed resolution.

(2) Where the administrator makes use of the procedure allowed by this rule, the administrator shall send out to members of the committee or their representatives (as the case may be) a statement incorporating a copy of any proposed resolution on which a decision is sought, which shall be set out in such a way that agreement with or dissent from each separate resolution may be indicated by the recipient on the copy so sent.

(3) The FSA shall also be sent a statement under paragraph (2).

(4) In a special administration (bank administration), if the statement referred to in paragraph (2) is sent out before the Bank of England has given the Objective A Achievement Notice, the Bank of England shall also be sent the statement.

(5) Any member of the committee may, within 7 business days from the date of the administrator sending out a resolution, require the administrator to summon a meeting of the committee to consider the matters raised by the resolution.

(6) In the absence of such a requirement, the resolution is deemed to have been passed by the committee if and when the administrator is notified in writing by a majority of the members that they concur with it.

(7) A copy of every resolution passed under this rule, and a note that the committee’s concurrence was obtained, shall be kept in the sederunt book.

Information from administrator

95

(1) Where the creditors’ committee resolves to require the attendance of the administrator under paragraph 57(3)(a), the notice to the administrator shall be in writing, authenticated by the majority of the members of the committee for the time being.

(2) A member’s authentication under paragraph (1) may be made by that member’s representative.

(3) The meeting at which the administrator’s attendance is required shall be fixed by the committee for a business day, and shall be held at such time and place as the administrator determines.

(4) The administrator shall notify the FSA of the time and place of the meeting.

(5) In a special administration (bank administration), if the meeting is to be held before the Bank of England has given the Objective A Achievement Notice, the Bank of England shall be given the notice in paragraph (4).

(6) Where the administrator so attends, the members of the committee may elect any one of their number to be chair of the meeting, in place of the administrator or the administrator’s nominee.

Expenses of members

96

(1) Subject to paragraph (2), the administrator shall defray, out of the assets of the investment bank, any reasonable travelling expenses directly incurred by members of the creditors’ committee or their representatives in respect of their attendance at the committee’s meetings, or otherwise on the committee’s business, as an expense of the special administration.

(2) The administrator shall defray, out of the client assets held by the investment bank, any expenses referred to in paragraph (1) incurred by a client member of the committee.

(3) Paragraph (1) does not apply to any meeting of the committee held within 6 weeks of a previous meeting, unless the meeting in question is summoned at the instance of the administrator.

Members dealing with the investment bank

97

(1) This rule applies to—

(a) any member of a creditors’ committee;

(b) any committee member’s representative;

(i) a member of the committee, or

(ii) a committee member’s representative; and

(d) any person who has been a member of the committee at any time in the last 12 months or who is an associate of such a member.

(2) A person to whom this rule applies may deal with the investment bank while it is in special administration provided that any transactions in the course of such dealings are in good faith and for value.

Formal defects

98

The acts of the creditors’ committee established for a special administration are valid despite any defect in the appointment, election or qualifications of any member of the committee or any committee member’s representative or in the formalities of its establishment.

CHAPTER 9 — Progress reports

Content of progress report

99

(1) For the purposes of this Part, “progress report” means a report which includes—

(a) a statement that the special administration order was made by the court and the court reference number (if any);

(b) the investment bank’s name, registered address and registration number;

(d) where there are joint administrators, details of the apportionment of functions;

(e) details of progress to date (containing the information as detailed in paragraph (2) below);

(f) details of any assets of the investment bank that remain to be realised;

(g) in a special administration (bank administration), details of any amounts received from a scheme under a resolution fund order;

(h) details of whether a bar date has been set and progress made in pursuit of Objective 1 of the special administration objectives;

(i) whether the FSA have given a direction under regulation 16 and whether that direction has been withdrawn;

(j) where a distribution is to be made to creditors, in respect of an accounting period, the scheme of division;

(k) details of the basis fixed for the remuneration of the administrator under rule 16 or 29 (or if not fixed at the date of the report, the steps taken during the period of the report to fix it); and

(l) any other relevant information for the creditors or clients.

(2) The information to be provided under paragraph (1)(e) is—

(a) a receipts and payments account (in the form of an abstract) which states what assets of the investment bank have been realised, for what value, and what payments have been made to creditors including—

(i) receipts and payments during the relevant accounting period,

(ii) where the administrator has ceased to act, receipts and payments during the period from the end of the last accounting period to the time when the administrator so ceased (or, where the administrator has made no previous progress report, receipts and payments in the period since that person’s appointment as administrator), and

(iii) the amount paid to unsecured creditors by virtue of the application of section 176A of the 1986 Act[^f00018] (prescribed part);

(b) in a special administration (bank insolvency), before a full payment resolution has been passed, details of—

(i) how Objective A (as defined in paragraph 4(1)(a) of Schedule 1 to the Regulations) is being achieved, and

(ii) the arrangements for managing and financing the investment bank while Objective A continues to be pursued;

(c) in a special administration (bank administration), before the Bank of England has given an Objective A Achievement Notice, details of—

(i) the extent of the business of the investment bank that has been transferred,

(ii) the property, rights and liabilities that have been transferred or which the administrator expects to be transferred, under a power in Part 1 of the 2009 Act (special resolution regime),

(iii) any requirements imposed on the investment bank for the purposes of the pursuit of Objective A (as defined in paragraph 3(1)(a) of Schedule 2 to the Regulations), under a power in Part 1 of the 2009 Act, and

(iv) the arrangements for managing and financing the investment bank while Objective A continues to be pursued.

(3) Where the administrator has made a statement of pre-administration costs under rule 39(2)(m)—

(a) if they are approved under rule 112, the first progress report after the approval must include a statement setting out the date of the approval and the amounts approved;

(b) each successive report, so long as any of the costs remain unapproved, must include a statement either—

(i) of any steps taken to get approval, or

(ii) that the administrator has decided, or (as the case may be) another insolvency practitioner entitled to seek approval has told the administrator or that practitioner’s decision, not to seek approval.

Sending progress report

100

(1) The administrator must, within 6 weeks of the end of each accounting period and within 6 weeks after that person ceases to act as administrator, send a copy of the progress report—

(a) to the creditors and to the clients;

(b) the court; and

(2) For the purposes of these Rules, except for Part 6, “accounting period” in relation to an administration shall be construed as follows—

(a) the first accounting period is the period of 6 months beginning with the date on which the investment bank entered special administration; and

(b) any subsequent accounting period is the period of 6 months beginning with the end of the last accounting period.

(3) The court may, on the administrator’s application, extend the period of 6 weeks mentioned in paragraph (1).

(4) If the administrator makes default in complying with this rule, the administrator is liable to a fine and, for continued contravention, to a daily default fine and rule 163 applies.

(5) This rule is without prejudice to the requirements of Part 6 (distributions to creditors).

CHAPTER 10 — Proxies and corporate representation

Definition of “proxy”

101

(1) For the purposes of these Rules, a person (“the principal”) may authorise another person (“the proxy-holder”) to attend, speak and vote as their representative at meetings of creditors, clients, creditors and clients or contributories or members in a special administration and any such authority is referred to as a proxy.

(2) A proxy may be given either generally for all meetings in a special administration or specifically for any meeting or class of meetings.

(3) Only one proxy may be given by the principal for any one meeting; and it may only be given to one person, being an individual aged 18 or over. The principal may nevertheless nominate one or more other such persons to be proxy-holder in the alternative in the order in which they are named in the proxy.

(4) Without prejudice to the generality of paragraph (3), a proxy for a particular meeting may be given to whoever is to be the chair of the meeting and any person to whom any such proxy is given cannot decline to be proxy-holder in relation to that proxy.

(5) A proxy may require the holder to vote on behalf of the principal on matters arising for determination at any meeting, or to abstain, either as directed or in accordance with the holder’s own discretion; and it may authorise or require the holder to propose, in the principal’s name, a resolution to be voted on by the meeting.

Form of proxy

102

(1) Forms of proxy shall be sent out with every notice summoning a meeting in the special administration.

(2) A form of proxy shall not be sent out with the name or description of any person inserted in it.

(3) A proxy shall be in the form sent out with the notice summoning the meeting or in a form substantially to the same effect.

(4) A form of proxy shall be filled out and signed by the principal, or by some person acting under the principal’s authority and, where it is signed by someone other than the principal, the nature of the signatory’s authority shall be stated on the form.

Use of proxy at a meeting

103

(1) A proxy given for a particular meeting may be used at any adjournment of that meeting.

(2) A proxy may be lodged at or before the meeting at which it is to be used.

(3) Where the administrator holds proxies to be used by the administrator as chair of the meeting, and some other person acts as chair, the other person may use the administrator’s proxies as if the administrator were the proxy-holder.

(4) Where a proxy directs a proxy-holder to vote for or against a resolution for the nomination or appointment of a person to be the administrator, the proxy-holder may, unless the proxy states otherwise, vote for or against (as they think fit) any resolution for the nomination or appointment of that person jointly with another or others.

(5) A proxy-holder may propose any resolution which, if proposed by another, would be a resolution in favour of which the proxy-holder would be entitled to vote by virtue of the proxy.

(6) Where a proxy gives specific directions as to voting, this does not, unless the proxy states otherwise, preclude the proxy-holder from voting at their discretion on resolutions put to the meeting which are not dealt with in the proxy.

Retention of proxies

104

(1) Proxies used for voting at any meeting shall be retained by the chair of the meeting.

(2) The chair shall deliver the proxies forthwith after the meeting to the administrator (where the administrator was not the chair).

(3) The administrator shall retain all proxies in the sederunt book.

Right of inspection

105

(1) The administrator shall, so long as proxies lodged with the administrator are in the administrator’s hands, allow them to be inspected at all reasonable times on any business day, by—

(a) the creditors, in the case of proxies used at a meeting of creditors, or a meeting of creditors and clients;

(b) the clients, in the case of proxies used at a meeting of clients, or a meeting of creditors and clients; and

(c) the investment bank’s members or contributories, in the case of proxies used at a meeting of the members of the investment bank or of its contributories.

(2) A reference in paragraph (1) to a creditor or a client is to a person who has submitted a claim in writing to the administrator but does not include a person whose claim has been wholly rejected for purposes of voting or otherwise.

(3) The right of inspection given by this rule is also exercisable by the directors of the investment bank in special administration.

(4) Any person attending a meeting in a special administration is entitled, immediately before or in the course of the meeting, to inspect proxies and associated documents (including claims)—

(a) to be used in connection with that meeting; or

(b) sent or given to the chair of that meeting or to any other person by a creditor, client, member or contributory for the purpose of that meeting, whether or not they are to be used at it.

Proxy holder with financial interest

106

(1) A proxy-holder (“P”) shall not vote in favour of any resolution which would directly or indirectly place P, or any associate of P’s, in a position to receive any remuneration out of the insolvent estate, unless the proxy specifically directs P to vote in that way.

(2) Where a P has signed the proxy as being authorised to do so by P’s principal and the proxy specifically directs P to vote in the way mentioned in paragraph (1), P shall nevertheless not vote in that way unless P produces to the chair of the meeting written authorisation from P’s principal sufficient to show that the proxy-holder was entitled so to sign the proxy.

(3) This rule applies also to any person acting as chair of a meeting and using proxies in that capacity in accordance with rule 103(3); and in the application of this rule to any such person, the proxy-holder is deemed an associate of that person.

Representation of corporations

107

(1) Where a person (“P”) is authorised under section 323 of the 2006 Act[^f00019] (representation of corporations at meetings) to represent a corporation at a meeting held in a special administration, P shall produce to the chair of the meeting a copy of the resolution from which P’s authority is derived.

(2) The copy resolution must be signed or subscribed by or on behalf of the corporation in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995[^f00020] or certified by the secretary or a director of the corporation to be a true copy.

(3) Nothing in this rule requires the authority of a person to sign a proxy on behalf of a principal which is a corporation to be in the form of a resolution of that corporation.

CHAPTER 11 — Disposal of charged property

Application to dispose of secured property

108

(1) The following applies where the administrator applies to the court under paragraph 71 or 72 for authority to dispose of property of the investment bank which is subject to a security (other than a floating charge), or goods in the possession of the investment bank under a hire purchase agreement.

(2) If an order is made under paragraph 71 or 72, the administrator shall as soon as reasonably practicable give notice of it to that person or owner and shall send to the person who is the holder of the security or owner under the agreement a copy of the order, certified by the clerk of court.

(3) The administrator shall place in the sederunt book a copy of any order granted under paragraph 71 or 72.

Application in a special administration (bank administration)

109

If an application referred to in rule 108(1) is made before the Bank of England has given an Objective A Achievement Notice—

(a) the administrator must notify the Bank of England of the time and place of the hearing;

(b) the Bank of England may appear or be represented at the hearing;

and if an order is made, the administrator must send a copy to the Bank of England as soon as reasonably practicable.

PART 4 — Expenses of the Special Administration

Order of priority of expenses of the special administration

110

(1) Subject to rule 111, the expenses of the special administration are payable out of the assets of the investment bank in the following order of priority—

(a) any outlays properly chargeable or incurred by a person appointed under section 135 or the administrator in carrying out the administrator’s functions in the special administration, except those outlays specifically mentioned in the following sub-paragraphs;

(b) the cost, or proportionate cost, of any caution provided by the administrator or by a person appointed under section 135 in accordance with the Regulations or these Rules;

(c) in a special administration (bank insolvency) or special administration (bank administration) the remuneration of the person appointed under section 135 (if any);

(d) the expenses of the applicant for a special administration order, and of any other party whose expenses are allowed by the court;

(e) any allowance made by the administrator under rule 38 (expenses of statement of affairs);

(f) the remuneration or emoluments of any person who has been employed by the administrator to perform any services for the investment bank, as required or authorised by or under the Regulations or these Rules;

(g) the administrator’s remuneration for services in pursuit of—

(i) Objective A in a special administration (bank insolvency),

(ii) Objective A in a special administration (bank administration), and

(iii) Objectives 2 and 3,

the basis of which has been fixed under rule 16, 29, or 135, and

(iv) unpaid pre-administration costs for work done in pursuit of these Objectives approved under rule 112; and

(h) the amount of any corporation tax on chargeable gains accruing on the realisation of any asset of the investment bank (without regard to whether the realisation is effected by the administrator, a secured creditor or otherwise).

(2) Where a special administration order, a special administration (bank insolvency) order or a special administration (bank administration) order is made and a voluntary arrangement under Part 1 of the 1986 Act is in force for the investment bank, any expenses properly incurred as expenses of the administration of the arrangement in question shall be payable after the expenses set out in paragraph (1).

(3) Nothing in this rule applies to or affects the power of any court, in proceedings by or against the investment bank, to order expenses to be paid by the investment bank or the administrator nor does it affect the rights of any person to whom such expenses are ordered to be paid.

(4) The priorities laid down by virtue of paragraph (1) are subject to the power of the court to make orders under paragraph (5) where the assets are insufficient to satisfy the liabilities.

(5) The court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the expenses incurred in the special administration in such order of priority as the court thinks just.

(6) For the purposes of paragraph 99(3), the former administrator’s remuneration and expenses shall comprise all those items set out in paragraph (1).

(7) In this rule, a reference to “section 135” is to section 135 of the 1986 Act (appointment and powers of provisional liquidator) as modified by—

(a) in a special administration (bank insolvency), Schedule 1; or

(b) in a special administration (bank administration), Schedule 2,

to the Regulations.

Expenses to be paid out of the client assets

111

(1) The expenses of the special administration to be paid out of the client assets held by the investment bank are payable in the following order of priority—

(a) subject to rule 112, expenses properly incurred by the administrator in pursuing Objective 1;

(b) any necessary disbursements by the administrator in the course of the special administration specific to the achievement of Objective 1 (including any expenses incurred by client members of the creditors’ committee or their representatives and allowed for by the administrator under rule 96 but not including any payment of corporation tax in circumstances referred to in rule 110(1)(h));

(c) the remuneration or emoluments of any person who has been employed by the administrator to perform any services for the investment bank specific to the achievement of Objective 1, as required or authorised under the Regulations or these Rules; and

(d) the administrator’s remuneration, the basis of which has been fixed under rule 135 and unpaid pre-administration costs approved under rule 112 in respect of the work done in pursuance of Objective 1.

(2) The priorities laid down by paragraph (1) of this rule are subject to the power of the court to make orders under paragraph (3) of this rule where the client assets are insufficient to satisfy the liabilities.

(3) The court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the expenses incurred in the administration in such order of priority as the court thinks just.

(4) For the purposes of paragraph 99(3) the former administrator’s remuneration and expenses incurred in respect of the pursuit of Objective 1 shall comprise all those items set out in paragraph (1) of this rule.

Pre-administration costs

112

(1) Where the administrator has made a statement of pre-administration costs under rule 39(2)(m), the creditors’ committee may determine whether and to what extent the unpaid pre-administration costs set out in the statement are approved for payment.

(2) But if—

(a) there is no creditors’ committee; or

(b) there is but it does not make the necessary determination; or

(c) it does do so but the administrator or other insolvency practitioner who has charged fees or incurred expenses as pre-administration costs considers the amount determined to be insufficient,

paragraph (3) applies.

(3) When this paragraph applies, determination of whether and to what extent the unpaid pre-administration costs are approved for payment shall be by resolution of—

(a) where the pre-administration costs were incurred in pursuance of Objective A, or Objectives 2 and 3, a meeting of creditors;

(b) where the pre-administration costs were incurred wholly in pursuance of Objective 1, a meeting of clients; or

(c) where the pre-administration costs were incurred in pursuance of Objective 1, Objective A and Objectives 2 and 3, a meeting of creditors and clients.

(4) The administrator must call a meeting of the creditors’ committee or a meeting under paragraph (3) if so requested for the purposes of paragraphs (1) to (3) by another insolvency practitioner who has charged fees or incurred expenses as pre-administration costs, and the administrator must give notice of the meeting within 28 days of receipt of the request.

(5) If—

(a) there is no determination under paragraph (1) or (3); or

(b) there is such a determination but the administrator or other insolvency practitioner who has charged fees or incurred expenses as pre-administration costs considers the amount determined to be insufficient,

the administrator (where the fees were charged or expenses incurred by the administrator) or other insolvency practitioner (where the fees were charged or expenses incurred by that practitioner) may apply to the court for a determination of whether and to what extent the unpaid pre-administration costs are approved for payment.

(6) Paragraphs (4), (5) and (8) of rule 136 apply to an application under paragraph (5) of this rule as they do to an application under paragraph (1) of that rule (references to the administrator being read as references to the insolvency practitioner who has charged fees or incurred expenses as pre-administration costs).

(7) Where the administrator fails to call a meeting of the creditors’ committee or a meeting under paragraph (3) in accordance with paragraph (4), the other insolvency practitioner may apply to the court for an order requiring the administrator to do so.

Allocation of expenses to be paid from client assets

113

(1) The administrator shall set out, in the distribution plan under rule 120, how the administrator proposes that the expenses of the special administration, to be paid out of the client assets in accordance with this Chapter, are to be allocated between client assets.

(2) Where paragraph (1) applies and, as a result of this, on the court approving the distribution plan in accordance with rule 122, there is a shortfall in the amount of assets to be returned to a client—

(a) that shortfall is to be treated as a debt owed to the client by the investment bank arising before the investment bank entered special administration; and

(b) where the assets are securities, the claim is to be valued in accordance with rule 69 and for this purpose the references to “chair” in rule 69 shall be read as references to the administrator.

PART 5 — Objective 1

CHAPTER 1 — Setting a bar date

Notice of the bar date

114

(1) This Part applies where the administrator sets a bar date for the submission of claims as set out in regulation 11(1).

(2) The administrator shall give notice of the bar date—

(a) to all clients of whose claim in respect of the client assets the administrator is aware; and

(b) to all those persons whom the administrator believes have a right to assert a security interest or other entitlement over the client assets,

and whom the administrator has a means of contacting.

(3) Notice of the bar date shall also be sent to—

(a) the FSA; and

(b) in a special administration (bank administration) before the Bank of England has given an Objective A Achievement Notice, the Bank of England.

(4) Notice of the bar date—

(a) shall be advertised once in the Edinburgh Gazette; and

(b) may be advertised in such other manner as the administrator thinks fit.

(5) In advertising the date under paragraph (4), the administrator shall aim to ensure that the bar date comes to the attention of as many of those persons who are eligible to submit a claim under regulation 11(1) as the administrator considers practicable.

(6) After setting a bar date, the administrator may agree a later date for the submission of a claim under regulation 11(1) if the potential claimant submits a request to administrator before the bar date.

(7) The FSA may also submit a request to the administrator under paragraph (6) if the FSA considers that there are particular circumstances in respect of a claimant, or a class of claimants, that mean that those persons will have difficulty submitting their claim before the bar date.

Content of claim for client assets

115

(1) This rule applies to the submission of claims as described in regulation 11(1)(a).

(2) A person submitting a claim must submit that claim in writing to the administrator.

(3) The claim must—

(a) be made out by, or under the direction of, the claimant and must be signed by the claimant or a person authorised in that behalf; and

(b) state the following matters—

(i) the claimant’s name and address,

(ii) the total amount of client assets held or believed to be held for that claimant by the investment bank as at the time that the investment bank entered administration, categorised into type and securities of a particular description,

(iii) details as to the types of ownership the claimant asserts over those assets,

(iv) details of all financial contracts the claimant has entered into under which, at the time the claim is submitted, liabilities are still owed from either the investment bank to the claimant or vice versa, and

(v) details of any security granted by the claimant in respect of the client assets held by the investment bank; and

(4) The claim shall specify details of any documents by reference to which the claim can be substantiated; but (subject to paragraph (5)), it is not essential that such documents be attached to the claim or submitted with it.

(5) Where the administrator thinks it necessary for the purpose of substantiating the whole or any part of a claim submitted, the administrator may—

(a) call for any document or other evidence to be produced; or

(b) send a request in writing for further information from the claimant.

(6) In this rule, “securities of a particular description” has the meaning set out in regulation 12(9).

Content of claim in respect of security interest

116

(1) This rule applies to the submission of claims as described in regulation 11(1)(b).

(2) A person submitting a claim must submit that claim in writing to the administrator.

(3) The claim must—

(a) be made out by, or under the direction of, the claimant and must be signed by the claimant or a person authorised in that behalf; and

(b) state the following matters—

(i) the claimant’s name and address,

(ii) details of any security interest asserted by the claimant over any client assets held by the investment bank, including details of the client assets to which the security interest relates, the date on which the security interest was granted, conditions for the release of the security and the value which the claimant puts on the security interest,

(iii) details of any other parties’ interest in the security interest that are known to the claimant, and

(iv) any other information relating to the security interest that the claimant considers useful to the administrator in determining the rights attached to the client assets which are the subject of the claim; and

(4) The claim shall specify details of any documents by reference to which the claim can be substantiated; but (subject to paragraph (5)), it is not essential that such documents be attached to the claim or submitted with it.

(5) Where the administrator thinks it necessary for the purpose of substantiating the whole or any part of a claim submitted, the administrator may—

(a) call for any document or other evidence to be produced; or

(b) send a request in writing for further information from the claimant.

Costs of making a claim

117

Unless the court orders otherwise, every claimant under rule 115 or 116 bears the cost of making a claim, including expenses incurred in providing documents or evidence or responding to requests for further information.

New administrator appointed

118

(1) If a new administrator is appointed in place of another, the former administrator must as soon as reasonably practicable transmit to the new administrator all claims received, together with an itemised list of them.

(2) The new administrator shall authenticate the list by way of receipt for the claims, and return it to the former administrator.

(3) From then on, all claims submitted under rule 115 or 116 must be sent to and retained by the new administrator.

CHAPTER 2 — Further notification

Notifying potential claimants after bar date has passed

119

(1) This rule applies where, after the bar date has passed—

(a) there is evidence from either—

(i) the records of the investment bank; or

(ii) information received by the administrator under rule 115 or 116,

that there is a person (“P”) who is eligible to make a claim under regulation 11(1) in respect of certain client assets, but that the administrator has not received a claim from P in respect of those client assets; and

(b) the administrator has a means of contacting P.

(2) The administrator shall send notice to P in writing stating that the administrator believes P would have been eligible to submit a claim under regulation 11(1).

(3) Where P would have been eligible to submit a claim under regulation 11(1)(a), the notice under paragraph (2) shall state that—

(a) the administrator believes that the investment bank holds client assets on behalf of P; and

(b) in making the distribution plan under rule 120, the administrator intends to calculate the amount of assets to be returned to P according to the information available to the administrator, unless P submits a claim in accordance with rule 115 within 14 business days of receipt of the notice (or such longer period as may be agreed by the administrator).

(4) Where P would have been eligible to submit a claim under regulation 11(1)(b), the notice under paragraph (2) shall state that—

(a) the administrator believes that P is able to assert a security interest over certain client assets held by the investment bank; and

(b) in making the distribution plan under rule 120, the administrator intends to take into account the security interest according to the information available to the administrator, unless P submits a claim in accordance with rule 116 within 14 business days of receipt of the notice (or such longer period as may be agreed by the administrator).

CHAPTER 3 — Distribution plan

Distribution plan

120

(1) This rule applies where after setting a bar date and making the notification required by rule 119, the administrator proposes to return client assets.

(2) The administrator shall draw up a distribution plan setting out—

(a) subject to paragraph (3), a schedule of dates on which the client assets are to be returned (“a distribution”);

(b) the unencumbered assets to be returned and to whom;

(c) in respect of encumbered client assets, how the amount of client assets to be returned to a particular client is to be calculated (“the net asset claim”), taking into account—

(i) any liabilities owed by the client to the investment bank in respect of financial contracts,

(ii) any liabilities owed to the client by the investment bank in respect of financial contracts, and

(iii) any shortfall claim of the client (as defined in regulation 12(7));

(d) in respect of a client’s net assets claim, whether the administrator intends to pay the client money or money’s worth in lieu of returning the assets to the client (but a client cannot be paid money or money’s worth out of the investment bank’s estate in lieu of assets unless the estate is able to retain assets the value of which is equivalent to that paid out); and

(e) the amount and identity of client assets that are to be retained by the administrator to pay the expenses of the special administration in accordance with rule 113 and how the retention of these assets will affect the amount of client assets to be returned to clients.

(3) In setting out the schedule of dates for the return of the client assets, no date shall be sooner than the date which is 3 months after the bar date.

(4) In setting out the schedule for the return of encumbered client assets—

(a) where a person (“P”) notified under rule 119(2) has failed to respond to that notice, the administrator shall make provision in the distribution plan—

(i) for client assets to be returned to P according to the information available to the administrator in respect of the amount of client assets held for P by the investment bank; or

(ii) to take into account any security interest that according to the information available to the administrator, P is entitled to assert over certain client assets held by the investment bank,

as the case may be;

(b) the administrator shall make provision in respect of any security interest asserted over those assets by another person; and

(c) the administrator shall set out the extent to which a proportion of securities are to be held back from the initial distributions and the reasons why.

(5) The distribution plan will also set out—

(a) where any liabilities under paragraph (2)(c) are contingent, how the administrator intends to value the liability; and

(b) where any liabilities are disputed, whether the administrator intends to make an assumption as to the outcome of the dispute,

for the purpose of calculating the client’s net asset claim so that the claim can be paid out (or partly paid out) or assets returned (or returned in part) before the contingency occurs or the dispute is resolved, and the arrangements by which the administrator may revise such valuations or assumptions when further information becomes known.

(6) In this rule, “encumbered client assets” means client assets over which a third party or the investment bank exerts a security interest.

Approval by the creditors’ committee

121

(1) Where there is a creditors’ committee, the administrator shall summon a meeting of that committee to approve the distribution plan.

(2) The administrator shall send the proposed distribution plan to each member of the creditors’ committee when sending out notice of the meeting.

(3) The creditors’ committee may approve the distribution plan with or without modification.

Approval by the court

122

(1) This rule applies where a meeting of the creditors’ committee has taken place in accordance with rule 121 or where there is no creditors’ committee.

(2) The administrator shall apply to the court for approval of the distribution plan.

(3) The administrator shall send a copy of the distribution plan, together with details as to how to find out the venue, time and place for the hearing, to—

(a) all persons who have submitted a claim of the type described in regulation 11(1);

(b) all persons notified under rule 119;

(c) in a special administration (bank administration), before the Bank of England has given an Objective A Achievement Notice, the Bank of England; and

(d) the FSA.

(4) The court, on receiving an application under paragraph (2) shall fix the venue, time and date for the hearing and in fixing the venue shall have regard to the desirability of the application being heard as soon as reasonably practicable subject to the persons notified under paragraph (3) and the members of the creditors’ committee being able to attend and make representations at the hearing.

(5) On hearing an application under paragraph (2) the court may—

(a) make an order approving the distribution plan with or without modification if satisfied that—

(i) where rule 119 applies, the administrator has made the necessary notifications in accordance with that rule, and

(ii) where there is a creditors’ committee, either that the committee has approved the distribution plan with or without modification or where the committee has been unable to approve the plan, the court has heard from the members of the committee or has given them an opportunity to explain why the committee were unable to approve the plan;

(b) dismiss the application;

(d) make any other order which the court thinks appropriate.

Treatment of late claimants

123

(1) This rule applies where after a distribution has taken place, the administrator receives a claim of the type described in regulation 11(1).

(2) Where the claim is not submitted in accordance with rule 115 or, as the case may be, rule 116, the administrator shall notify the claimant accordingly and ask them to resubmit their claim in accordance with the relevant rule.

(3) Where the claim is submitted in accordance with rule 115 or 116, if the administrator determines that, had the claim been submitted before the bar date, the claimant would have received client assets as part of the distribution—

(a) if enough of those assets amounting to what the client would have received in the distribution are still available to be distributed, they shall be returned to the client as soon as reasonably practicable and any remainder of the claimant’s claim shall be included in the distribution plan for further distributions; and

(b) if there are insufficient assets, any assets that can be returned to the claimant shall be, but the claimant may submit a claim under rule 125 for the value of those client assets not returned.

(4) Where the claimant’s claim under paragraph (3)(b) is in respect of assets that are securities, the value of those securities is to be calculated in accordance with rule 69 and for this purpose the references to “chair” in rule 69 shall be read as references to the administrator.

(5) The administrator may amend the distribution plan to reflect the return of client assets under this rule without need for the plan to be approved again by either the court or the creditors’ committee.

PART 6 — Distributions to Creditors

Application of Part 6

124

(1) This Part applies in any case where the administrator proposes to make a distribution to creditors or any class of them.

(2) Where the distribution is to a particular class of creditors, references in this Part (except rule 132(4)(b)) to creditors shall, so far as the context requires, be references to that class of creditors only.

Submission of claim

125

(1) A creditor, in order to obtain an adjudication as to that creditor’s entitlement—

(a) to vote at any meeting of the creditors, or of the creditors and clients, in the special administration; or

(b) to a dividend (so far as funds are available) out of the assets of the investment bank in respect of any accounting period,

shall submit their claim to the administrator at or before the meeting or, as the case may be, not later than 8 weeks before the end of the accounting period.

(2) A creditor shall submit their claim by producing to the administrator—

(a) a statement of claim in accordance with rule 126; and

(b) an account or voucher (according to the nature of the debt claimed) which constitutes prima facie evidence of the debt,

but the administrator may dispense with any requirement of this paragraph in respect of any debt or any class of debt.

(3) A claim submitted by a creditor, which has been accepted in whole or in part by the administrator for the purpose of drawing a dividend in respect of any accounting period, shall be deemed to have been resubmitted for the purpose of obtaining an adjudication as to that creditor’s entitlement (so far as funds are available) to a dividend in respect of an accounting period or, as the case may be, any subsequent accounting period.

(4) A creditor, who has submitted a claim, may at any time submit a further claim specifying a different amount for their claim, provided that a secured creditor shall not be entitled to produce a further claim specifying a different value for the security at any time after the administrator has required the creditor to discharge, or convey or assign, the security.

(5) In this rule, and in rule 127 including the provisions of the 1985 Act applied by that rule, any reference to the administrator includes a reference to the chair of the meeting.

Statement of claim

126

(1) A creditor’s statement of claim under this rule shall set out—

(a) the name of the investment bank and the date on which it entered special administration;

(b) the name and address of the creditor;

(d) the total amount of debt claimed for, including particulars of the debt.

(2) In this rule, “particulars of the debt” means—

(a) details of the nature of the debt, when it was incurred and the due date for payment;

(b) the amount of the debt, including the principal debt and interest due on the debt at the due date (if the creditor is entitled to claim interest);

(d) details of any preference under Schedule 6 to the 1986 Act being claimed for the debt;

(e) details of any security being held in respect of the debt including—

(i) the subjects covered,

(ii) the date on which the security was given,

(iii) the value of that security and whether the creditor is surrendering or intends to surrender this security,

and in giving the total amount of the debt, the creditor shall deduct the value of any security as estimated by that creditor, unless the creditor surrenders the security.

(3) The particulars of the debt submitted under this rule must be signed by the creditor, or a person acting on behalf of the creditor, certifying that the particulars of debt are true, complete and accurate to the best of the creditor’s knowledge and belief.

Application of the 1985 Act in relation to creditor’s claims

127

(1) The following provisions of the 1985 Act[^f00021] shall apply in relation to a special administration of the investment bank in a like manner as they apply in a sequestration of a debtor’s estate, subject to the modifications specified in paragraphs (2) and (3) and to any other necessary modifications—

(a) section 22(5) and (10) (criminal offence in relation to producing false claims or evidence);

(b) section 48(5), (6) and (8), together with sections 44(2) and (3) and 47(1) as applied by those sections (further evidence in relation to claims);

(d) section 50(1) (entitlement to vote and draw dividend);

(e) section 60 (liabilities and rights of co-obligants); and

(f) Schedule 1, except paragraphs 2, 4 and 6, (determination of amount of creditor’s claim).

(2) For any reference in the provisions of the 1985 Act as applied by these Rules to any expression in column 1 below, there shall be substituted a reference to the expression in column 2—

Column 1	Column 2
Accountant in Bankruptcy	The court
Commissioners	The creditors’ committee
Date of sequestration	Commencement of special administration
Debtor	Investment bank (and in the application of section 49(6) of the 1985 Act, any member or contributory of the investment bank)
Debtor’s estate	Investment bank’s estate
Preferred debts	Preferential debts within the meaning of section 386 of the 1986 Act.
Sequestration	Special administration
Sheriff`	The court
Trustee	Administrator

(3) In the application of—

(a) section 49(6) of the 1985 Act—

(i) notice of the application must be given to the FSA and in a special administration (bank insolvency) to the Bank of England and those bodies may appear or be represented at the hearing; and

(ii) in a special administration (bank administration), notice must be given to the FSCS and, in the period before the Bank of England has given an Objective A Achievement Notice, to the Bank of England and in those circumstances those bodies may appear or be represented at the hearing; and

(b) section 60 of the 1985 Act, omit references to the discharge of the debtor.

Claims in foreign currency

128

(1) A creditor may state the amount of their claim in a currency other than sterling where—

(a) their claim is constituted by decree or other order made by a court ordering the investment bank to pay to the creditor a sum expressed in a currency other than sterling; or

(b) where it is not so constituted, their claim arises from a contract or bill of exchange in terms of which payment is or may be required to be made by the investment bank to the creditor in a currency other than sterling.

(2) Where a claim is stated in currency other than sterling for the purpose of the preceding paragraph, it shall be converted into sterling at the rate of exchange for that other currency at the mean of the buying and selling spot rates prevailing in the London market at the close of business on the date of commencement of the special administration.

Administrator to allow inspection of proofs

129

The administrator shall, so long as submitted claims are in the administrator’s hands, allow them to be inspected, at all reasonable times on any business day, by any of the following persons—

(a) any creditor who has submitted a claim (unless that claim has been wholly rejected for purposes of dividend or otherwise);

(b) any contributory of the company; and

New administrator appointed

130

(1) If a new administrator is appointed in place of another, the former administrator must, as soon as reasonably practicable, transmit to the new administrator all the creditors’ claims which the former administrator has received, together with an itemised list of them.

(2) The new administrator must authenticate the list by way of receipt for the creditors’ claims and return it to the former administrator.

(3) From then on, all creditors’ claims must be sent to and retained by the new administrator.

Order of priority of distribution

131

(1) The funds of the investment bank’s assets shall be distributed by the administrator to meet the following expenses and debts in the order in which they are mentioned—

(a) the expenses of the special administration;

(b) where a special administration order, a special administration (bank insolvency) order or a special administration (bank administration) order is made and a voluntary arrangement under Part 1 of the 1986 Act is in force for the investment bank, any expenses properly incurred as expenses of the administration of the arrangement in question;

(c) any preferential debts within the meaning of section 386 of the 1986 Act[^f00022] (excluding any interest which has been accrued thereon to the date of commencement of the special administration);

(d) ordinary debts, that is to say a debt which is neither a secured debt nor a debt mentioned in any other sub-paragraph of this paragraph;

(e) interest at the official rate on—

(i) the preferential debts, and

(ii) the ordinary debts,

between the date of the commencement of the special administration and the date of the payment of the debt; and

(f) any postponed debt.

(2) In the above paragraph—

“official rate” in respect of any debt is whichever is the greater of— 15 per centum per annum; and the rate applicable to that debt apart from the effect of the special administration; and

“postponed debt” means a creditor’s right to any alienation which has been reduced or restored to the investment bank’s assets under section 242 of the 1986 Act[^f00023] or to the proceeds of sale of such an alienation.

(3) The expenses of the special administration mentioned in sub-paragraph (a) of paragraph (1) are payable in the order of priority mentioned in rule 110.

(4) Subject to the provisions of section 175 of the 1986 Act (as applied by paragraph 65(2)), any debt falling within any of sub-paragraphs (b) to (e) of paragraph (1) shall have the same priority as any other debt falling within the same sub-paragraph and, where the funds of the investment bank’s assets are inadequate to enable the debts mentioned in this sub-paragraph to be paid in full, they shall abate in equal proportions.

(5) Any surplus remaining, after all expenses and debts mentioned in paragraph (1) have been paid in full, shall (unless the articles of the investment bank otherwise provide) be distributed among the members according to their rights and interests in the investment bank.

(6) Nothing in this rule shall effect—

(a) the right of a secured creditor which is preferable to the rights of the administrator; or

(b) any preference of the holder of a lien over a title deed or other document which has been delivered to the administrator.

Application of 1985 Act in relation to distribution of assets

132

(1) Sections 52[^f00024] and 58[^f00025] of the 1985 Act shall apply in relation to the special administration of an investment bank as they apply in relation to the sequestration of a debtor’s estate, subject to the modifications specified in rule 127(2) and the following paragraphs and to any other necessary modifications.

(2) In section 52, the following modifications shall be made—

(a) for subsection (2)(b) substitute—

(b) any subsequent accounting period shall be the period of 6 months beginning with the end of the last accounting period; except that if the administrator and the creditors’ committee (or if there is no creditors’ committee, the court) agree that the accounting period shall be such other period beginning with the end of the last accounting period as may be agreed, it shall be that other period.

(b) in subsection (4)(a) for the reference to “the debts mentioned in subsection (1)(a) to (d) of section 51 of this Act”, there shall be substituted a reference to “the expenses of the special administration mentioned in rule 110(1) of the Investment Bank Special Administration (Scotland) Rules 2011”;

(d) in subsections (7) and (8) for the references to sections 48(5) and 49(6)(b) there should be substituted a reference to those sections as applied by rule 127; and

(e) for subsection (11) substitute—

(11) Subject to any notification by the creditor entitled to the dividend given to the administrator that the creditor wishes the dividend to be paid to another person or that the creditor has assigned the creditor’s entitlement to another person, payment of a dividend in respect of a claim shall only be made to the creditor.

(3) Section 52(3) of the 1985 Act, as applied by this rule, shall apply subject to paragraph (4).

(4) The administrator may pay a dividend to secured or preferential creditors or to unsecured creditors only if—

(a) the administrator has sufficient funds for the purpose;

(b) the administrator’s statement of proposals, as approved by the creditors under Chapter 3 of Part 3, contains a proposal to make a distribution to the class of creditors in question;

(c) the payment of a dividend is consistent with the functions and duties of the administrator and any proposals made by that administrator or which the administrator intends to make; and

(d) in a special administration (bank administration) before the Bank of England has given an Objective A Achievement Notice, the administrator has the consent of the Bank of England.

(5) Where the administrator pays a dividend under section 52(3), notice of the dividend shall be given to—

(a) the FSA;

(b) in a special administration (bank insolvency), the Bank of England; and

(c) in a special administration (bank administration), notice must be given to the FSCS and, if the dividend is paid in the period before the Bank of England has given an Objective A Achievement Notice, to the Bank of England,

and in a special administration (bank administration) following transfer to a bridge bank under section 12(2) of the 2009 Act, the notice shall include details of any payment from a scheme under a resolution fund order.

(6) Where the administrator postpones a payment under section 52(5), the administrator shall notify—

(a) the FSA;

(b) in a special administration (bank insolvency), the Bank of England; and

(c) in a special administration (bank administration), the FSCS and, if the payment is made in the period before the Bank of England has given an Objective A Achievement Notice, the Bank of England.

(7) Section 58 applies with the modification that in subsections (1) and (3) for “section 57(1)(a) or 58A(3) of this Act” there is substituted “rule 133(2) of the Investment Bank Special Administration (Scotland) Rules 2011”.

Payment of dividends

133

(1) On the final determination of the remuneration under rules 135 and 136 the administrator shall, subject to the rules in this Chapter, pay to the creditors their dividends in accordance with the scheme of division.

(2) Any dividend—

(a) allocated to a creditor which is not cashed or uplifted; or

(b) dependent on a claim in respect of which an amount has been set aside under subsection (7) or (8) of section 52 of the 1985 Act as applied by rule 132,

shall be deposited by the administrator in an appropriate bank or institution.

(3) If a creditor’s claim is revalued, the administrator may—

(a) in paying any dividend to that creditor, make such adjustment to it as the administrator considers necessary to take account of that revaluation; or

(b) require the creditor to repay to the administrator the whole or part of a dividend already paid to that creditor.

(4) The administrator shall insert in the sederunt book the audited accounts, the scheme of division and the final determination in relation to the administrator’s outlays and remuneration.

(5) For the purposes of paragraph 99(3), the former administrator’s remuneration and expenses shall comprise all those items set out in rule 110.

Rights of eligible depositors and set-off

134

(1) This rule applies—

(a) in a special administration (bank insolvency); and

(b) in a special administration (bank administration) if all or part of a creditor’s claim against the investment bank is in respect of protected deposits.

(2) In determining the sums due from the investment bank to an eligible depositor or from the eligible depositor to the investment bank for the purpose of any right or claim of set-off available to the investment bank against the eligible depositor—

(a) where the total of the sums held by the investment bank for any eligible depositor in respect of protected deposits is no more than the amount prescribed as the maximum compensation payable in respect of protected deposits under Part 15 of the 2000 Act (“the limit”) paragraph (3) applies; and

(b) where the sums held by the investment bank exceed the limit, paragraph (4) applies.

(3) Where this paragraph applies, regardless of whether there are any sums due from the eligible depositor to the investment bank, the investment bank shall not be entitled to exercise or claim any right of set-off available to it against or in respect of those sums held by the investment bank for the eligible depositor in respect of the protected deposits; and the sum due to the eligible depositor from the investment bank will be the total of the sums held by the investment bank for that eligible depositor in respect of protected deposits which sum shall be deemed free from any right or claim of set-off by the investment bank.

(4) Where this paragraph applies—

(a) the investment bank shall be entitled to exercise any right or claim of set-off available to it only in respect of any sums held by the investment bank for that eligible depositor in excess of the limit, which sums shall be subject to any right or claim of set-off available to the investment bank; and

(b) the sums due from the investment bank to the eligible depositor in respect of the protected deposits will be—

(i) the amount by which the total amount exceeds the limit, subject to any right or claim of set-off available to the investment bank; and

(ii) the sums held by the investment bank for the eligible depositor in respect of protected deposits up to the limit.

(5) Any arrangements with regard to set-off between the investment bank and the eligible depositor in existence before the commencement of special administration (bank insolvency) or special administration (bank administration), as the case may be, shall be subject to this rule in so far as they relate to protected deposits.

(6) In this rule—

“2000 Act” means the Financial Services and Markets Act 2000[^f00026];

“eligible depositor” has the meaning given by section 93(3) of the 2009 Act;

“protected deposit” means a protected deposit within the meaning given in the General Provisions and Glossary Instrument 2001 (2001/7) made by the Financial Services Authority under the 2000 Act; and

“set-off” includes (without limitation) claims of compensation, rights of retention and rights of balancing accounts on insolvency.

PART 7 — The Administrator

CHAPTER 1 — Remuneration of the administrator

Remuneration of administrator

135

(1) The administrator’s remuneration for services given in respect of—

(a) the pursuit of—

(i) Objective A in a special administration (bank insolvency),

(ii) Objective A in a special administration (bank administration), and

(iii) Objectives 2 and 3,

shall be paid out of the assets of the investment bank; and

(b) the pursuit of Objective 1 shall be paid out the client assets held by the investment bank.

(2) Subject to paragraph (3), within 2 weeks after the end of an accounting period, the administrator shall in respect of that period submit to the creditors’ committee (or if there is no creditors’ committee, to a meeting of creditors and clients)—

(a) the administrator’s accounts of intromissions with the investment bank’s assets for audit and, where funds are available after making allowance for contingencies, a scheme of division of the divisible funds; and

(b) a claim for the outlays reasonably incurred by the administrator and for the administrator’s remuneration,

in respect of the pursuit of the Objectives in paragraph (1)(a).

(3) Within 2 weeks after the end of an accounting period, the administrator shall in respect of that period submit to the creditors’ committee (or if there is no creditors’ committee, to a meeting of clients) a claim for the outlays reasonably incurred by the administrator and for the administrator’s remuneration in respect of the pursuit of the Objective in paragraph (1)(b).

(4) The administrator may, at any time before the end of an accounting period, submit to the creditors’ committee or, if there is no creditors’ committee, a meeting of creditors and clients (or in respect of a claim in respect of the pursuit of the Objective in paragraph (1)(b), a meeting of clients)—

(a) an interim claim in respect of that period for the outlays reasonably incurred by the administrator; and

(b) an interim claim in respect of that period for remuneration,

and the body to whom the claim has been submitted may make an interim determination in relation to the amount of the outlays and remuneration payable to the administrator and, where they do so, they shall take into account that interim determination when making their determination under paragraph (5)(a)(ii).

(5) Within 6 weeks after the end of an accounting period—

(a) the creditors’ committee or, as the case may be, a meeting of creditors and clients or a meeting of clients—

(i) may audit the accounts (in respect of a submission under paragraph (2)); and

(ii) shall issue a determination fixing the amount of the outlays and the remuneration payable to the administrator (and in a special administration (bank insolvency or in a special administration (bank administration) this determination shall replace the basis of the remuneration payable fixed under rule 16(5) or 29); and

(b) the administrator shall make the audited accounts, scheme of division and the said determination available for inspection by the members of the company, the creditors or clients.

(6) In a special administration (bank administration), paragraph (5) only applies in respect of the remuneration for services in pursuit of Objective A and Objectives 2 and 3, after the Bank of England has passed an Objective A Achievement Notice.

(7) The basis for fixing the amount of the remuneration payable under paragraph (1)(a) and (b) may be a commission calculated by reference to the value of the investment bank’s assets which have been realised by the administrator, but there shall in any event be taken into account—

(a) the work which, having regard to that value, was reasonably undertaken by the administrator; and

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