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The Banks and Building Societies (Depositor Preference and Priorities) Order 2014

Type Statutory-Instrument

Publication 2014-12-17

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

articles 2

Reform history JSON API PDF

Made: 17th December 2014

Coming into force: 1st January 2015

A draft of this Order has been laid before Parliament and approved by a resolution of each House of Parliament in accordance with paragraph 2(2) of Schedule 2 to the European Communities Act 1972, and section 90B(6) of the Building Societies Act 1986.

PART 1 — Introductory Provisions

Citation and commencement

1

(1) This Order may be cited as the Banks and Building Societies (Depositor Preference and Priorities) Order 2014.

(2) This Order comes into force on 1st January 2015.

Extent

2

The amendments made by this Order have the same extent as the enactments amended.

Transitional provision

3

(1) This Order has no effect in relation to any insolvency proceedings commenced before the date on which this Order comes into force.

(2) For this purpose—

(a) “insolvency proceedings” means——

(i) proceedings under the Bankruptcy (Scotland) Act 1985[^f00004];

(ii) proceedings under the Insolvency Act 1986[^f00005];

(iii) proceedings under the Insolvency (Northern Ireland) Order 1989[^f00006];

(iv) proceedings under the Insolvent Partnerships Order 1994[^f00007];

(v) proceedings under the Insolvent Partnerships Order (Northern Ireland) 1995[^f00008]; or

(vi) proceedings under Part 2 or 3 of the Banking Act 2009[^f00009] (including proceedings under either of those Parts as applied to building societies by section 90C of the Building Societies Act 1986[^f00010]);

(b) insolvency proceedings commence on—

(i) the date of presentation of a petition for a winding-up order, bank insolvency order, building society insolvency order, bankruptcy order or award of sequestration;

(ii) the date on which an application is made for an administration order, bank administration order or building society administration order;

(iii) the date on which notice of appointment of an administrator is given under paragraph 18 or 29 of Schedule B1 to the Insolvency Act 1986[^f00011] or paragraph 19 or 30 of Schedule B1 to the Insolvency (Northern Ireland) Order 1989[^f00012];

(iv) the date on which a proposal is made by the directors of a company for a company voluntary arrangement under Part 1 of the Insolvency Act 1986 or Part 2 of the Insolvency (Northern Ireland) Order 1989 or by an individual debtor for an individual voluntary arrangement under Part 8 of the Insolvency Act 1986 or Part 8 of the Insolvency (Northern Ireland) Order 1989;

(v) the date on which a resolution for voluntary winding up is passed.

PART 2 — Amendments of Insolvency Act 1986

Decisions of meetings

4

(1) Section 4 of the Insolvency Act 1986 (decisions of meetings)[^f00013] is amended as follows.

(2) In subsection (4)—

(a) omit the “or” at the end of paragraph (a);

(b) after paragraph (a) insert—

(aa) any ordinary preferential debt of the company is to be paid otherwise than in priority to any secondary preferential debts that it may have,

(i) for “a preferential debt”, substitute “an ordinary preferential debt”, and

(ii) for “another”, substitute “another ordinary”;

(d) at the end of paragraph (b), insert—

or (c) a preferential creditor of the company is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt.

(3) In subsection (7), after “preferential debts” insert “, ordinary preferential debts, secondary preferential debts”.

Preferential debts

5

(1) Section 175 of the Insolvency Act 1986 (preferential debts: general provision) is amended as follows.

(2) In subsection (1) omit “(within the meaning given by section 386 in Part XII)”.

(3) After subsection (1) insert—

(1A) Ordinary preferential debts rank equally among themselves after the expenses of the winding up and shall be paid in full, unless the assets are insufficient to meet them, in which case they abate in equal proportions. (1B) Secondary preferential debts rank equally among themselves after the ordinary preferential debts and shall be paid in full, unless the assets are insufficient to meet them, in which case they abate in equal proportions.

(4) In subsection (2), omit paragraph (a) and the “and” immediately following it.

(5) After subsection (2), insert—

(3) In this section “preferential debts”, “ordinary preferential debts” and “secondary preferential debts” each has the meaning given in section 386 in Part 12.

Decisions of creditors’ meetings and preferential debts

6

(1) Section 258 of the Insolvency Act 1986 (decisions of creditors’ meeting)[^f00014] is amended as follows.

(2) In subsection (5)—

(a) omit the “or” at the end of paragraph (a);

(b) after paragraph (a) insert—

(aa) any ordinary preferential debt of the debtor is to be paid otherwise than in priority to any secondary preferential debts that the debtor may have,

(i) for “a preferential debt”, substitute “an ordinary preferential debt”, and

(ii) for “another”, substitute “another ordinary”;

(d) at the end of paragraph (b), insert—

or (c) a preferential creditor of the debtor is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt.

(3) In subsection (7), for “has” substitute “, “ordinary preferential debt” and “secondary preferential debt” each has”.

Priority of debts

7

(1) Section 328 of the Insolvency Act 1986 (priority of debts) is amended as follows.

(2) In subsection (1) omit “(within the meaning given by section 386 in Part XII)”.

(3) After subsection (1) insert—

(1A) Ordinary preferential debts rank equally among themselves after the expenses of the bankruptcy and shall be paid in full, unless the bankrupt’s estate is insufficient to meet them, in which case they abate in equal proportions between themselves. (1B) Secondary preferential debts rank equally among themselves after the ordinary preferential debts and shall be paid in full, unless the bankrupt’s estate is insufficient to meet them, in which case they abate in equal proportions between themselves.

(4) Omit subsection (2).

(5) After subsection (6) insert—

(7) In this section “preferential debts”, “ordinary preferential debts” and “secondary preferential debts” each has the meaning given in section 386 in Part 12.

Categories of preferential debts

8

(1) Section 386[^f00015] of the Insolvency Act 1986 (categories of preferential debts) is amended as follows.

(2) In subsection (1), after “Compensation Scheme”, insert “; other deposits”.

(3) After subsection (1), insert—

(1A) A reference in this Act to the “ordinary preferential debts” of a company or an individual is to the preferential debts listed in any of paragraphs 8 to 15B of Schedule 6 to this Act. (1B) A reference in this Act to the “secondary preferential debts” of a company or an individual is to the preferential debts listed in paragraph 15BA or 15BB of Schedule 6 to this Act.

(4) In subsection (2), for “that Schedule” substitute “Schedule 6”.

Moratorium where directors propose voluntary arrangement and preferential debts

9

(1) Schedule A1[^f00016] to the Insolvency Act 1986 (moratorium where directors propose voluntary arrangement) is amended as follows.

(2) In paragraph 31(5)—

(a) omit the “or” at the end of paragraph (a);

(b) after paragraph (a) insert—

(aa) any ordinary preferential debt of the company is to be paid otherwise than in priority to any secondary preferential debts that it may have,

(i) for “a preferential debt”, substitute “an ordinary preferential debt”, and

(ii) for “another”, substitute “another ordinary”;

(d) at the end of paragraph (b), insert—

or (c) a preferential creditor of the company is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt.

(3) In paragraph 31(8), after “preferential debts” insert “, ordinary preferential debts, secondary preferential debts”.

Administration and preferential debts

10

(1) Schedule B1[^f00017] to the Insolvency Act 1986 (administration), paragraph 73(1) is amended as follows.

(2) Omit the “or” at the end of paragraph (b).

(3) After paragraph (b) insert—

(bb) would result in an ordinary preferential debt of the company being paid otherwise than in priority to any secondary preferential debts that it may have,

(4) In paragraph (c), for “his debt” substitute “an ordinary preferential debt”.

(5) At the end of paragraph (c), insert—

or (d) would result in one preferential creditor of the company being paid a smaller proportion of a secondary preferential debt than another.

Additional preferential debts

11

(1) Schedule 6[^f00018] to the Insolvency Act 1986 (preferential debts) is amended as follows.

(2) After paragraph 15B, insert—

(15BA) So much of any amount owed at the relevant date by the debtor to one or more eligible persons in respect of an eligible deposit as exceeds any compensation that would be payable in respect of the deposit under the Financial Services Compensation Scheme to that person or those persons. (15BB) An amount owed at the relevant date by the debtor to one or more eligible persons in respect of a deposit that— (a) was made through a non-EEA branch of a credit institution authorised by the competent authority of an EEA state, and (b) would have been an eligible deposit if it had been made through an EEA branch of that credit institution.

(3) In the italic heading before paragraph 15C, for “Category 7” substitute “Categories 7 and 8”.

(4) In paragraph 15C—

(a) in sub-paragraph (1), for “paragraph 15B” substitute “paragraphs 15B to 15BB”;

(b) in sub-paragraph (2), for “this purpose” substitute “the purposes of those paragraphs and this paragraph”; and

(3) In paragraphs 15BA and 15BB, “eligible person” means— (a) an individual, or (b) a micro-enterprise, a small enterprise or a medium-sized enterprise, each of those terms having the meaning given in Article 2.1(107) of Directive 2014/59/EU of 15th May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms.[^f00019] (4) In paragraph 15BB— (a) “credit institution” has the meaning given in Article 4.1(1) of the capital requirements regulation; (b) “EEA branch” means a branch, as defined in Article 4.1(17) of the capital requirements regulation, which is established in an EEA state; (c) “non-EEA branch” means a branch, as so defined, which is established in a country which is not an EEA state; and for this purpose “the capital requirements regulation” means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26th June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012[^f00020].

PART 3 — Amendments of Insolvent Partnerships Order 1994

Amendments of Schedule 1 to the Insolvent Partnerships Order 1994

12

(1) Schedule 1 to the Insolvent Partnerships Order 1994 (modified provisions of Part 1 of, and Schedule A1 to, the Insolvency Act 1986 (company voluntary arrangements) as applied by Article 4)[^f00021], is amended as follows.

(2) In modified section 4(4) (decisions of meetings)—

(a) omit the “or” at the end of paragraph (a);

(b) after paragraph (a) insert—

(aa) any ordinary preferential debt of the partnership is to be paid otherwise than in priority to any secondary preferential debts that it may have,

(i) for “a preferential debt”, substitute “an ordinary preferential debt”, and

(ii) for “another”, substitute “another ordinary”;

(d) at the end of paragraph (b), insert—

or (c) a preferential creditor of the partnership is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt.

(3) In modified section 4(7) after “preferential debts” insert “, ordinary preferential debts, secondary preferential debts”.

Amendments of Schedule 2 to the Insolvent Partnerships Order 1994

13

(1) Paragraph 25 of Schedule 2 to the Insolvent Partnerships Order 1994 (modified provisions of Part 2 of, and Schedule B1 to, the Insolvency Act 1986 (Administration) as applied by Article 6)[^f00022] is amended as follows.

(2) In modified paragraph 73(1)—

(a) omit the “or” at the end of paragraph (b);

(b) after paragraph (b) insert—

(bb) would result in an ordinary preferential debt of the partnership being paid otherwise than in priority to any secondary preferential debts that it may have,

(d) at the end of paragraph (c), insert—

or (d) would result in one preferential creditor of the partnership being paid a smaller proportion of a secondary preferential debt than another.

Amendments of Schedule 4 to the Insolvent Partnerships Order 1994

14

(1) Paragraph 23 of Schedule 4 to the Insolvent Partnerships Order 1994 (provisions of the Insolvency Act 1986[^f00023] which apply with modifications for the purposes of article 8 to winding up of insolvent partnership on creditor’s petition where concurrent petitions are presented against one or more members) is amended as follows.

(2) In modified section 175A(2) (priority of debts in joint estate), for paragraph (a) substitute—

(a) the ordinary preferential debts; (aa) the secondary preferential debts;

(3) In modified sections 175A(4), 175A(5), 175A(6) and 175B(2), for “paragraphs (a) and (b)” substitute “paragraphs (a), (aa) and (b)”.

(4) In modified section 175B(1) (priority of debts in separate estate), for paragraph (a) substitute—

(a) the ordinary preferential debts; (aa) the secondary preferential debts;

Amendments of Schedule 7 to the Insolvent Partnerships Order 1994

15

(1) Paragraph 21 of Schedule 7 to the Insolvent Partnerships Order 1994 (provisions of the Insolvency Act 1986[^f00024] which apply with modifications for the purposes of article 11 where joint bankruptcy presented by individual members without winding up of partnership as unregistered company) is amended as follows.

(2) In modified section 328A(2) (priority of debts in joint estate), for paragraph (a) substitute—

(a) the ordinary preferential debts; (aa) the secondary preferential debts;

(3) In modified sections 328A(4), 328A(5), 328A(6) and 328B(2) for “paragraphs (a) and (b)” substitute “paragraphs (a), (aa) and (b)”.

(4) In modified section 328B(1) (priority of debts in separate estate), for paragraph (a) substitute—

(a) the ordinary preferential debts; (aa) the secondary preferential debts;

PART 4 — Amendments of Insolvency (Northern Ireland) Order 1989

Decisions of meetings and preferential debts

16

(1) Article 17 of the Insolvency (Northern Ireland) Order 1989 (decisions of meetings)[^f00025] is amended as follows.

(2) In paragraph (4)—

(a) omit the “or” at the end of sub-paragraph (a);

(b) after sub-paragraph (a) insert—

(aa) any ordinary preferential debt of the company is to be paid otherwise than in priority to any secondary preferential debts that it may have,

(i) for “a preferential debt”, substitute “an ordinary preferential debt”, and

(ii) for “another”, substitute “another ordinary”;

(d) at the end of sub-paragraph (b), insert—

or (c) a preferential creditor of the company is to be paid an amount in respect of a secondary preferential debt that bears to that debt a smaller proportion than is borne to another secondary preferential debt by the amount that is to be paid in respect of that other debt.

(3) In paragraph (7), for “has” substitute “, “ordinary preferential debt” and “secondary preferential debt” each has”.

Preferential debts: general provision

17

(1) Article 149 of the Insolvency (Northern Ireland) Order 1989 (preferential debts: general provision) is amended as follows.

(2) In paragraph (1) omit “(within the meaning of Article 346)”.

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