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The Payment and Electronic Money Institution Insolvency Regulations 2021

Type Statutory-Instrument

Publication 2021-06-17

Last updated 2025-04-06

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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Made: 17th June 2021

Coming into force: 8th July 2021

A draft of these Regulations has been laid before and approved by a resolution of each House of Parliament in accordance with section 235(2) of the Banking Act 2009 as applied and modified by regulation 24A of, and paragraph 4 of Schedule 2ZA to, the EMR 2011 and regulation 23A of, and paragraph 4 of Schedule 3A to, the PSR 2017, and paragraph 1(3) of Schedule 7 to the European Union (Withdrawal) Act 2018.

Citation

1

These Regulations may be cited as the Payment and Electronic Money Institution Insolvency Regulations 2021.

Commencement

2

These Regulations come into force on the twenty-first day after the day on which they are made.

Extent

3

(1) These Regulations extend to England and Wales , Scotland and Northern Ireland, subject as follows.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) A modification made by Schedule 3 has the same extent as the provision modified.

(4) An amendment made by Schedule 4 has the same extent as the provision amended.

Overview

4

(1) Regulations 7 to 48 and Schedules 1 to 4 make provision about the insolvency of payment institutions and electronic money institutions (“institutions”).

(2) Regulations 7 to 47 and Schedules 1 to 4 set out a special alternative procedure for the insolvency of institutions.

(3) The procedure is to be known as—

(a) payment institution special administration, where the institution is a payment institution, or

(b) electronic money institution special administration, where the institution is an electronic money institution.

(4) Regulation 48 applies with modifications various provisions of Part 24 of the Financial Services and Markets Act 2000[^f00005] (“FSMA 2000”) to institutions except in respect of special administration.

(5) Regulation 49 corrects a defect in an instrument relating to the United Kingdom’s withdrawal from the European Union and bank recovery and resolution.

Application: Scottish LLPs and partnerships

5

Regulations 7 to 47 do not apply to the insolvency of ... partnerships formed under the law of Scotland.

Definitions

6

In these Regulations, the words and expressions in the first column of the Table have the meaning indicated in the second column—

Word or expression	Meaning
BA 2009	Banking Act 2009[^f00006]
CA 2006	Companies Act 2006[^f00007]
CDDA 1986	Company Directors Disqualification Act 1986[^f00008]
CDD(NI)O 2002	Company Directors Disqualification (Northern Ireland) Order 2002
FSMA 2000	has the meaning given in regulation 4(4)
IA 1986	Insolvency Act 1986[^f00009]
I(NI)O 1989	Insolvency (Northern Ireland) Order 1989
SBEEA 2015	Small Business, Enterprise and Employment Act 2015[^f00010]
EMR 2011	Electronic Money Regulations 2011[^f00011]
IBSAR 2011	Investment Bank Special Administration Regulations 2011[^f00012]
PSR 2017	Payment Services Regulations 2017[^f00013]
administrator (except in the expression Schedule B1 administrator)	person appointed under regulation 7
agency or distribution services (in the case of electronic money institutions)	services provided by an agent or distributor within the meaning of regulation 2(1) of the EMR 2011
agency services (in the case of a payment institutions)	services provided by an agent within the meaning of regulation 2(1) of the PSR 2017
asset pool (in the case of electronic money institutions)	(a) in the case of funds received for the execution of payment transactions which are not related to the issuance of electronic money, see regulation 23(18) of the PSR 2017, or(b) in any other case, see regulation 24(4) of the EMR 2011
asset pool (in the case of payment institutions)	see regulation 23(18) of the PSR 2017
authorised payment institution	see regulation 2(1) of the PSR 2017
Authorities	the Bank of England, the Treasury and the FCA
contributory	(a) in England and Wales and Scotland, has the same meaning as in the IA 1986 (see section 79 of that Act) as applied and modified by these Regulations , and (b) in Northern Ireland, has the same meaning as in the I(NI)O 1989 (see Article 13 of that Order) as applied and modified by these Regulations
court	(a) in England and Wales and in Northern Ireland, the High Court, and(b) in Scotland, the Court of Session
electronic money	see regulation 2(1) of the EMR 2011
electronic money institution	see regulation 2(1) of the EMR 2011
enactment	includes—(a) an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament,(b) an enactment contained in, or in an instrument made under, a Measure or Act of Senedd Cymru,(ba) an enactment contained in, or in an instrument made under, Northern Ireland legislation, and(c) any assimilated direct legislation
fair	has the same meaning as in Part 2 of the BA 2009 (see section 93(8) of that Act)
FCA	Financial Conduct Authority
foreign property	has the same meaning as in the BA 2009 (see section 39(2) of that Act)
holder	electronic money holder
special administration insolvency rules	(a) in relation to special administrations in England and Wales, or Scotland, means rules made under section 411 of the IA 1986, (b) in relation to special administrations in Northern Ireland, means rules made under Article 359 of the I(NI)O 1989,in each case as applied and modified by these Regulations to give effect to these Regulations.
institution	has the meaning given in regulation 4(1)
institution’s own bank accounts	includes any account, other than a relevant funds account, opened by the administrator for the purposes of the special administration
Objective 1	has the meaning given in regulation in 12(2)
Objective 2	has the meaning given in regulation in 12(3)
Objective 3	has the meaning given in regulation in 12(4)
payment institution	authorised payment institution or small payment institution
payment services	see regulation 2(1) of the PSR 2017
payment system	has the same meaning as in the BA 2009 (see section 182 of that Act[^f00014])
payment system operator	has the same meaning as in the BA 2009 (see section 183 of that Act[^f00015])
payment transaction	see regulation 2(1) of the PSR 2017
PPTA	has the meaning given in regulation 24(3)
PS or EMI contract	contract for payment services or electronic money issuance
relevant funds (in the case of electronic money institutions)	(a) in the case of funds received for the execution of payment transactions which are not related to the issuance of electronic money, see regulation 23(1) and (2) of the PSR 2017(b) in any other case, see regulation 20(1) of the EMR 2011
relevant funds (in the case of payment institutions)	see regulation 23(1) and (2) of the PSR 2017
relevant funds account	account which an institution maintains in order to safeguard relevant funds
relevant funds claim	claim, of a user or holder, for the return of relevant funds
reverse transfer	has the meaning given in regulation 30(1)(a)
safeguard (in the case of electronic money institutions)	(a) in the case of relevant funds received for the execution of payment transactions which are not related to the issuance of electronic money, has the same meaning as in the PSR 2017 (see regulation 23 of those Regulations), or(b) in any other case, has the same meaning as in the EMR 2011 (see regulations 20 to 22 of those Regulations)
safeguard (in the case of payment institutions)	has the same meaning as in the PSR 2017 (see regulation 23 of those Regulations)
Schedule B1	(a) in relation to special administrations in England and Wales, or Scotland, means Schedule B1 to the IA 1986; (b) in relation to special administrations in Northern Ireland, means Schedule B1 to the I(NI)O 1989.
Schedule B1 administration	the administration procedure set out in Schedule B1
Schedule B1 administration order	administration order made under Schedule B1 (see paragraph 10 of Schedule B1 to the IA 1986 and paragraph 11 of Schedule B1 to the I(NI)O 1989)
Schedule B1 administrator	administrator appointed under Schedule B1
small electronic money institution	see regulation 2(1) of the EMR 2017
small payment institution	see regulation 2(1) of the PSR 2017
special administration (except in the expression investment bank special administration)	payment institution special administration or electronic money institution special administration (see regulation 4(3))
special administration objectives	Objective 1, Objective 2 and Objective 3
special administration order	has the meaning given in regulation 7
statement of proposals	statement of proposals drawn up by the administrator in accordance with—(a) paragraph 49 of Schedule B1 to the IA 1986 or paragraph 50 of Schedule B1 to the I(NI)O 1989 as applied and modified by these Regulations, or(b) where the FCA has given a direction, regulation 39
TA	has the meaning given in regulation 24(2)
transferee	has the meaning given in regulation 24(2)
user	payment service user (see regulation 2(1) of the PSR 2017)
voluntarily safeguard (in the case of small electronic money institutions)	voluntarily safeguard pursuant to regulation 20(6) of the EMR 2011 and regulation 23(16) of the PSR 2017
voluntarily safeguard (in the case of small payment institutions)	voluntarily safeguard pursuant to regulation 23(16) of the PSR 2017

Special administration order

7

(1) A special administration order is an order appointing a person as the administrator of an institution.

(2) A person is eligible for appointment as administrator under a special administration order if they are qualified to act as an insolvency practitioner in relation to the institution.

(3) An appointment may be made only if the person has consented to act.

(4) For the purposes of these Regulations—

(a) an institution is “in special administration” while the appointment of the administrator has effect,

(b) an institution “enters special administration” when the appointment of the administrator takes effect,

(c) an institution ceases to be in special administration when the appointment of the administrator ceases to have effect in accordance with these Regulations, and

(d) an institution does not cease to be in special administration merely because an administrator vacates office (by reason of resignation, death or otherwise) or is removed from office.

Application for order

8

(1) An application to the court for a special administration order may be made to the court by—

(a) the institution,

(b) the directors of the institution,

(d) in England and Wales, the designated officer for a magistrates’ court in the exercise of the power conferred by section 87A of the Magistrates’ Courts Act 1980[^f00016],

(da) in Northern Ireland, the chief clerk in the exercise of the power conferred by section 35(4A) of the Criminal Justice Act (Northern Ireland) 1945,

(db) in Northern Ireland, a clerk of petty sessions in exercise of the power conferred by Article 92A of the Magistrates’ Courts (Northern Ireland) Order 1981,

(e) a contributory of the institution, subject to paragraph (7),

(f) a combination of persons listed in sub-paragraphs (a) to (e),

(g) the Secretary of State, or

(h) the FCA.

(2) Where an application is made by a person other than the FCA, the FCA is entitled to be heard at—

(a) the hearing of the application for a special administration order, and

(b) any other hearing of the court in relation to the institution under these Regulations.

(3) An application must nominate a person to be appointed as the administrator.

(4) As soon as is reasonably practicable after making the application, the applicant must notify—

(a) a person who gave notice to the FCA in accordance with Condition 1 of regulation 11, and

(b) such other persons as may be described in special administration insolvency rules.

(5) An application may not be withdrawn without the permission of the court.

(6) In paragraph (1)(c), “creditor” includes a contingent creditor and a prospective creditor.

(7) A contributory (“C”) is not entitled to make an application for a special administration order unless either—

(a) the number of members is reduced below 2, or

(b) the shares in respect of which C is a contributory, or some of them, either were originally allotted to C, or have been held by C and registered in C’s name, for at least 6 months during the 18 months before the commencement of the special administration, or have devolved on C through the death of a former holder.

Grounds for applying

9

(1) In this regulation—

(a) Ground A is that the institution is, or is likely to become, unable to pay its debts,

(b) Ground B is that it is fair to put the institution into special administration, and

(2) For the meaning of “unable to pay its debts”, in paragraph (1)(a), see section 93(4) of the BA 2009 (as applied and modified by the EMR 2011 and the PSR 2017[^f00017]).

(3) The FCA or a person listed in regulation 8(1)(a) to (f) may apply for a special administration order only if they consider that Ground A or Ground B is met.

(4) The Secretary of State may apply for a special administration order only if it appears to the Secretary of State that Grounds B and C are met.

(5) The sources of information on the basis of which the Secretary of State may reach a decision on Ground C include those listed in section 124A(1) of the IA 1986 or, as the case may be, Article 104A of the I(NI)O 1989 (petition for winding up on grounds of public interest).

Powers of the court

10

(1) On an application for a special administration order the court may—

(a) grant the application in accordance with paragraph (2);

(b) dismiss the application;

(d) make an interim order;

(e) on the application of the FCA, treat the application as an application by the FCA for Schedule B1 administration in accordance with section 359(1) of the FSMA 2000[^f00018];

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

(2) The court may make a special administration order if it is satisfied ...—

(a) on the application of persons listed in regulation 8(1)(a) to (e) or the FCA, that Ground A or Ground B in regulation 9 is satisfied, or

(b) on the application of the Secretary of State, ... that Grounds B and C in regulation 9 are satisfied.

(3) Where the application for a special administration order is made by members of the institution as contributories on the basis that Ground B in regulation 9 is satisfied, the court must make a special administration order if it is of the opinion that—

(a) the applicants are entitled to relief either by a special administration order being made in respect of the institution or by some other means, and

(b) in the absence of any other remedy it would be fair that the special administration order be made in respect of the institution.

(4) But paragraph (3) does not apply if the court is also of the opinion that an alternative remedy is available to the applicants and that they are acting unreasonably in applying for a special administration order instead of pursuing that other remedy.

(5) A special administration order takes effect in accordance with its terms.

Notice to FCA: other proceedings

11

(1) An application for a Schedule B1 administration order in respect of an institution may not be determined unless all of Conditions 1 to 4 are satisfied.

(2) An application for an order under regulation 5 of the IBSAR 2011 in respect of an institution may not be determined unless all of Conditions 1 to 4 are satisfied.

(3) A petition for a winding-up order in respect of an institution may not be determined unless all of Conditions 1 to 4 are satisfied.

(4) A resolution for voluntary winding up of an institution may not be made unless all of Conditions 1 to 4 are satisfied.

(5) A Schedule B1 administrator of an institution may not be appointed unless all of Conditions 1 to 4 are satisfied.

(6) Condition 1 is that the FCA has been notified—

(a) by the applicant for a Schedule B1 administration order, that the application has been made,

(b) by the applicant for an order under regulation 5 of the IBSAR 2011, that the application has been made,

(d) by the institution, that a resolution for voluntary winding up may be made, or

(e) by the person proposing to appoint a Schedule B1 administrator, of the proposed appointment.

(7) Condition 2 is that a copy of the notice complying with Condition 1 has been filed (in Scotland, lodged) with the court and made available for public inspection by the court.

(8) Condition 3 is that—

(a) the period of 2 weeks, beginning with the day on which the notice is received by the FCA, has ended, or

(b) the FCA has informed the person who gave the notice that it consents to the proceedings to which the notice relates going ahead.

(9) Condition 4 is that no application for a special administration order is pending.

(10) Where the FCA receives notice under Condition 1, it must inform the person who gave the notice, within the period in Condition 3—

(a) whether or not it consents to the proceedings to which the notice relates going ahead,

(b) whether or not it intends to apply for those (or alternative) proceedings itself, or

(11) Arranging for the giving of the notice in order to satisfy Condition 1 may be treated as a step with a view to minimising the potential loss to the institution’s creditors for the purpose of section 214 of the IA 1986 or, as the case may be, Article 178 of the I(NI)O 1989 as applied and modified by these Regulations.

Special administration objectives

12

(1) The administrator has the following special administration objectives.

(2) Objective 1 is to ensure the return of relevant funds—

(a) as soon as is reasonably practicable in accordance with regulations 13 to 15 and 17 to 34, or

(b) promptly, in the case of post-administration receipts, in accordance with regulation 16,

subject to paragraph (10).

(3) Objective 2 is to ensure timely engagement with payment system operators, the Payment Systems Regulator and the Authorities in accordance with regulation 35.

(4) Objective 3 is to either—

(a) rescue the institution as a going concern, or

(b) wind it up in the best interests of the creditors.

(5) The order in which Objectives 1 to 3 are listed in this regulation is not significant.

(6) The administrator is entitled to deal with and return relevant funds in whatever order the administrator thinks best achieves Objective 1.

(7) The administrator must commence work on each objective immediately after appointment, prioritising the order of work on each objective as the administrator thinks fit, in order to achieve the best result overall for users or holders and creditors.

(8) The administrator must set out, in the statement of proposals, the order in which the administrator intends to further pursue the objectives once the statement has been approved.

(9) The administrator must work to achieve each objective, in accordance with the priority afforded to the objective, as quickly and efficiently as is reasonably practicable.

(10) Paragraphs (2) and (6) and regulations 13 to 23 do not apply to relevant funds received by—

(a) a small payment institution, or

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

where the institution had not chosen to voluntarily safeguard the funds when it entered special administration.

Objective 1: initial reconciliation

13

(1) The administrator must carry out a reconciliation immediately after appointment, subject as follows.

(2) The purpose of the reconciliation is—

(a) to identify any shortfall or excess in an asset pool, according to the institution’s own records, which it would have settled, had it not entered special administration, and

(b) to settle this with the institution’s own bank accounts.

(3) The administrator must carry out the reconciliation using the method adopted by the institution when it last carried out a reconciliation to identify any shortfall or excess in the asset pool and to settle that shortfall or excess (“last reconciliation”).

(4) Paragraph (1) does not apply where the administrator cannot identify any occasion on which the institution carried out a reconciliation of that kind.

(5) The reconciliation must be based on the records and accounts of the institution as they stood immediately after the last reconciliation.

(6) The administrator must take no further account—

(a) of money received by the institution, or

(b) of payments, transfers or transactions made by the institution,

of which account was taken in the last reconciliation.

(7) The administrator must take account of—

(a) money received by the institution, and

(b) payments, transfers and transactions made by the institution,

after the institution’s last reconciliation and before the appointment of the administrator.

(8) The administrator must, where amount A exceeds amount B, transfer an amount equal to, or as close as possible to, the difference from the institution’s own bank accounts to an appropriate relevant funds account.

(9) The administrator must, where amount B exceeds amount A, transfer an amount equal to the difference from the asset pool to the institution’s own bank accounts.

(10) “Amount A” means the total amount of relevant funds which the institution is required to safeguard, according to its own records and accounts.

(11) “Amount B” means the total amount of relevant funds which are being safeguarded.

(12) In paragraph (11), the reference to “amount” is—

(a) in the case of liquid assets, a reference to the amount of the cash proceeds of realising those assets without delay, and

(b) in the case of insurance policies or guarantees, to be determined in accordance with the method adopted at the last reconciliation.

(13) This regulation does not apply to an institution which is also an investment bank within the meaning of the BA 2009 (see section 232 of that Act[^f00019]).

(14) Nothing in this regulation authorises an administrator to transfer funds from one of the institution’s own bank accounts to a relevant funds account where to do so would interrupt a payment to a payment system operator to settle a payment transaction.

(15) This regulation does not apply to post-administration receipts (see regulation 16).

Objective 1: constitution of asset pool

14

(1) The administrator must take the following steps relating to the constitution of an asset pool—

(a) as soon as reasonably practicable after the reconciliation under regulation 13, or

(b) where regulation 13(4) or 13(13) applies, as soon as reasonably practicable after appointment.

(2) The administrator must—

(a) take reasonable steps to identify any relevant funds held as funds in the institution’s own accounts, and

(b) transfer those funds into an appropriate relevant funds account.

(3) The administrator must, where relevant funds are held in the asset pool in the form of liquid assets—

(a) liquidate those assets, and

(b) deposit the cash proceeds in an appropriate relevant funds account.

(4) But paragraph (3) does not apply where the administrator thinks that Objective 1 would be better achieved by continuing, during any period, to hold the relevant funds in the form of liquid assets.

(5) The administrator must, where relevant funds are covered by insurance policies or guarantees, take any steps which are necessary to ensure that, subsequently, at the appropriate time—

(a) claims may be made for the cash proceeds of those policies or guarantees without delay, and

(b) those cash proceeds are deposited in an appropriate relevant funds account without delay.

(6) Nothing in this regulation prevents an administrator from subsequently repeating any of the steps in this regulation, in pursuit of Objective 1.

(7) This regulation does not apply to post-administration receipts (see regulation 16).

Objective 1: monitoring and maintaining asset pool

15

(1) The administrator must monitor any funds, liquid assets or insurance policies or guarantees held within an asset pool.

(2) That duty includes a duty to compare, from time to time, the institution’s internal accounts and records with those of any third party with custody or control over funds or liquid assets held within an asset pool.

(3) The administrator may decide when and how often to perform that comparison depending on—

(a) the circumstances of the institution,

(b) the scale, frequency and nature of activity after its entry into special administration.

(4) The administrator must also maintain any funds, liquid assets or insurance policies or guarantees held within an asset pool.

(5) The administrator must, in carrying out their duty under paragraph (4), have regard to—

(a) whether the asset pool includes funds, liquid assets or insurance policies or guarantees,

(b) the currencies in which funds are held and those in which users or holders have a right to be paid,

(d) whether Objective 1 may be best achieved by liquidating, at any given time, liquid assets,

(e) the risk of any third party connected with the asset pool failing,

(f) the general risks of fraud, misuse, negligence or poor administration, and

(g) any other matter which the administrator thinks is relevant.

(6) This regulation does not apply to post-administration receipts (see regulation 16).

Objective 1: post-administration receipts

16

(1) This regulation applies to relevant funds received by an institution while it is in special administration.

(2) The administrator may only hold the funds in a relevant funds account which does not (or will not) contain relevant funds held when the institution entered special administration.

(3) The account mentioned in paragraph (2) includes an account which existed when the institution entered special administration.

(4) The administrator must promptly return the relevant funds to the user or holder, less any costs incurred by the administrator in returning them.

(5) Regulations 17 to 34 do not apply to relevant funds to which this regulation applies.

Objective 1: determining claim entitlements

17

(1) The administrator must, in respect of an asset pool, as soon as reasonably practicable after appointment, determine—

(a) the identity of every user or holder on behalf of whom the institution was required to safeguard relevant funds, and

(b) for each such person, the amount of relevant funds which it was required to safeguard.

(2) The determination under paragraph (1) must relate to the precise time at which the institution entered special administration.

(3) The administrator may, where making that determination, have regard to the particulars of—

(a) any transactions involving the institution,

(b) the institution’s internal records or systems,

(d) any internal or external records involving the institution,

(e) any agency, distribution or outsourcing arrangements the institution has entered into, or

(f) any information obtained through the bar date or hard bar date process set out in regulations 20 and 21 respectively.

(4) Nothing in this regulation prevents an administrator from subsequently revising any determination under paragraph (1), in pursuit of Objective 1.

Objective 1: principles of distribution

18

(1) A user’s or holder’s entitlement to a distribution of relevant funds from an asset pool must be determined by reference to the amount of relevant funds which that person is entitled to claim against the institution (see regulation 17).

(2) Regulation 19 makes provision about entitlements to a distribution of relevant funds where there is a shortfall in an asset pool.

(3) Relevant funds claims are to be paid from an asset pool in priority to all other claims.

(4) Paragraph (3) is subject to paragraphs (5) and (6) and regulation 21(4) (which relates to late claims).

(5) Relevant funds claims do not take priority over the costs of distribution.

(6) Relevant funds claims do not take priority over any third party’s fees and expenses for operating a relevant funds account in so far as the party has a right of set off or a security right against the funds for the fees or expenses.

Objective 1: shortfalls in asset pool

19

(1) This regulation applies if the administrator becomes aware —

(a) that the amount of relevant funds available for distribution in an asset pool is less than the total amount liable to be paid under relevant funds claims for that asset pool, and

(b) that shortfall cannot be made good—

(i) by taking any of the steps mentioned in regulation 14 (which relates to the constitution of the asset pool), or

(ii) by the resolution of ongoing disputes.

(2) The administrator must, in making the distribution, ensure that the shortfall referred to in paragraph (1) be borne pro rata by all users or holders for whom the institution holds relevant funds within the asset pool.

(3) Paragraph (2) is subject to regulations 20 and 21.

(4) Nothing in this regulation affects any right of a user or holder to claim the shortfall borne under paragraph (2) in other ways (for example as an unsecured creditor).

(5) An administrator may not, where an electronic money institution has two asset pools (see regulation 20(6) of the EMR 2011), offset any shortfall in one asset pool against any relevant funds or assets held in the other.

Objective 1: bar date

20

(1) The administrator may, if they think it necessary in order to expedite the return of relevant funds from an asset pool, set a bar date for the submission of relevant funds claims.

(2) The bar date must be set out in a notice.

(3) A reasonable time must be given after the notice has been published for persons to be able to calculate and submit relevant funds claims before the bar date.

(4) The administrator must, as soon as reasonably practicable after the bar date, make a distribution of relevant funds from the asset pool to persons who are entitled to them under their claims.

(5) The administrator must, so far as is reasonably practicable, include within that distribution any person who submits a late, pre-distribution claim.

(6) The administrator must, when determining the amount to be distributed, make allowance for any entitlement to the return of relevant funds (by way of a subsequent distribution) which will not be distributed under paragraph (4).

(7) No payment or part of any payment made to any person in the distribution under paragraph (4) may be recovered for the purpose of meeting a relevant funds claim which is not taken into account in that distribution.

(8) The restriction in paragraph (7) does not apply where—

(a) relevant funds were returned to a person by the administrator in bad faith in which that person was complicit, or

(b) a person to whom relevant funds were returned is later found to have made a false relevant funds claim.

(9) The administrator must include a person who makes a late, pre-distribution claim or a late, post-distribution claim in a subsequent distribution from the asset pool if that person would have been included in the distribution under paragraph (4) had their relevant funds claim been submitted earlier.

(10) In this regulation—

“late, pre-distribution claim” means a relevant funds claim made after a bar date but before the corresponding distribution under paragraph (4);

“late, post-distribution claim” means a relevant funds claim made after a bar date and after the corresponding distribution under paragraph (4).

Objective 1: hard bar date

21

(1) The administrator may, if they think it necessary in order to further expedite the return of relevant funds from an asset pool after setting a bar date under regulation 20, set a hard bar date for the submission of final relevant funds claims.

(2) The hard bar date must be set out in a notice.

(3) The administrator may not set a hard bar date without the approval of the court given on application by the administrator.

(4) The priority afforded to relevant funds claims under the following provisions does not apply to late claims—

(a) regulation 18(3), and

(b) any provision of the safeguarding provisions;

and no late claim may be founded on a beneficial interest in property.

(5) Immediately after the hard bar date, any relevant funds held in the asset pool which have not been claimed may also be distributed, in accordance with Objective 1, to users or holders who are entitled to them under their claims made before the hard bar date.

(6) The administrator must, as soon as reasonably practicable after the hard bar date, make a final distribution of relevant funds from the asset pool to users or holders who are entitled to them under their claims made before the hard bar date.

(7) Immediately after that final distribution, the ownership of any relevant funds which remain in the asset pool is vested in the institution and the administrator must, as soon as possible, transfer those funds to the institution’s own bank accounts.

(8) A notice under this regulation must—

(a) specify the hard bar date, and

(b) refer to paragraphs (4) to (6) and explain that (in accordance with paragraph (7)) following the distribution of relevant funds from the asset pool any remaining funds will be transferred to the institution’s own bank accounts.

(9) In this regulation—

“late claim” means a relevant funds claim, in response to the setting of a hard bar date, received after the hard bar date;

“safeguarding provisions” means—regulation 23 of the PSR 2017, in the case of the following relevant funds—those received by a payment institution, orthose received by an electronic money institution for the execution of payment transactions which are not related to the issuance of electronic money, orregulations 20 to 24 of the EMR 2011, in the case of relevant funds received by an electronic money institution apart from those in paragraph (a)(ii).

Objective 1: hard bar date: powers of the court

22

(1) On an application under regulation 21(3) for the approval of the court to set a hard bar date the court may—

(a) make an order approving the setting of a hard bar date,

(b) adjourn the hearing of the application conditionally or unconditionally, or

(2) The court may make an order under paragraph (1)(a) only if—

(a) it is satisfied that the administrator has taken all reasonable measures to identify and contact persons who may be entitled to the return of relevant funds, and

(b) it considers that, if a hard bar date is set, there is no reasonable prospect that the administrator will receive claims for the return of relevant funds after that date.

Objective 1: interest on relevant funds claims

23

(1) This regulation applies where—

(a) a debt arises from a liability of the institution to return relevant funds,

(b) the user or holder has not submitted a relevant funds claim or has submitted a relevant funds claim after a hard bar date, and

(2) The user or holder is not entitled to interest on the debt for the period commencing on the date on which the institution entered special administration, except interest on such part of the debt which remains after deduction of the total amount which the user or holder would have received on a relevant funds claim.

Objectives 1 and 3: transfer arrangements: overview

24

(1) This regulation and regulations 25 to 34 make provision for where there is a transfer arrangement.

(2) A transfer arrangement (“TA”) is a binding arrangement in pursuit of Objective 1 (whether or not also in pursuit of Objective 3) with another institution which transfers to that institution (“the transferee”)—

(a) all or some of the property, rights and liabilities of the institution in special administration, and

(b) all or some of the relevant funds held by the institution in special administration such that the transferee becomes the payment institution or electronic money institution in respect of those funds.

(3) A partial property transfer arrangement (“PPTA”) is any TA which does not transfer all of the property, rights and liabilities of, and relevant funds held by, the institution.

(4) Regulations 25 to 28 make provision about TAs.

(5) Regulations 29 to 34 make further provision about PPTAs.

(6) In this regulation and regulations 25 to 34, a reference to the rights and liabilities of an institution or to rights and liabilities under a PS or EMI contract in relation to property held by the institution on trust (however arising) includes—

(a) the legal and beneficial interest of the institution in the property, and

(b) the powers and obligations of the institution acting as a trustee of the property.

Objectives 1 and 3: TAs: Conditions 1 to 3

25

(1) The administrator may not enter into the TA unless all of Conditions 1 to 3 are met.

(2) Condition 1 is that the arrangement includes such provision as the administrator thinks necessary to ensure that users or holders whose relevant funds are to be transferred will be able to exercise their rights in relation to those funds as soon as reasonably practicable after the transfer.

(3) Condition 2 is that the institution has obtained a contractual undertaking from the transferee that the transferee will—

(a) safeguard the relevant funds to be transferred, and

(b) after the transfer, safeguard any further relevant funds of users or holds whose relevant funds, rights or liabilities under PS or EMI contracts were transferred.

(4) Paragraph (3) applies even if the transferee is a small payment institution or a small electronic money institution.

(5) Condition 3 is that the institution has obtained a contractual undertaking from the transferee that the transferee will, within a period of 14 days beginning with the day on which the arrangement is entered into, notify the persons in paragraph (6) of the matters in paragraph (7).

(6) The persons who must be notified are—

(a) the users or holders whose relevant funds are to be transferred,

(b) any agents of the institution, and

(7) The notice must—

(a) explain the undertaking given in accordance with paragraph (3), and

(b) in the case of a PPTA, explain the right to a reverse transfer in accordance with regulation 30.

(8) Regulation 29(1) to (3) contains a further condition (Condition 4) for PPTAs.

Objectives 1 and 3: TAs: effect

26

(1) The transfer of any of the following under the TA has effect, despite the existence of any matter mentioned in paragraph (2)—

(a) relevant funds;

(b) any rights or liabilities under the corresponding PS or EMI contracts;

(c) any rights and liabilities under other PS or EMI contracts for which no relevant funds are held at the time of transfer.

(2) The matters are—

(a) a restriction affecting what can or cannot be assigned or transferred by the institution (whether generally or by a particular person or particular description of persons),

(b) a requirement (however referred to) to give notice to, or obtain the consent of, any person who is party to the PS or EMI contract,

(c) in the case of a payment institution, a requirement (however referred to) to give notice to, or obtain the consent of any person who is party to a contract under which a person provides agency services to the institution,

(d) in the case of an electronic money institution, a requirement (however referred to) to give notice to, or obtain the consent of any person who is party to a contract under which a person provides agency or distribution services to the institution, or

(e) any entitlement of any person to the return of the relevant funds otherwise than by transfer under the arrangement.

(3) Paragraphs (1) and (2) are subject to subject to regulation 29(4) and (5).

(4) In paragraph (2), it does not matter whether a restriction, requirement or entitlement has effect by virtue of a provision contained in a contract or an enactment, or in any other way, subject to paragraph (5).

(5) In paragraph (2)(a) the reference to a restriction does not include one imposed by—

(a) regulations 20 to 22 of the EMR 2011, or

(b) regulation 23 of the PSR 2017.

(6) If the TA purports to be one which is not a PPTA despite a possibility that anything purportedly transferred is foreign property (and might not have been effectively transferred), the administrator may assume it is a TA which is not a PPTA and that regulations 29 to 34 do not apply.

Objectives 1 and 3: TAs: novation of contracts

27

(1) The TA has effect so that contracts falling within Types 1 to 4 are to be read, immediately after the transfer, as if they had been made by the transferee rather than the institution.

Type	Description
Type 1	PS or EMI contracts which relate to the relevant funds which are transferred.
Type 2	Other PS or EMI contracts which confer or impose rights or liabilities which are transferred but for which no relevant funds are held at the time of transfer.
Type 3	Contracts—(a) where the institution is a payment institution which is a party to the contract,(b) under which another person provides agency services to that institution, and(c) under which that other person provides those services in respect of those users whose relevant funds or rights or liabilities under contracts for payment services are being transferred.
Type 4	Contracts—(a) where the institution is an electronic money institution which is party to the contract,(b) under which another person provides agency or distribution services to that institution, and(c) under which that other person provides those services in respect of those users or holders whose relevant funds or rights or liabilities under PS or EMI contracts are being transferred.

(2) The TA also has effect so that the transferee may, immediately after the transfer, vary the terms of a PS or EMI contract without obtaining the agreement of any person who is party to the contract to the following extent—

(a) to give effect to the TA, and

(b) to ensure that the powers, rights and obligations of the transferee acting as a trustee are exercisable.

Objectives 1 and 3: TAs: disclosure of information

28

(1) The administrator may, where necessary for the purposes of a TA, disclose to the transferee all information which is, in the administrator’s view, relevant to the transfer of—

(a) relevant funds,

(b) any rights or liabilities under the corresponding PS or EMI contracts,

(c) any rights and liabilities under other PS or EMI contracts for which no relevant funds are held at the time of transfer.

(2) Paragraph (1) overrides any contractual or other requirement to keep information in confidence.

(3) Nothing in this regulation requires or authorises a disclosure of information that would contravene the data protection legislation (but in determining whether a disclosure would do so, take into account the duties and powers imposed or conferred by these Regulations).

(4) “Data protection legislation” has the same meaning as in the Data Protection Act 2018[^f00020] (see section 3(9) of that Act).

Objectives 1 and 3: PPTAs: Condition 4 and restrictions

29

(1) The administrator may enter a PPTA only if Condition 4 is met (in addition to all of Conditions 1 to 3 in regulation 25).

(2) Condition 4 is that the administrator is satisfied that no user or holder (or person acting on their behalf) will, pursuant to Objective 1 or 3, subsequently have returned or transferred to them an amount of retained relevant funds less than if the administrator had not entered the PPTA.

(3) “Retained relevant funds” means any relevant funds held by the institution which are not transferred under the PPTA.

(4) Regulation 26(1) does not apply to the requirement described in paragraph (2)(b) of that regulation in the case of a PPTA unless—

(a) the PPTA transfers—

(i) all of the relevant funds held by the institution, and

(ii) all of the rights and liabilities under the corresponding PS or EMI contracts, and

(b) the administrator is satisfied that either—

(i) the total amount of relevant funds to be transferred is at least equal to the total amount that the institution is, at the time of transfer, required to safeguard, or

(ii) the transferee has undertaken to make good any shortfall in that amount.

(5) Regulation 26(1) does not apply to the requirements described in paragraph (2)(c) and (d) of that regulation in the case of a PPTA unless the PPTA transfers—

(a) all of the relevant funds held by the institution,

(b) all of the rights or liabilities under the corresponding PS or EMI contracts, and

(c) all of the rights and liabilities under other PS or EMI contracts for which no relevant funds are held at the time of transfer.

Objectives 1 and 3: PPTAs: reverse transfers

30

(1) A PPTA must include such provision as the administrator thinks appropriate—

(a) to ensure that a user or holder whose relevant funds are to be transferred by the arrangement will be entitled to demand a transfer back to the institution of any relevant funds which are transferred (“reverse transfer”),

(b) for the identification of relevant funds for the purposes of a reverse transfer, and

(c) to ensure that the transferee is obliged to give effect to the reverse transfer as soon as reasonably practicable after the demand is made.

(2) A reverse transfer has effect to transfer back to the institution all rights and liabilities under the corresponding PS or EMI contract so far as they have effect in relation to the reverse-transferred relevant funds.

(3) The administrator must take all steps necessary to give effect to the reverse transfer.

Objectives 1 and 3: PPTAs: set-off and netting

31

(1) A PPTA may not provide for the transfer of some (but not all) of the protected rights and liabilities (“PRL”) between the institution and—

(a) a user or holder (“U”), or

(b) another person (“P”).

(2) PRL are—

(a) rights and liabilities which U or P or the institution is entitled to set off or net under a particular set-off arrangement, netting arrangement or title transfer financial collateral arrangement which U or P has entered into with the institution, and

(b) not excluded rights (“ER”) or excluded liabilities (“EL”).

(3) ER, in relation to rights between U or P and the institution, means “excluded rights” within the meaning of the Banking Act 2009 (Restriction of Partial Property Transfers) Order 2009[^f00021] (see article 1(3)), subject as follows—

Provision	Modification
Paragraph (a)	To be read as if for “relate to a retail deposit” there were substituted “conferred by a PI or EMI contract”.
Paragraph (b)	To be read as if for “relate to a retail liability owed to a banking institution” there were substituted “are conferred, in relation to relevant funds, by an enactment”.
Paragraphs (c) and (d)	Omitted.
Paragraph (e)	To be read as if after “subordinated debt” there were inserted “issued by U or P or the institution”.
Paragraph (f)	To be read as if after “article 3(1)” there were inserted “issued by U or P or the institution”.

(4) “EL” is to be read in light of paragraph (3).

(5) It is immaterial whether or not—

(a) the arrangement which permits U or P or the institution to set off or net rights and liabilities also permits U or P or the institution to set off or net rights and liabilities with another person, or

(b) the right of U or P or the institution to set off or net is exercisable only on the occurrence of a particular event.

(6) A PPTA made in contravention of this regulation does not affect the exercise of the right to set off or net.

(7) If a PPTA purports to transfer all of the PRL between U or P and the institution despite a possibility that any of the PRL are foreign property (and might not have been effectively transferred), the administrator may assume it is a PPTA which is not subject to the restriction in paragraph (1).

(8) In this regulation—

“netting arrangement” has the same meaning as in the IBSAR 2011 (see regulation 10D(6));

“set-off arrangement” means an arrangement under which two or more debts, claims or obligations can be set off against each other;

“title transfer financial collateral arrangement” has the same meaning as in the Financial Collateral Arrangements (No 2) Regulations 2003[^f00022] (see regulation 3(1)).

Objectives 1 and 3: PPTAs: security interests

32

(1) This regulation applies where under any binding arrangement one party owes to the other a liability which is secured against any property or rights.

(2) But this regulation does not apply if the institution entered into the binding arrangement in contravention of—

(a) regulation 21(4) or 22(2) of the EMR 2011,

(b) any authorisation of the institution as a electronic money institution (or variation of that authorisation) under the EMR 2011 (see regulations 5 to 11 of those regulations),

(d) any authorisation of the institution as a payment institution (or variation of that authorisation) under the PSR 2017 (see regulations 5 to 12 of those regulations).

(e) a rule prohibiting such arrangements made by the FCA under the FSMA 2000, or

(f) otherwise than in accordance with the institution’s Part 4A permission within the meaning given by section 55A(5) of the FSMA 2000.

(3) In paragraph (1), it is immaterial whether or not—

(a) the liability is secured against all or substantially all of the property or rights of a person,

(b) the liability is secured against specified property or rights, or

(4) A PPTA may not transfer the property or rights against which the liability is secured unless that liability and the benefit of the security are also transferred.

(5) A PPTA may not transfer the benefit of the security unless the liability which is secured is also transferred.

(6) A PPTA may not transfer the liability unless the benefit of the security is also transferred.

(7) If a PPTA purports to be in compliance with paragraphs (4) to (6) despite a possibility that any property, right or liability is foreign property (and might not have been effectively transferred), the administrator may assume the property, rights and liabilities may be transferred in accordance with paragraphs (4) to (6).

Objectives 1 and 3: PPTAs capital markets arrangements

33

(1) A PPTA may not provide for the transfer of some (but not all) of the property, rights and liabilities which are or form part of a capital market arrangement to which the institution is a party (“CMPRL”).

(2) But paragraph (1) does not apply where the only property, rights and liabilities which are or are not transferred relate to deposits.

(3) If a PPTA purports to transfer all of the CMPRL despite a possibility that any of them are foreign property (and might not have been effectively transferred), the administrator may assume it is a PPTA which is not subject to the restriction in paragraph (1).

(4) In this regulation—

“capital market arrangement” has the meaning given by paragraph 1 of Schedule 2A to the IA 1986[^f00023] or, as the case may be, paragraph 1 of Schedule 1A to the I(NI)O 1989;

“deposit” has the same meaning as in article 5 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001[^f00024], disregarding the exclusions in other articles of that Order.

Objectives 1 and 3: PPTAs: financial markets

34

(1) A PPTA may not transfer property, rights and liabilities to the extent that doing so would have the effect of modifying, modifying the operation of, or rendering unenforceable—

(a) a market contract;

(b) the default rules of the Payment Systems Regulator; or

(2) A PPTA is void in so far as it is made in contravention of this regulation.

(3) In this regulation—

“default rules” has the same meaning as in the Companies Act 1989[^f00025] (see section 188 of that Act);

“market contract” has the same meaning as in the FSMA 2000 (see section 286(4) of that Act).

Objective 2: engagement: payment systems, market disruption and consumer protection

35

(1) The administrator must work with payment system operators—

(a) to facilitate the operation of their rules or arrangements,

(b) to resolve issues arising from the operation of those rules or arrangements, and

in respect of the institution.

(2) The administrator must also work with the Payment Systems Regulator and the Authorities to facilitate any actions they propose to take—

(a) to minimise the disruption of businesses and the markets, or

(b) to secure an appropriate degree of protection for users or holders,

as a consequence of a special administration order being made in respect of the institution.

(3) In this regulation “work with” means—

(a) to comply, as soon as reasonably practicable, with a written request from a payment systems operator, the Payment Systems Regulator or any of the Authorities for the provision of information or the production of documents (in whatever format) relating to the institution, and

(b) to allow any of those persons, on reasonable request, access to the facilities, staff and premises of the institution.

(4) But nothing in this regulation requires the administrator to take action to the extent that, in their opinion, it would lead to a material reduction in the value of the property of the institution.

(5) If the administrator receives a request under paragraph (1) from a payment system operator based overseas, no action needs to be taken to the extent that it conflicts with a request from any of the Authorities or the Payment Systems Regulator.

(6) Where a payment system operator has made a request under paragraph (1) and the administrator, in pursuit of Objective 2, reasonably requires information in connection with this, the operator must provide the administrator with the information.

(7) Nothing in this regulation requires the administrator, a payment systems operator, the Payment Systems Regulator or any of the Authorities to provide any information—

(a) which they would be entitled to refuse to provide on grounds of legal professional privilege in proceedings in the High Court or on grounds of confidentiality of communications in the Court of Session, or

(b) if such provision by the person holding it would be prohibited by or under any enactment.

Continuity of supply

36

(1) This regulation applies where, before the special administration order is made, the institution had entered into arrangements with a supplier for the provision of a supply to the institution.

(2) After the special administration order is made, the supplier—

(a) may not terminate a supply unless—

(i) any charges in respect of the supply, being charges for a supply given after the special administration order is made, remain unpaid for more than 28 days,

(ii) the administrator consents to the termination, or

(iii) the supplier has the permission of the court, which may be given if the supplier can show that the continued provision of the supply would cause the supplier to suffer hardship, and

(b) may not make it a condition of a supply, or do anything which has the effect of making it a condition of the giving of a supply, that any outstanding charges in respect of the supply, being charges for a supply given before the special administration order is made, are paid.

(3) Where, before the special administration order is made, a contractual right to terminate a supply has arisen but has not been exercised, then, for the purposes of this regulation, the making of the special administration order causes that right to lapse and the supply may only be terminated if a ground in paragraph (2)(a) applies.

(4) Any provision in a contract between the institution and the supplier that purports to terminate the agreement if any action is taken to put the institution into special administration is void.

(5) Any expenses incurred by the institution on the provision of a supply after the special administration order is made are to be treated as necessary disbursements in the course of the special administration.

(6) In this regulation—

“accredited network provider” means a person accredited with a relevant system who operates a secure data network through which the institution communicates with the relevant system;

“relevant system” has the meaning set out in regulation 2(1) of the Uncertificated Securities Regulations 2001[^f00026],

“sponsoring system participant” has the meaning set out in regulation 3 of the Uncertificated Securities Regulations 2001 (in the definition of “system participant”),

“supplier” means the person controlling the provision of a supply to the institution under a licence, sub-licence or other arrangement, and includes a company that is a group undertaking (within the meaning of section 1161(5) of the CA 2006) in respect of the institution, but does not include payment system operators;

“supply” means a supply of—services relating to the safeguarding of relevant funds;computer hardware or software or other hardware used by the institution,financial data,infrastructure permitting electronic communication services,data processing,secure data networks provided by an accredited network provider, oraccess to a relevant system by a sponsoring system participant,but does not include any services provided for in the contract between the institution and the supplier beyond the provision of the supply.

Application of the IA 1986

37

(1) The provisions of the IA 1986 mentioned in the first column of the Table apply to special administration as they apply to any other insolvency proceedings, with any modifications shown in the third column.

(1A) This regulation applies to the special administration of, or in relation to, an institution which is incorporated in, or formed under the law of England and Wales or Scotland.

(1B) For the purposes of paragraph (1A), an institution whose registered office, or in the case of an institution with no registered office, whose principal place of business, is situated in one part of the United Kingdom is to be treated as incorporated in, or formed under, the law of that part.

(2) This regulation is subject to—

(a) Schedule 1 (which makes provision about how special administration applies to limited liability partnerships), and

(b) Schedule 2 (which makes provision about how special administration applies to partnerships).

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