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The Payment and Electronic Money Institution Insolvency (Scotland) Rules 2022

Type Statutory-Instrument

Publication 2022-11-25

Last updated 2025-02-26

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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(c) any necessary disbursements incurred by the administrator in the course of the special administration specific to the achievement of Objective 1 (including any expenses incurred by customer members of the creditors’ committee or their representatives and allowed for by the administrator under rule 82 but not including any payment of corporation tax in circumstances referred to in rule 95(1)(j),

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

(e) the administrator’s remuneration the basis of which has been fixed under rule 129 and unpaid pre-administration costs approved under rule 97 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 there are insufficient relevant funds to satisfy the liabilities.

(3) The court may, in the event of the relevant funds being insufficient to satisfy the liabilities, make an order as to the payment out of the relevant funds of the expenses incurred in the special 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.

(5) The “costs of distribution” referred to in regulation 18(5) comprise the expenses set out in this rule.

Pre-administration costs

97

(1) Where the administrator has made a statement of pre-administration costs under rule 24(2)(p), 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) Paragraph (3) applies if—

(a) there is no creditors’ committee,

(b) the creditors’ committee does not make the necessary determination, or

(c) the creditors’ committee makes the necessary 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.

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

(a) a meeting of customers where the pre-administration costs were incurred wholly in pursuance of Objective 1,

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

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

(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 twenty-eight days of receipt of the request.

(5) 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 if—

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

(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.

(6) Paragraphs (2) to (4) of rule 130 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 the relevant funds

98

The administrator must set out, in the distribution plan under rule 109, how the administrator proposes that the expenses of the special administration, to be paid out of the relevant funds in accordance with this Chapter, are to be allocated where the institution has more than one asset pool.

PART 5 — Relevant funds claims

Content of relevant funds claim

99

(1) This rule applies to the submission of relevant funds claims.

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

(3) The relevant funds claim must—

(a) be made out by, or under the direction of, the claimant and must be authenticated by the claimant or a person authorised on its behalf,

(b) contain the claimant’s name and address,

(4) The relevant funds claim must include the following information to the extent that the information is known by the claimant—

(a) the amount of the relevant funds claim as at the time the institution entered special administration less any payments made after that date in relation to the relevant funds claim,

(b) details of how and when the debt was incurred by the institution including details of all PS or EMI contracts the claimant has entered into under which, at the time the relevant funds claim is submitted, liabilities are still owed from either the institution to the claimant or vice versa,

(5) Where a relevant funds claim does not include the information set out in paragraph (4)(a) or where such information differs from the information held by the institution, the administrator shall be entitled to rely on their and the institution’s own records to assess the amount of the relevant funds claim.

(6) The relevant funds claim must specify details of any documents by reference to which the relevant funds claim can be substantiated but, subject to paragraph (7), it is not essential that such documents be attached to the relevant funds claim or submitted with it.

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

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

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

Debt in a foreign currency

100

(1) A relevant funds claim payable in a foreign currency must state the amount of the relevant funds claim in that currency.

(2) The administrator must convert all such relevant funds claims into sterling at a single rate for each currency determined by the administrator by reference to the exchange rates prevailing in the London market at the close of business on the date the institution entered special administration.

Costs of making a claim

101

Unless the court orders otherwise, every claimant under rule 99 bears the cost of making a relevant funds claim, including costs incurred in providing documents or evidence or responding to requests for further information.

New administrator appointed

102

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

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

(3) From then on, all relevant funds claims submitted under rule 99 must be sent to and retained by the new administrator.

Admission and rejection of relevant funds claim

103

(1) The administrator may admit or reject a relevant funds claim in whole or in part.

(2) If the administrator rejects a relevant funds claim in whole or in part, the administrator must prepare a written statement of reasons for doing so, and deliver it as soon as is reasonably practicable to the claimant.

(3) The administrator must include the following information in the sederunt book—

(a) details of a decision of the administrator to accept a relevant funds claim (whether in whole or in part) under paragraph (1) including the amount of the claim accepted,

(b) details of the administrator’s reasons for rejecting a relevant funds claim (whether in whole or in part) under paragraph (2),

(d) any decision of the court on an application made under rule 106.

Appeal against decision on relevant funds claim

104

(1) If a claimant is dissatisfied with the administrator’s decision with respect to their relevant funds claim, that claimant may apply to the court for the decision to be reversed or varied.

(2) An application under paragraph (1) must be made within twenty-one days (or such other period as the administrator may agree or the court may order) of the claimant receiving the statement sent under rule 103.

(3) The applicant must give notice of an application under paragraph (1) to the FCA.

(4) Where application is made to the court under this rule, the court must fix a venue for the application to be heard.

(5) The applicant must send notice of the venue fixed by the court under paragraph (4) to—

(a) the administrator,

(b) the FCA.

(6) The administrator must, on receipt of the notice, lodge with the court the relevant funds claim, together (if relevant) with a copy of the statement sent under rule 103.

(7) After the application has been heard and determined, the documentation relating to the relevant funds claim must, unless the relevant funds claim has been wholly disallowed, be returned by the court to the administrator.

(8) The administrator is not personally liable for costs incurred by any person in respect of an application under this rule unless the court otherwise orders.

(9) Except with the permission of the court, the administrator must not make a distribution out of the asset pool so long as there is pending any application to the court to reverse or vary the administrator’s decision on a relevant funds claim, or to exclude a statement of claim or to reduce the amount claimed.

(10) If the court gives permission under paragraph (9), the administrator must make such provision in respect of the relevant funds claim in question as the court directs.

Withdrawal or variation of relevant funds claim

105

A relevant funds claim may at any time, with the agreement of the administrator, be withdrawn or varied as to the amount claimed.

Exclusion of relevant funds claim by the court

106

(1) The court may exclude a relevant funds claim or reduce the amount claimed—

(a) on the administrator’s application, where the administrator thinks that the relevant funds claim has been improperly admitted, or ought to be reduced,

(b) on the application of a creditor or customer, if the administrator declines to interfere in the matter.

(2) Where an application is made to the court under this rule, the court must fix a venue for the application to be heard.

(3) The applicant must send notice of the venue fixed by the court under paragraph (2)—

(a) in the case of an application by the administrator, to the claimant who made the relevant funds claim,

(b) in the case of an application by a customer or creditor, to the administrator and to the claimant who made the relevant funds claim (if the applicant is not the same customer).

(4) Except with the permission of the court, the administrator must not make a distribution out of the asset pool so long as there is pending any application to the court to reverse or vary the administrator’s decision on a relevant funds claim, or to reduce the amount claimed.

(5) If the court gives permission under paragraph (3), the administrator must make such provision in respect of the relevant funds claim in question as the court directs.

PART 6 — Objective 1

CHAPTER 1 — Setting a bar date and further notifications

Notice of the bar date

107

(1) This rule applies where the administrator sets a bar date for the submission of relevant funds claims as set out in regulation 20(1) and 21(1) (and for the purposes of this rule “bar date” includes a hard bar date).

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

(a) to each customer of whose relevant funds claim the administrator is aware and whom the administrator has a means of contacting,

(b) to each person whom the administrator believes has a right to assert a security interest or other entitlement over the asset pool and whom the administrator has a means of contacting.

(3) Notice of the bar date must also be sent to the FCA.

(4) Notice of the bar date—

(a) must be gazetted,

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

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

Notifying potential claimants after bar date has passed

108

(1) This rule applies where, after the bar date under regulation 20 has passed—

(a) there is evidence from—

(i) the records of the institution, or

(ii) information received by the administrator,

that there is a customer who is eligible to make a relevant funds claim but that the administrator has not received a relevant funds claim from that customer,

(b) the administrator has a means of contacting that customer.

(2) The administrator must send notice to that customer in writing stating that the administrator believes that customer is eligible to submit a relevant funds claim.

(3) The notice under paragraph (2) must state that—

(a) the administrator believes that that customer has a relevant funds claim,

(b) in making the distribution plan under rule 109, the administrator intends to calculate that customer’s relevant funds claim according to the information available to the administrator unless—

(i) that customer advises the administrator that it is not owed any relevant funds within fourteen business days of receipt of the notice or such longer period as may be agreed by the administrator,

(ii) that customer submits a relevant funds claim in accordance with rule 99 within fourteen business days of receipt of the notice or such longer period as may be agreed by the administrator, or

(iii) the court directs otherwise following an application made in accordance with rule 106.

CHAPTER 2 — Distribution plan

Distribution plan

109

(1) This rule applies where after setting a bar date under regulation 20, the administrator proposes to make a distribution from the asset pool.

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

(a) subject to paragraph (3), a schedule of dates on which a distribution is to be made from the asset pool (“a distribution”),

(b) the identity of the customers to whom a distribution is to be made,

(i) any liabilities owed by the customer to the institution under a PS or EMI contract,

(ii) any liabilities owed to the customer by the institution under a PS or EMI contract,

(iii) any shortfall claim of the customer,

(d) the amount to be retained by the administrator from the asset pool to pay the expenses of the special administration in accordance with rules 96 and 98 and how the retention of these amounts will affect the amount paid to settle relevant funds claims,

(e) the amount to be retained by the administrator from the asset pool by way of provision for any third party fees and expenses in respect of which a third party has a right of set-off or security right which takes priority over relevant funds claims in terms of regulation 18 and how the retention of these amounts will affect the amount paid to settle relevant funds claims.

(3) In setting out the schedule of dates for distributions, no date must be earlier than three months after the bar date.

(4) For the purpose of calculating the customer’s relevant funds claim so that the claim can be paid out (or partly paid out) before the contingency occurs or the dispute is resolved, the distribution plan must also set out—

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

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

(5) Where an institution has more than one asset pool, the administrator must draw up a distribution plan for each asset pool.

Approval by the creditors’ committee

110

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

(2) The administrator must 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

111

(1) This rule applies where a meeting of the creditors’ committee has taken place in accordance with rule 110 or where there is no creditors’ committee.

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

(3) The administrator must send a copy of the distribution plan together with details as to how to find out the venue of the hearing, to the following—

(a) all persons who have submitted a relevant funds claim,

(b) any customer notified under rule 108,

(4) The court, on receiving an application under paragraph (2) must fix the venue for the hearing and in fixing the venue must have regard to the desirability of the application being heard as soon as is 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 the 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 108 applies, the administrator has made the necessary notifications in accordance with that rule,

(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

112

(1) This rule applies where the administrator receives a relevant funds claim after the bar date set under regulation 20.

(2) Where the relevant funds claim is not submitted in accordance with rule 99, the administrator must notify the claimant accordingly and ask them to resubmit their relevant funds claim in accordance with the relevant rule.

(3) Where the relevant funds claim is submitted in accordance with rule 99 after the bar date set under regulation 20 but before a distribution under either regulation 20 or a distribution plan, the administrator must, so far as is reasonably practicable, include within the distribution any such relevant funds claim in accordance with regulation 20(5).

(4) Where the relevant funds claim is submitted in accordance with rule 99 after a distribution under either regulation 20 or a distribution plan, the administrator must, so far as is reasonably practicable include within any subsequent distribution any such relevant funds claim in accordance with regulation 20(9).

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

PART 7 — Claims by and distributions to creditors

Application and Interpretation of Part

113

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

(2) Where the distribution is to a particular class of creditors, references in this Part to creditors shall be a reference to that class of creditors only.

Payments of dividends

114

(1) On the final determination of the remuneration under Chapter 1 of Part 8 the administrator must, subject to rule 128, 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 rule 128(6) or rule 128(7)

must be held by the administrator in an appropriate bank or institution in the name of the Accountant of Court and the deposit receipts transmitted to the Accountant of Court.

(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 the creditor.

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

New administrator appointed

115

(1) If a new administrator is appointed in place of another, the former administrator must, as soon as is 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.

Submission of claims

116

(1) A creditor, in order to obtain an adjudication as to the creditor’s entitlement to a dividend (so far as funds are available) out of the assets of the institution in respect of any accounting period, must submit the creditor’s claim to the administrator not later than eight weeks before the end of the accounting period.

(2) A creditor must submit a claim by producing to the administrator the following—

(a) a statement of claim as described in paragraph (3),

(b) documentary evidence of debt,

but the administrator may dispense with the requirement of sub-paragraph (b) in respect of any debt or any class of debt.

(3) The statement of claim must—

(a) be made out by, or under the direction of, the creditor and dated and authenticated by the creditor or a person authorised on the creditor’s behalf,

(b) state the creditor’s name and address,

(d) state the name and address of any person authorised to act on behalf of the creditor,

(e) state the total amount claimed in respect of all debts as at the date on which the institution entered special administration,

(f) state whether or not the claim includes any outstanding uncapitalised interest,

(g) contain particulars of how and when the debt was incurred by the institution,

(h) contain particulars of any security held, the date on which it was given and the value which the creditor puts on it,

(i) include details of any retention of title in relation to goods to which the debt relates,

(j) state the nature and amount of any preference under Schedule 6 to the IA 1986¹⁷ claimed in respect of the debt,

(k) include any details of any document by reference to which the debt can be substantiated,

(l) state the name, postal address and authority of the person authenticating the statement of claim and documentary evidence of debt (if someone other than the creditor).

(4) 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, is to be deemed to have been resubmitted for the purpose of obtaining an adjudication as to the creditor’s entitlement to a dividend in respect of an accounting period or, as the case may be, any subsequent accounting period.

(5) A creditor who has submitted a claim may at any time submit a further claim specifying a different amount for the claim, provided that a secured creditor is not 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 under Rule 124.

(6) Where the administrator becomes aware that a customer has a shortfall claim, the administrator must—

(a) keep a record of the shortfall claim, including the details set out in paragraphs (3)(b) to (3)(l) to the extent relevant,

(b) treat each record under sub-paragraph (a) as if it were a statement of claim submitted by a customer in respect of its shortfall claim,

(c) notify the customer that a statement of claim for the shortfall claim has been submitted under this rule as soon as is reasonably practicable.

(7) Where paragraph (6) applies, a customer does not need to submit a separate statement of claim under paragraph (1) for the shortfall claim.

False claims or evidence

117

If a creditor produces under rule 116 a statement of claim or documentary evidence of debt or other evidence which is false—

(a) the creditor is guilty of an offence unless the creditor shows that the creditor neither knew nor had reason to believe that the statement of claim or documentary evidence of debt or other evidence was false,

(b) the institution is guilty of an offence if the institution—

(i) knew or became aware that the statement of claim or documentary evidence of debt or other evidence was false,

(ii) failed as soon as is reasonably practicable after acquiring such knowledge to report it to the administrator.

Evidence of Claims

118

(1) The administrator, for the purpose of being satisfied as to the validity or amount of a claim submitted by a creditor under rule 116, may require—

(a) the creditor to produce further evidence, or

(b) any other person who the administrator believes can produce relevant evidence, to produce such evidence.

(2) If the creditor or other person refuses or delays to produce such evidence as required under paragraph (1), the administrator may apply to the court for an order requiring the creditor or other person to attend for private examination before the court.

(3) On an application to it under paragraph (2) above the court may make an order requiring the creditor or other person to attend for private examination before it on a date (being not earlier than eight days nor later than sixteen days after the date of the order) and at a time specified in the order.

(4) If a creditor or other person is for any good reason prevented from attending for examination, the court may grant a commission to take the examination (the commissioner being in this rule referred to as an “examining commissioner”).

(5) At any private examination under paragraph (2) or where the court grants a commission to take the examination under paragraph (4), a solicitor or counsel may act on behalf of the administrator, or the administrator may appear on the administrator’s own behalf.

(6) The examination, whether before the court or an examining commissioner, must be taken on oath.

(7) A person who fails without reasonable excuse to comply with an order made under paragraph (2) is guilty of an offence.

(8) References in this rule to a creditor in a case where the creditor is one of the following entities—

(a) a trust,

(b) a partnership (including a dissolved partnership),

(d) a limited partnership (including a dissolved partnership) within the meaning of the Limited Partnerships Act 1907¹⁸,

are to be construed, unless the context otherwise requires, as references to a person representing the entity.

Adjudication of Claims

119

(1) Where funds are available for payment of a dividend out of the institution’s assets in respect of an accounting period, the administrator for the purpose of determining who is entitled to such a dividend must—

(a) not later than four weeks before the end of the period, accept or reject every claim submitted or deemed to have been re-submitted under rule 116,

(b) at the same time make a decision on any matter requiring to be specified under paragraph (4)(a) or (4)(b).

(2) On accepting or rejecting, under paragraph (1), every claim submitted or deemed to have been re-submitted, the administrator must, as soon as is reasonably practicable, send a list of every claim so accepted or rejected (including the amount of each claim and whether it has been accepted or rejected) to the following—

(a) every creditor known to the administrator,

(b) the FCA.

(3) Where the administrator rejects a claim, the administrator must without delay notify the creditor giving reasons for the rejection.

(4) The administrator must include the following information in the sederunt book—

(a) details of the decision whether to accept a claim including—

(i) the amount of the claim accepted,

(ii) the category of debt, and the value of any security, as decided by the administrator,

(b) if the administrator is rejecting the claim, the administrator’s reasons for doing so,

(5) Any member of the institution or any creditor may, if dissatisfied with the acceptance or rejection of any claim (or, in relation to such acceptance or rejection with a decision in respect of any matter requiring to be recorded under paragraph (4)(a) or (4)(b) appeal to the court not later than 14 days before the end of the accounting period, and the applicant must give notice of an application under this paragraph to the FCA.

(6) Any reference in this rule to the acceptance or rejection of a claim is to be construed as a reference to the acceptance or rejection of the claim in whole or in part.

Entitlement to draw a dividend

120

(1) A creditor who has had a claim accepted in whole or in part by the administrator under rule 119(1) or on appeal under rule 119(5) is entitled to payment out of the institution’s assets of a dividend in respect of the accounting period for the purposes of which the claim is accepted.

(2) Such entitlement to payment arises only in so far as the institution has funds available to make that payment, having regard to rule 127.

Liabilities and rights of obligants

121

(1) Where a creditor has an obligant bound to the creditor along with the institution for the whole or part of the debt, the obligant is not freed or discharged from liability for the debt by reason of the dissolution of the institution or the creditor’s voting or drawing a dividend or assenting to or not opposing—

(a) the dissolution of the institution, or

(b) any composition with creditors.

(2) Paragraph (3) applies where—

(a) a creditor has had a claim accepted in whole or in part,

(b) the obligant holds a security over any part of the institution’s assets.

(3) The obligant must account to the administrator so as to put the institution’s assets in the same position as if the obligant had paid the debt to the creditor and subsequently had had the obligant’s claim accepted in whole or in part in the special administration after deduction of the value of the security.

(4) The obligant may require and obtain at the obligant’s own expense from the creditor an assignation of the debt on payment of the amount of the debt, and on that being done may in respect of the debt submit a claim, and vote and draw a dividend, if otherwise legally entitled to do so.

(5) Paragraph (4) is without prejudice to any right, under any rule of law, of an obligant who has paid the debt.

(6) In this rule an “obligant” includes a cautioner.

Amount which may be claimed generally

122

(1) Subject to the provisions of this rule and rules 123 and 124 a creditor is entitled to claim the accumulated sum of principal and any interest which is due on the debt as at the date on which the institution entered special administration.

(2) If a debt does not depend on a contingency but would not be payable but for the special administration until after the date on which the institution entered special administration, the amount of the claim is to be calculated as if the debt were payable on the date on which the institution entered special administration but subject to the deduction of interest at the rate specified in paragraph (4) from that date until the date for payment of the debt.

(3) In calculating the amount of a creditor’s claim, the creditor must deduct any discount (other than any discount for immediate or early settlement) which is allowable by contract or course of dealing between the creditor and the institution or by the usage of trade.

(4) The rate of interest referred to in paragraph (2) is to be whichever is the greater of—

(a) the official rate at the date the institution entered special administration, or

(b) the rate applicable to that debt apart from the special administration.

Debts depending on contingency

123

(1) Subject to paragraph (2), the amount which a creditor is entitled to claim is not to include a debt in so far as its existence or amount depends on a contingency.

(2) On an application by the creditor—

(a) to the administrator, or

(b) if there is no administrator, to the court,

the administrator or court must put a value on the debt in so far as it is contingent.

(3) Where under paragraph (2) a value is put on the debt—

(a) the amount in respect of which the creditor is then entitled to claim is to be that value but no more,

(b) where the contingent debt is an annuity, a cautioner may not then be sued for more than that value.

(4) Any interested person may appeal to the court against a valuation under paragraph (2) by the administrator, and the court may affirm or vary that valuation.

Secured debts

124

(1) In calculating the amount of a secured creditor’s claim the secured creditor is to deduct the value of any security as estimated by the secured creditor.

(2) If the secured creditor surrenders, or undertakes in writing to surrender, a security for the benefit of the institution’s assets, the secured creditor is not required to deduct the value of that security.

(3) The administrator may, at any time after the expiry of twelve weeks from the date on which the institution entered special administration, require a secured creditor at the expense of the institution’s assets to discharge the security or convey or assign it to the administrator on payment to the creditor of the value specified by the creditor.

(4) Where under paragraph (3) the administrator makes payment to the creditor, the amount in respect of which the creditor is then entitled to claim is to be any balance of the creditor’s debt remaining after receipt of such payment.

(5) In calculating the amount of the claim of a creditor whose security has been realised, the creditor must deduct the amount (less the expenses of realisation) which the creditor has received, or is entitled to receive, from the realisation.

Claims in a foreign currency

125

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

(a) the creditor’s claim is constituted by decree or other order made by a court ordering the institution to pay to the creditor a sum expressed in a currency other than sterling, or

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

(2) Where under paragraph (1) a claim is stated in a currency other than sterling the administrator must convert it into sterling at a single rate for each currency determined by the administrator by reference to the exchange rates prevailing in the London market at the close of business on the date on which the institution entered special administration.

(3) On the next occasion when the administrator communicates with the creditors the administrator must advise them of any rate so determined.

(4) A creditor who considers that the rate determined by the administrator is unreasonable may apply to the court.

(5) If on hearing the application the court finds that the rate is unreasonable it may itself determine the rate.

(6) The administrator must place a copy of any court order granted under paragraph (5) in the sederunt book.

Administrator to allow inspection of statements of claim

126

The administrator must, 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 institution,

Order of priority in distribution

127

(1) The funds of the institution’s assets must 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) any preferential debts within the meaning of section 386(1) of the IA 1986¹⁹ (excluding any interest which has been accrued to the date on which the institution entered special administration),

(c) 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,

(d) interest at the official rate, between the date on which the institution entered special administration and the date of payment, on—

(i) the preferential debts,

(ii) the ordinary debts,

(e) any postponed debt.

(2) In paragraph (1)—

(a) “postponed debt” means—

(i) a creditor’s right to any alienation which has been reduced or restored to the institution’s assets under section 242 of the IA 1986²⁰ or to the proceeds of the sale of such an alienation,

(ii) a claim arising by virtue of section 382(1)(a) of the Financial Services and Markets Act 2000²¹ (restitution orders), unless it is also a claim arising by virtue of sub-paragraph (b) of that section (a person who has suffered loss etc.), or

(iii) in special administration, a claim which by virtue of the IA 1986 (as applied by regulation 37) or any other enactment is a claim the payment of which is to be postponed.

(3) The expenses of the special administration mentioned in paragraph (1)(a) are payable in the order of priority mentioned in rule 95.

(4) Subject to section 175 of the IA 1986²² (as applied by paragraph 65(2))—

(a) any debt falling within either of sub-paragraphs (1)(b) or (1)(c) is to have the same priority as any other debt falling within the same sub-paragraph,

(b) where the funds of the institution’s assets are inadequate to enable such debts to be paid in full, they are to abate in equal proportions.

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

(6) Nothing in this rule affects—

(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 the administrator has taken into their custody or control in accordance with paragraph 67.

Assets to be distributed in respect of the accounting periods

128

(1) The administrator must make up accounts of the administrator’s intromissions with the institution’s assets in respect of each accounting period.

(2) In this rule, “accounting period” is to be construed as follows—

(a) the first accounting period is the period of six months beginning with the date on which the institution entered special administration,

(b) any subsequent accounting period is the period of six months beginning with the end of the last accounting period except that—

(i) where the administrator and the creditors’ committee agree, or

(ii) where there is no creditors’ committee, the court determines,

the accounting period is to be such other period beginning with the end of the last accounting period as may be agreed or, as the case may be determined, it is to be that other period.

(3) An agreement or determination under paragraph (2)(b)—

(a) may be made in respect of one or more than one accounting period,

(b) may be made before the beginning of the accounting period in relation to which it has effect and, in any event, is not to have effect unless made before the day on which such accounting period would, but for the agreement or determination, have ended,

(4) The administrator may pay a dividend to secured or preferential creditors or, where the administrator has the permission of the court, to unsecured creditors only if the following conditions are met—

(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 the administrator or which the administrator intends to make.

(5) The administrator may pay—

(a) the expenses of the special administration mentioned in rule 95, other than the administrator’s remuneration, at any time,

(b) the preferential debts within the meaning of section 386 of the IA 1986 at any time but only with the consent of the creditors’ committee or, if there is no creditors’ committee, of the court.

(6) If the administrator—

(a) is not ready to pay a dividend in respect of an accounting period, or

(b) considers it would be inappropriate to pay such a dividend because the expenses of doing so would be disproportionate to the amount of the dividend,

the administrator may postpone such payment to a date not later than the time for payment of a dividend in respect of the next accounting period.

(7) Where an appeal is taken under rule 119(5) against the acceptance or rejection of a creditor’s claim, the administrator must at the time of payment of dividends and until the appeal is determined, set aside an amount which would be sufficient, if the determination in the appeal were to provide for the claim being accepted in full, to pay a dividend in respect of that claim.

(8) Where a creditor—

(a) has failed to produce evidence in support of a claim earlier than eight weeks before the end of an accounting period on being required by the administrator to do so under rule 118,

(b) has given a reason for such failure which is acceptable to the administrator,

the administrator must set aside, for such time as is reasonable to enable the creditor to produce that evidence or any other evidence that will enable the administrator to be satisfied under rule 118, an amount which would be sufficient, if the claim were accepted in full, to pay a dividend in respect of that claim.

(9) Where a creditor submits a claim to the administrator later than eight weeks before the end of an accounting period but more than eight weeks before the end of a subsequent accounting period in respect of which, after making allowance for contingencies, funds are available for the payment of a dividend, the administrator must, if accepting the claim in whole or in part, pay to the creditor—

(a) the same dividend or dividends as has or have already been paid to creditors of the same class in respect of any accounting period or periods,

(b) whatever dividend may be payable to that creditor in respect of the said subsequent accounting period,

provided that paragraph (a) is without prejudice to any dividend which has already been paid.

(10) In the declaration of and payment of a dividend, no payments are to be made more than once by virtue of the same debt.

(11) Where the administrator pays a dividend under this rule, notice of the dividend must be given to the FCA.

(12) Where the administrator postpones payment of a dividend in accordance with paragraph (6), the administrator must notify the FCA.

(13) Details of any agreement reached under paragraph (2)(b)(i) and of any determination made under paragraph (2)(b)(ii) must be inserted in the sederunt book.

PART 8 — The Administrator

CHAPTER 1 — Remuneration of the administrator

Remuneration of administrator

129

(1) The administrator is entitled to receive remuneration—

(a) to be paid out of the estate of the institution for services given—

(i) in respect of the pursuit of Objectives 2 and 3,

(ii) as a consequence of a failure by the institution to safeguard relevant funds,

(b) to be paid out of relevant funds for services given in respect of the pursuit of Objective 1.

(2) The basis of remuneration in both cases in paragraph (1) must be fixed—

(a) as a percentage of the value of the property with which the administrator has to deal,

(b) by reference to the time properly given by the insolvency practitioner (as administrator) and their staff in attending to matters arising in the special administration, or

(3) The basis of remuneration may be fixed as any one or more of the bases set out in paragraph (2), and different bases may be fixed in respect of different things done by the administrator or administrator’s staff.

(4) Subject to paragraph (5) and paragraph (6), where an administrator intends to submit a claim for the outlays reasonably incurred by the administrator and for remuneration within two weeks of the end of an accounting period, the administrator must submit to the creditors’ committee, or, if there is no creditors’ committee, to a meeting of creditors and customers, in respect of that period—

(a) the administrator’s accounts of their intromissions with the institution’s assets for audit,

(b) where funds are available after making allowance for contingencies, a scheme of division of the divisible funds,

(i) any outlays reasonably incurred by the administrator,

(ii) the administrator’s remuneration, in respect of the pursuit of the Objectives in paragraph (1)(a).

(5) The administrator may, at any time within two weeks after the end of an accounting period, in respect of the previous accounting period, submit to a creditors’ committee, or if there is no creditors’ committee, to a meeting of creditors and customers, in respect of that period—

(a) the administrator’s accounts of its intromissions with the institutions’ assets for audit (such accounts of intromissions may include or consist of a progress report),

(b) a claim for—

(i) the outlays reasonably incurred by the administrator,

(ii) the administrator’s remuneration in respect of the pursuit of the Objectives under paragraph (1)(a).

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

(7) 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 customers (or in respect of a claim in respect of the pursuit of the Objective in paragraph (1)(b), a meeting of customers)—

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

(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 must take into account that interim determination when making their determination under paragraph (9)(a)(ii).

(8) In fixing the amount of the administrator’s remuneration and outlays in respect of any accounting period, the body to whom the claim has been submitted may take into account any adjustment which it may wish to make in the amount of the remuneration and outlays fixed in respect of any earlier accounting period.

(9) Within six weeks of the end of an accounting period—

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

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

(ii) must issue a determination fixing the amount of the outlays and the remuneration payable to the administrator,

(b) the administrator must make the audited accounts, scheme of division and the said determination available for inspection by the members of the institution, the creditors or customers.

(10) If the administrator’s remuneration and outlays have been fixed by determination of the creditor’s committee in accordance with paragraph (9)(a)(ii) and the administrator considers the amount to be insufficient, the administrator may request that the remuneration and outlays be increased by—

(a) resolution of the creditors and customers in respect of claim under paragraph (1)(a), or

(b) resolution of the customers in respect of a claim under paragraph (1)(b).

(11) If the creditor’s committee fails to issue a determination in accordance with paragraph (9)(a)(ii), the administrator must submit their claim—

(a) to a meeting of creditors and customers in respect of a claim under paragraph (1)(a), or

(b) to a meeting of customers in respect of a claim under paragraph (1)(b),

and the meeting must issue a determination in accordance with paragraph (9)(a)(ii).

(12) If the meeting of creditors and customers, or as the case may be, the meeting of customers fails to issue a determination in accordance with paragraph (11), then the administrator must submit their claim to the court and the court must issue a determination.

(13) Where there are joint administrators—

(a) it is for them to agree between themselves as to how the remuneration payable should be apportioned,

(b) if they cannot agree as to how the remuneration payable should be apportioned, any one of them may refer the issue for determination—

(i) by the court, or

(ii) by resolution of the creditors’ committee or a meeting of creditors and customers.

(14) The administrator must insert the final determination in relation to the administrators’ outlays and remuneration in the sederunt book, together with the audited accounts and scheme of division.

Appeal against fixing of remuneration

130

(1) If the administrator considers that the remuneration or outlays fixed for the administrator under rule 129 by—

(a) the creditors’ committee, or

(b) by resolution of the creditors and customers, or as the case may be, of the customers,

is insufficient, the administrator may apply to the court for an order increasing this amount or rate.

(2) The administrator must give at least fourteen days’ notice of the application to the members of the creditors’ committee, and the committee may nominate one or more members to appear, or be represented, and to be heard, on the application.

(3) If there is no creditors’ committee, the notice of the application must be sent to such one or more of the institution’s creditors or customers as the court may direct, which creditors or customers may nominate one or more of their number to appear or be represented and heard on the application.

(4) Notice of the application must also be given to the FCA.

(5) The court may order the expenses of the administrator’s application, including the expenses of any member of the creditors’ committee appearing or being represented on it, or any creditor or customer so appearing or being represented, to be paid as an expense of the special administration.

Claim that remuneration is excessive

131

(1) The following persons may apply to the court for an order that the administrator’s remuneration or outlays be reduced on the grounds that they are, in all the circumstances, excessive in respect of the administrator’s remuneration for services set out in rule 129(1)(a)—

(a) a secured creditor,

(b) any unsecured creditor or creditors representing at least twenty-five per cent in value of the unsecured creditors (including that creditor),

(c) a customer or customers whose relevant funds claims represent at least twenty-five per cent of all relevant funds claims,

(d) the FCA.

(2) A customer, with the concurrence of customers whose relevant funds claims represent at least twenty-five per cent of the total relevant funds claims, or with the permission of the court, may apply to the court for an order in paragraph (1) in respect of the administrator’s remuneration for services set out in rule 129(1)(b).

(3) An application under paragraphs (1) and (2) may be made on the grounds that the remuneration charged by the administrator is, or the expenses incurred by the administrator are, in all the circumstances, excessive.

(4) The application must be made no later than eight weeks after the end of an accounting period.

(5) The court may make an order fixing the remuneration or outlays at a reduced amount or rate.

(6) The court may order the expenses of the person making application to be paid as an expense of the special administration.

CHAPTER 2 — Replacing the administrator

Grounds for resignation

132

(1) The administrator may resign in the following circumstances—

(a) on grounds of ill health,

(b) that the administrator intends ceasing to be in practice as an insolvency practitioner, or

(c) that there is some conflict of interest, or change of personal circumstances, which precludes or makes impracticable the further discharge by that person of the duties of administrator.

(2) The administrator may, with the permission of the court, resign on grounds other than those specified in paragraph (1).

Notice of intention to resign

133

(1) The administrator must in all cases give at least five business days’ notice of their intention to resign, or their intention to apply for the court’s permission to do so, to the following persons—

(a) if there is a continuing administrator of the institution, to that person,

(b) if there is a creditors’ committee, to it.

(2) If there is no continuing administrator and no creditors’ committee, the administrator must give at least five business days’ notice of their intention to resign, or their intention to apply for the court’s permission to do so, to the institution and its creditors and customers of whose claim the administrator is aware and whom the administrator has a means of contacting.

(3) Where the administrator was appointed on the application of the FCA or the Secretary of State, notice under paragraph (1) or paragraph (2) must also be given to the applicant.

(4) Notice under paragraph (1) or paragraph (2) must set out—

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

(b) the full name, registered address, registered number of the institution,

(d) either—

(i) the date on which the administrator’s resignation shall take effect, or

(ii) the date upon which the administrator intends to apply to the court for leave to resign.

(5) The notice must be accompanied by a summary of the administrator’s receipts and payments.

Notice of resignation

134

(1) The notice of resignation must set out—

(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 institution,

(d) whether or not the person resigning is the sole administrator of the institution,

(e) a statement that either—

(i) the administrator resigns from office with effect from a specified date, or

(ii) the court gave the administrator leave to resign (and the statement must include the date of the court’s permission) and that the administrator therefore resigns with effect from a specified date.

(2) The notice must be lodged with the court and a copy of the notice of resignation must be sent not more than five business days after it has been lodged with the court to all those to whom the notice of intention to resign was sent.

(3) The administrator must notify the registrar of companies of their resignation.

Application to court to remove administrator from office

135

(1) Any application for an order under paragraph 88 must state the grounds on which it is requested that the administrator should be removed from office.

(2) Notice of the application must be served on the following—

(a) the administrator,

(b) the person who made the application for the special administration order,

(d) the joint administrator (if any),

(e) where there is neither a creditors’ committee nor a joint administrator, the institution and all the creditors and customers of whose claim the administrator is aware and of whom they have a means of contacting,

(f) the FCA.

(3) Where a court makes an order removing the administrator it must give a copy of the order to the applicant, who as soon as is reasonably practicable must send a copy to the administrator.

(4) The applicant must also within five business days of the order being made send a copy of the order to all those to whom notice of the application was sent.

(5) The applicant must send notice of the order to the registrar of companies within five business days of the order being made.

Notice of vacation of office when administrator ceases to be qualified

136

Where the administrator who has ceased to be qualified to act as an insolvency practitioner in relation to the institution gives notice in accordance with paragraph 89, notice must also be given—

(a) to the registrar of companies,

(b) where the administrator was appointed on the application of the FCA or the Secretary of State, to the applicant.

Administrator deceased

137

(1) Subject to paragraphs (2) to (4), where the administrator has died, it is the duty of the administrator’s executors to give notice of the fact to the court, specifying the date of the death. This does not apply if notice has been given under either paragraph (3) or (4) of this rule.

(2) Notice of the death must also be sent to the registrar of companies.

(3) If the deceased administrator was a partner in or an employee of a firm, notice to the court may be given by a partner in the firm who is qualified to act as an insolvency practitioner, or is a member of any body recognised by the Secretary of State or the Department for the Economy for Northern Ireland for the authorisation of insolvency practitioners.

(4) Notice of the death may be given to the court by any person.

Application to replace

138

(1) Where an application is made to court under paragraph 91(1) to appoint a replacement administrator, the application must be accompanied by a written statement by the person proposed to be the replacement administrator.

(2) The written statement must be in accordance with rule 7.

(3) A copy of the application must be served on the following—

(a) the person who made the application for a special administration order,

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