The Building Society Special Administration Rules (Northern Ireland) 2014

Made: 13th February 2014

Coming into operation: 13th March 2014

The Department of Justice makes the following Rules in the exercise of powers conferred by Article 359(1D), (2), (2D), (3) and (3A) of the Insolvency (Northern Ireland) Order 1989 .

The Department of Finance and Personnel concurs in the making of the Rules.

The Lord Chief Justice of Northern Ireland concurs in the making of the Rules in so far as they affect court procedure.

The Department of Justice has not consulted the Committee existing for the purposes of Article 360 of the Insolvency (Northern Ireland) Order 1989: this is the first set of Rules made in relation to building society insolvency and the duty to consult does not therefore apply to these Rules by virtue of Article 16 of the Building Societies (Insolvency and Special Administration) Order 2009 .

PART 1 — Introduction

Citation

1

These Rules may be cited as the Building Society Special Administration Rules (Northern Ireland) 2014.

Commencement

2

These Rules shall come into operation on 13th March 2014.

Application of Rules

3

These Rules apply in relation to a building society undergoing the procedure in Part 3 of the Banking Act 2009[^f00003], as applied and modified by section 90C of the Building Societies Act 1986[^f00004].

Interpretation

4

• (1) In these Rules—

• “the 1989 Order” means the Insolvency (Northern Ireland) Order 1989;

• “the 1991 Rules” means the Insolvency Rules (Northern Ireland)1991[^f00005] including all amendments to them up to and including those made by the Insolvency (Amendment) Rules (Northern Ireland) 2013[^f00006];

• “the 2009 Order” means the Building Societies (Insolvency and Special Administration) Order 2009;

• “the 2014 Rules” means these Rules;

• “an affidavit” means an affidavit as provided for by Article 165 of the 1989 Order;

• “the appropriate regulator”, in relation to a building society, means— if the building society is a PRA-authorised person (within the meaning of the Financial Services and Markets Act 2000), the Prudential Regulation Authority and, where relevant, the Financial Conduct Authority; and in any other case, the Financial Conduct Authority;

• “the Banking Act” means the Banking Act 2009 (and includes those provisions as applied by Part 3 of Schedule 1 to the 2009 Order;

• “the Building Societies Act” means the Building Societies Act 1986[^f00007];

• “building society” means a building society incorporated (or deemed to be incorporated) under the Building Societies Act;

• “building society special administration”, “building society special administration order” and “building society special administrator” have the same meaning as in the Building Societies Act (see sections 90C(2) and 119(1) of that Act)[^f00008];

• “business day” means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday in any part of Northern Ireland under or by virtue of the Banking and Financial Dealings Act 1971[^f00009];

• “contributory”, in relation to a building society— means every person liable to contribute to the assets of the society in the event of its being wound up, and for the purposes of all proceedings for determining, and all proceedings prior to the determination of, the persons who are deemed to be contributories, includes any person alleged to be a contributory, and includes persons who are liable to pay or contribute to the payment of any debt or liability of the building society, or any sum for the adjustment of rights of members among themselves, or the expenses of the winding up, but does not include persons liable to contribute by virtue of a declaration by the court under Article 177 (fraudulent trading) or 178 (wrongful trading) of the 1989 Order;

• “the Department” means the Department of Enterprise, Trade and Investment[^f00010];

• “principal office” means— the place which is specified in a building society’s memorandum sent to the appropriate regulator under paragraph 1(1)(c) of Schedule 2 to the Building Societies Act as the address of its principal office, or if notice has been given by a building society to the appropriate regulator under paragraph 11(2) of that Schedule (change of principal office), the place specified in that notice or, as the case may be, in the last such notice;

• “registered name”, in relation to a building society, means the name of the society which is for the time being registered with the appropriate regulator; and

• “society”, “special administration”, “special administration order” and “special administrator” mean respectively building society, building society special administration, building society special administration order and building society special administrator;

• (2)

• (a) the following expressions have the same meaning as in Part 1 or Part 3 of the Banking Act—

• (i) “bridge bank” (s. 136(2)),

• (ii) “the court” (the High Court– s. 166(1)),

• (iii) “the FCA” (the Financial Conduct Authority—s 166(2)),

• (iv) “Objective 1” (support for commercial purchaser or bridge bank– ss. 137 and 138),

• (v) “Objective 1 Achievement Notice” (s. 139(4)),

• (vi) “Objective 2” (normal administration– ss. 137 & 140),

• (vii) “the PRA” (the Prudential Regulation Authority—s 166(2)),

• (viii) “private sector purchaser” (s. 136(2)),

• (ix) “property transfer instrument” (s. 33),

• (x) “residual building society” (s. 136(2))[^f00011],

• (xi) “resolution fund order” (s. 49(3)).

• (b) any reference to Part 1 of the Banking Act (Special Resolution Regime), or to any provision in that Part, is a reference to that Part or to that provision as applied, with modifications, by section 84 of that Act;

• (c) any reference to Part 3 of the Banking Act (Bank Administration), or to any provision in that Part, is a reference to that Part or to that provision as applied by section 167 of that Act and as applied and modified by section 90C of the Building Societies Act and by any order made under section 158 of the Banking Act[^f00012]; and

• (d) any reference to any provision of the Building Societies (Insolvency and Special Administration) Order 2009 is a reference to that provision as applied by Article 17 of that Order.

• (3) Other expressions used in these Rules, where used in relation to building societies, have the same meaning as in the Building Societies Act.

5

In these Rules—

• (a) “the FSCS” means the scheme manager of the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000[^f00013]);

• (b) “the Objective 1 Stage” means the period during which a building society special administration order is in force before the Bank of England gives an Objective 1 Achievement Notice;

• (c) “the Objective 2 Stage” means the period during which a building society special administration order is in force after the Bank of England gives an Objective 1 Achievement Notice;

• (d) a reference to personal service is a reference to personal service in accordance with Order 65 of the Rules of the Court of Judicature (Northern Ireland) 1980[^f00014];

• (e) a reference to an affidavit (including a reference implied by the application of an enactment) is a reference to an affidavit, if made by a special administrator, stating that the affidavit is made in that capacity and giving the address at which the special administrator works; and

• (f) a reference to “the purpose of the special administration” is a reference to the objectives of building society administration in section 137 of the Banking Act.

Overview

6

The purpose of these Rules is to prescribe a procedure for the appointment of a special administrator, and the operation of special administration, under Part 3 of the Banking Act in Northern Ireland.

Forms

7

• (1) This rule applies where a provision of these rules—

• (a) applies a provision of the 1991 Rules which requires the use of a prescribed form, or

• (b) makes provision similar to that made by a provision of those Rules which requires the use of a prescribed form.

• (2) The form prescribed for the purposes of those Rules is to be used with any modification that the person using the form thinks desirable to reflect the nature of building society insolvency.

PART 2 — Application for Building Society Special Administration Order

Introduction

8

This Part makes specific provision for a number of aspects of applications for special administration orders; Part 5 applies a number of provisions of the 1991 Rules to applications for special administration orders (with specified modifications).

Content of application

9

An application by the Bank of England for a special administration order in respect of a building society shall specify—

• (a) the registered name of the society;

• (b) any other trading names of the society;

• (c) the address of the society’s principal office;

• (d) an e-mail address for the society;

• (e) the address of the Bank of England; and

• (f) the identity of the person (or persons) nominated for appointment as building society special administrator.

10

If the society has notified the Bank of England of an address for service which is, because of special circumstances, to be used in place of the principal office, that address shall be specified under Rule 9(c).

Statement of proposed special administrator

11

An application shall be accompanied by a statement by the proposed special administrator—

• (a) specifying the name and address of any person proposed to be appointed;

• (b) giving that person’s consent to act;

• (c) giving details of the person’s qualification to act as an insolvency practitioner; and

• (d) giving details of any prior professional relationship that the person has had with the society.

Bank of England affidavit

12

• (1) An application for a special administration order in respect of a society shall be accompanied by an affidavit made on behalf of the Bank of England—

• (a) certifying that the conditions for applying for a special administration order, set out in section 143 of the Banking Act, are met in respect of the society;

• (b) stating the society’s current financial position to the best of the Bank of England’s knowledge and belief (including actual, contingent and prospective assets and liabilities);

• (c) specifying any security which the Bank of England knows or believes to be held by a creditor of the building society;

• (d) specifying whether any security confers power to appoint an administrative receiver (and whether an administrative receiver has been appointed);

• (e) specifying any insolvency proceedings which have been instituted in respect of the society (including any process notified to the FCA and where relevant the PRA under section 90D of the Building Societies Act)[^f00015];

• (f) giving details of the property transfer instrument which the Bank of England has made or intends to make in respect of the society;

• (g) where the property transfer instrument has not yet been made, explaining what effect it is likely to have on the society’s financial position;

• (h) specifying how functions are to be apportioned where more than one person is to be appointed as special administrator (stating, in particular, whether functions are to be exercisable jointly or concurrently); and

• (i) including any other material which the Bank of England thinks may help the court to decide whether to make the special administration order.

• (2) The affidavit shall identify the person making it and shall include the capacity in which that person makes the affidavit and the basis for that person’s knowledge of the matters set out in it.

Filing

13

The application, and its accompanying documents, shall be filed with the court, together with enough copies of the application and accompanying documents for service under Rule 15.

14

Each filed copy shall—

• (a) have the seal of the court applied to it;

• (b) be endorsed with the date and time of filing;

• (c) be endorsed with the venue for the hearing of the application (fixed by the court under Rule 21); and

• (d) be issued to the Bank of England.

Service

15

The Bank of England shall serve the application on—

• (a) the society;

• (b) any person nominated for appointment as special administrator;

• (c) any person whom the Bank of England knows to be entitled to appoint an administrative receiver;

• (d) any person who has given notice to the FCA and where relevant the PRA in respect of the society under section 90D of the Building Societies Act (notice of preliminary steps); and

• (e) each transferee, if the property transfer instrument was made or is to be made under section 11(2)(b) of the Banking Act 2009 (transfer to commercial purchaser).

16

Service under Rule 15 shall be service of a sealed and endorsed copy of the application and its accompanying documents issued under Rule 14.

17

Service shall be effected as soon as is reasonably practicable, having regard in particular to the need to give the society’s representatives a reasonable opportunity to attend the hearing.

18

• (1) Service shall be effected—

• (a) by personal service to an address that the person has notified to the Bank of England as an address for service;

• (b) by personal service to the person’s registered office or principal office (where no address for service has been notified);

• (c) by personal service to the person’s usual or last known principal place of business in Northern Ireland (where there is no registered office or principal office and no address for service has been notified); or

• (d) in such other manner and at such a place as the court may direct.

• (2) If the Bank of England knows of an email address that is habitually used for business purposes by a person on whom service is required, the Bank shall (in addition to personal service) as soon as is reasonably practicable send by email an electronic copy of a sealed and endorsed copy of the application and its accompanying documents.

19

• (1) Service of the application shall be verified by an affidavit specifying the date on which, and the manner in which, service was effected.

• (2) The affidavit, with a sealed copy of the application attached to it, shall be filed with the court—

• (a) as soon as is reasonably practicable; and

• (b) in any event, before the hearing of the application.

Other notification

20

As soon as is reasonably practicable after filing the application the Bank of England shall notify—

• (a) the Enforcement of Judgements Office;

• (b) any person whom the Bank of England knows to have distrained against the society or its property; and

• (c) the FCA and where relevant the PRA.

Venue

21

• (1) The court shall fix the venue for the hearing when the application is filed.

• (2) In fixing the venue the court shall have regard to—

• (a) the desirability of the application being heard as soon as is reasonably practicable; and

• (b) the need to give the building society a reasonable opportunity to attend.

Hearing

22

At the hearing of the application, any of the following may appear or be represented—

• (a) the Bank of England;

• (b) the appropriate regulator;

• (c) the society;

• (d) a director of the society;

• (e) any person nominated for appointment as special administrator;

• (f) any person who has given notice to the FCA and where relevant the PRA in respect of the society under section 90D of the Building Societies Act (notice of preliminary steps); and

• (g) with the permission of the court, any other person who appears to have an interest.

The order

23

A special administration order shall be in the form specified in Rule 2.012(2) of the 1991 Rules.

Notice of order

24

If the court makes a special administration order, it shall send four or, if the building society is a PRA-authorised person (within the meaning of the Financial Services and Markets Act 2000), five sealed copies to the Bank of England.

25

The Bank of England shall as soon as is reasonably practicable send one sealed copy of the special administration order to each of the following—

• (a) the special administrator;

• (b) the FCA and where relevant the PRA; and

• (c) the FSCS.

Costs

26

If the court makes a special administration order, the following are payable as an expense of the special administration—

• (a) the Bank of England’s costs of making the application; and

• (b) any other costs allowed by the court.

PART 3 — Process of Building Society Special Administration

Introduction

27

This Part makes specific provision for a number of aspects of special administration; Part 5 applies a number of provisions of the 1991 Rules to special administration (with specified modifications).

Building society special administrator's proposals: Objective 1 Stage

28

• (1) This Rule makes provision about the statement of proposals which the special administrator is required to make in the Objective 1 Stage under section 147 of the Banking Act.

• (2) In addition to the information required by section 147 the statement shall include—

• (a) details of the court where the proceedings are and the court reference number;

• (b) the registered name, any other trading names and the address of the principal office of the building society;

• (c) details of the appointment of the special administrator (including the date);

• (d) in the case of joint special administrators, details of the apportionment of functions;