Banking Act 1979

28 Payments to depositors when institution becomes insolvent

(1) Subject to the provisions of this section, if at any time an institution becomes insolvent and at that time—

(a) it is a recognised bank or licensed institution which is not excluded from being a contributory institution by an order under section 23(2) above; or

(b) it is neither recognised nor licensed but is an institution which was formerly a recognised bank or licensed institution and, at the time when it ceased to have either recognition or a licence, was not excluded as mentioned in paragraph (a) above ;

the Board shall as soon as practicable pay out of the Fund to a depositor who has a protected deposit with that institution an amount equal to three-quarters of his protected deposit.

(2) The Board may decline to make any payment under subsection (1) above to a person who, in the opinion of the Board, had any responsibility for, or may have profited directly or indirectly from, the circumstances giving rise to the institution's financial difficulties.

(3) For the purposes of this Part of this Act, a body corporate becomes insolvent—

(a) on the making of a winding-up order against it; or

(b) on the passing of a resolution for a creditors' voluntary winding up;

or, in the case of a body corporate formed under the law of a country or territory outside the United Kingdom, on the occurrence of an event which appears to the Board to correspond under that law with either of the events specified above.

(4) For the purposes of this Part of this Act, a partnership becomes insolvent—

(a) on the making of a winding-up order against the firm under Part IX of the [1948 c. 38.] Companies Act 1948 or the [1960 c. 22 (N.I.).] Companies Act (Northern Ireland) 1960 (unregistered companies) ; or

(b) in England and Wales, on the making of a receiving order against the firm; or

(c) in Scotland, on the making of an award of sequestration on the estate of the partnership; or

(d) in Northern Ireland, on the making of an order of adjudication of bankruptcy against any of the partners ;

or, in the case of a partnership whose principal place of business is in a country or territory outside the United Kingdom, on the occurrence of an event which appears to the Board to correspond under the law of that country or territory with any of the events specified above.

(5) For the purposes of this Part of this Act, an unincorporated institution which is formed under the law of another member State and is not a partnership becomes insolvent on the occurrence of an event which, under the law of that member State, appears to the Board to correspond, as near as may be, with any of the events specified in paragraphs (a) and (b) of subsection (3) or paragraphs (a) to (d) of subsection (4) above.

(6) Notwithstanding that the Board may not yet have made or become liable to make a payment under this section, in relation to an institution falling within subsection (1) above.—

(a) the Board shall at all times be entitled to receive any notice or other document required to be sent to a creditor of the institution whose debt has been proved ; and

(b) a duly authorised representative of the Board shall be entitled—

(i) to attend any meeting of creditors of the institution;

(ii) to be a member of any committee of inspection appointed under section 20 of the [1914 c. 59.] Bankruptcy Act 1914;

(iii) to be a commissioner under section 72 of the [1913 c. 20.] Bankruptcy (Scotland) Act 1913 ; and

(iv) to be a member of any committee of inspection appointed by virtue of Part V or Part IX of the [1948 c. 38.] Companies Act 1948 or the [1960 c. 22 (N.I.).] Companies Act (Northern Ireland) 1960;

but where a representative of the Board exercises the right to be a member of a committee of inspection or to be a commissioner by virtue of paragraph (b) above, he may not be removed except with the consent of the Board and, for the purposes of any provision made by or under any enactment or Northern Ireland legislation which specifies a minimum or maximum number of members of such committee or such commission, his appointment hereunder shall be disregarded.

(7) In relation to an insolvent institution which is a partnership, any reference in this Part of this Act to the liquidator shall be construed, where the case so requires, as a reference—

(a) to the trustee in bankruptcy or, in Northern Ireland, the official assignee in bankruptcy; or

(b) in England and Wales, where no adjudication of bankruptcy occurs, to any trustee appointed in pursuance of a composition or scheme of arrangement to administer the firm's property or manage its business or distribute the composition and, where an adjudication of bankruptcy is annulled under subsection (2) of section 21 of the Bankruptcy Act 1914, to any person in whom the property of the firm is vested under that subsection; or

(c) in Scotland, where the sequestration is declared at an end by a competent court, to any trustee or other person appointed to administer the firm's property or manage its business or distribute a composition in pursuance of any deed of arrangement or other settlement or arrangement by way of composition between the firm and its creditors.