Companies Act 1989

Changes over time for: Section 188

Alternative versions:

Changes to legislation:

There are currently no known outstanding effects for the Companies Act 1989, Section 188.

Changes to Legislation

Revised legislation carried on this site may not be fully up to date. At the current time any known changes or effects made by subsequent legislation have been applied to the text of the legislation you are viewing by the editorial team. Please see ‘Frequently Asked Questions’ for details regarding the timescales for which new effects are identified and recorded on this site.

188 Meaning of “default rules” and related expressions.U.K.

(1)In this Part “default rules” means rules of a [F1recognised body] which provide for the taking of action in the event of a person [F2(including another [F1recognised body])] appearing to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts [F3connected with [F4the recognised body], F5....]

[F6(1A)In the case of a recognised central counterparty, “default rules” includes—

(a)the default procedures referred to in Article 48 of the EMIR Level 1 Regulation; and

(b)any rules of the recognised central counterparty which provide for the taking of action in accordance with a request or instruction from a clearing member under the default procedures referred to in [F7Article 4(6) and (7) of the EMIR Level 2 Regulation or Article 4(6) and (7) of the MIFIR Level 2 Regulation] in respect of assets or positions held by the recognised central counterparty for the account of an indirect client or group of indirect clients.]

[F8(1B)In the case of a recognised CSD, “default rules” includes the default rules and procedures referred to in Article 41 of the CSD regulation.]

(2)References in this Part to a “defaulter” are to a person in respect of whom action has been taken by [F9a recognised body] under its default rules, whether by declaring him to be a defaulter or otherwise; and references in this Part to “default”[F10, “defaulting” and “non-defaulting”] shall be construed accordingly.

[F11(2A)For the purposes of subsection (2), where a recognised central counterparty takes action under the rules referred to in subsection (1A)(b), the action is to be treated as taken in respect of the client providing the indirect clearing services.]

(3)In this Part “default proceedings” means proceedings taken by [F12a recognised body] under its default rules.

[F13(3A)In this Part “default fund contribution” means—

(a)contribution by a member or designated non-member of a recognised investment exchange to a fund which—

(i)is maintained by that exchange for the purpose of covering losses arising in connection with defaults by any of the members of the exchange, or defaults by any of the members or designated non-members of the exchange, and

(ii)may be applied for that purpose under the default rules of the exchange;

(b)contribution by a member of a recognised clearing house to a fund which—

(i)is maintained by that clearing house for the purpose of covering losses arising in connection with defaults by any of the members of the clearing house, and

(ii)may be applied for that purpose under the default rules of the clearing house;

(c)contribution by a recognised clearing house to a fund which—

[F14(i)is maintained by another recognised body (A) for the purpose of covering losses arising in connection with defaults by recognised bodies other than A or by any of their members, and]

(ii)may be applied for that purpose under A’s default rules; F15...

(d)contribution by a recognised investment exchange to a fund which—

[F16(i)is maintained by another recognised body (A) for the purpose of covering losses arising in connection with defaults by recognised bodies other than A or by any of their members, and]

(ii)may be applied for that purpose under A’s default rules.]

[F17(e)contribution by a member of a recognised CSD to a fund which—

(i)is maintained by that central securities depository for the purpose of covering losses arising in connection with defaults by any of the members of the central securities depository, and

(ii)may be applied for that purpose under the default rules of the central securities depository; or

(f)contribution by a recognised CSD to a fund which—

(i)is maintained by another recognised body (A) for the purpose of covering losses arising in connection with defaults by recognised bodies other than A or by any of their members, and

(ii)may be applied for that purpose under A’s default rules.]

(4)If [F18a recognised body] takes action under its default rules in respect of a person, all subsequent proceedings under its rules for the purposes of or in connection with the settlement of market contracts to which the defaulter is a party shall be treated as done under its default rules.

Textual Amendments

F1Words in s. 188(1) substituted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), regs. 1, 3(24)(a)(i) (with regs. 7(4), 9(1))

F2Words in s. 188(1) inserted (15.6.2009) by The Financial Markets and Insolvency Regulations 2009 (S.I. 2009/853), regs. 1(1), 2(15)(a)

F3Words in s. 188(1) substituted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 4(17)(a) (with regs. 52-58)

F4Words in s. 188(1) substituted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), regs. 1, 3(24)(a)(ii) (with regs. 7(4), 9(1))

F5Words in s. 188(1) omitted (26.8.2013) by virtue of The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (No. 2) Regulations 2013 (S.I. 2013/1908), regs. 1(3)(c), 2(10)(a)

F6S. 188(1A) inserted (26.8.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (No. 2) Regulations 2013 (S.I. 2013/1908), regs. 1(3)(c), 2(10)(b)

F7Words in s. 188(1A)(b) substituted (3.1.2018) by The Companies Act 1989 (Financial Markets and Insolvency) (Amendment) Regulations 2017 (S.I. 2017/1247), regs. 1, 2(4)

F8S. 188(1B) inserted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), regs. 1, 3(24)(b) (with regs. 7(4), 9(1))

F9Words in s. 188(2) substituted (28.11.2017) by The Central Securities Depositories Regulations 2017 (S.I. 2017/1064), regs. 1, 3(24)(c) (with regs. 7(4), 9(1))

F10Words in s. 188(2) inserted (1.4.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) Regulations 2013 (S.I. 2013/504), regs. 1(2), 4(17)(b) (with regs. 52-58)

F11S. 188(2A) inserted (26.8.2013) by The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (No. 2) Regulations 2013 (S.I. 2013/1908), regs. 1(3)(c), 2(10)(c)