SCHEDULE 1 Modified application of Parts 2 and 3 of the Banking Act 2009 to building societies

PART 3 Modified application of Part 3 of the 2009 Act
24 This Part sets out modifications to Part 3 of the 2009 Act (Bank Administration) as it applies in relation to building societies by virtue of section 90C of the 1986 Act.

25 Introduction
In section 140 of the 2009 Act (objective 2: “normal” administration) the references in subsections (1) and (2) to the residual building society’s creditors as a whole include references to all holders of shares in the society.

Process
26 In section 145 of the 2009 Act (general powers, duties and effect), in subsection (4) omit paragraph (d).
27 (1) In section 145, table 1 (Schedule B1 to the Insolvency Act 1986) applies with the modifications set out in this paragraph.
(2) For the entries for paras. 59 to 64, see paragraph 29 below;
(3) For the entry for para. 65, substitute—

“Para. 65	Distribution	(a) In sub para. (1) the reference to a creditors includes a reference to a shareholding member. (b) In the case of building society special administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice a bank administrator may make a distribution only with the Bank of England’s consent. (c) Ignore sub para. (3).”

.
(4) For the entry for para. 75, substitute—

“Para. 75	Misfeasance	(a) In addition to applications that may anyway be made under para. 75, an application may be made by the building society special administrator or the Bank of England. (b) An application may not be made by a borrowing member.”

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(5) For the entry for para. 80 (termination: successful rescue) substitute—

“Para. 80	Termination: successful rescue	See section 153 (a) In sub-paragraph (4) the reference to every creditor of whose claim and address he is aware includes a reference to every shareholding member. (b) In sub-paragraph (5) the reference to a creditor includes a reference to a shareholding member.”

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(6) Ignore the entry for para. 84 (termination: no more assets for distribution): paragraph 30 below makes equivalent provision;
(7) For the entry for para. 111 (interpretation) substitute—

“Para. 111	Interpretation	Ignore sub-paragraphs (1A) and (1B)”

.
28 (1) In section 145, table 2 (other provisions of the Insolvency Act 1986) applies with the modifications set out in this paragraph.
(2) For the entry for section 168(4) (and para. 13 of Schedule 4) substitute—

“Section 168(4) (and para. 13 of Schedule 4)	Discretion in managing and distributing assets	(a) In the case of building society special administration following transfer to a bridge bank, until the Bank of England has given an Objective 1 Achievement Notice distribution may be made only (i) with the Bank of England’s consent or (ii) out of assets which have been designated as realisable by agreement between the bank administrator and the Bank of England. (b) In subsection (4) the references to creditors includes a reference to shareholding members.”

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(3) For the entry for sections 423 – 425 substitute—

“Section 423 – 425	Transactions defrauding creditors	(a) Sections 423-425 apply only where a building society special administration order is made. (b) In considering granting leave under section 424(1) the court must have regard to Objective 1 of section 137. (c) In considering making an order in reliance on section 425 the court must have regard to Objective 1 of section 137.”

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29 General powers of administrator
(1) This paragraph modifies the application of paragraphs 59 to 64 of Schedule B1 to the Insolvency Act 1986 (general powers of administrator); the modifications have effect in addition to those set out for those paragraphs in table 1 in section 145 of the 2009 Act.
(2) Subject to sub-paragraph (3), paragraphs 59 to 64 of Schedule B1 have effect as if they required the building society special administrator, in exercising powers under those paragraphs—
(a) to ensure compliance with the provisions of the Building Societies Act 1986, and
(b) not to appoint to be a director any person who is not a fit and proper person to hold that position.
(3) Sub-paragraph (2)(a) does not apply in relation to section 5, 6 or 7 of the Building Societies Act 1986.

30 No more assets for distribution
(1) This paragraph makes provision equivalent to paragraph 84 of Schedule B1 to the Insolvency Act 1986 (termination: no more assets for distribution).
(2) A building society special administrator who thinks that the building society has no property which might permit a distribution to its creditors and shareholding members must send a notice to that effect to the FSA.
(3) The court may on the application of the building society special administrator disapply sub-paragraph (2) in respect of the building society.
(4) On receipt of a notice under sub-paragraph (2) the FSA must place it on the public file of the building society and record in that file the date on which it was placed there.
(5) The appointment of the building society special administrator ceases to have effect on the date on which the notice under sub-paragraph (2) is placed in the public file of the society.
(6) A building society special administrator who sends a notice under sub-paragraph (2) must as soon as is reasonably practicable—
(a) file a copy of the notice with the court, and
(b) send a copy of the notice to each creditor and shareholding member whose address is known.
(7) The building society is dissolved at the end of the period of three months beginning with the date on which the notice under sub-paragraph (2) was placed in its public file.
(8) On an application in respect of a building society by the building society special administrator or another interested person the court may—
(a) extend the period specified in sub-paragraph (7),
(b) suspend that period, or
(c) disapply sub-paragraph (7).
(9) Where an order is made under sub-paragraph (8) in respect of a building society the building society special administrator shall as soon as is reasonably practicable notify the FSA.
(10) A building society special administrator who fails without reasonable excuse to comply with sub-paragraph (6) commits an offence.
(11) An offence under sub-paragraph (10) shall be treated for all purposes as an offence under paragraph 84(9) of Schedule B1 to the Insolvency Act 1986.

31 Property of society dissolved under paragraph 30
Sections 1012 to 1023 and 1034 of the Companies Act 2006 (provisions as to property of dissolved company) shall apply in relation to the property of a building society dissolved under paragraph 30 of this Schedule as they apply in relation to the property of a dissolved company.

32 Multiple transfers
(1) In section 152 of the 2009 Act (property transfer from temporary public ownership), in subsection (1)—
(a) for paragraph (a) substitute—

“(a) make an order under section 85 (temporary public ownership) in respect of a building society, and”

;
(b) in paragraph (b) for “(or from another bank which is or was in the same group as the bank)” substitute “(or from a bank which is or was in the same group as the building society”).
(2) Where the Treasury make an order under section 85 in respect of a building society, and later make a property transfer order from a bank which was in the same group as the building society, Part 3 of the 2009 Act, and any subordinate legislation made under that Part, applies to the transferor bank without the modifications made by section 90C of the Building Societies Act 1986 and this Order.

33 Termination
In section 154 of the 2009 Act (winding-up or voluntary arrangement)—
(a) in subsection (2), in paragraph (a), the reference to paragraph 84 of Schedule B1 to the Insolvency Act 1986 has effect as a reference to paragraph 30 of this Schedule;
(b) in that subsection, in paragraph (b), at the end insert “as applied in relation to building societies by section 90A of, and Schedule 15A to, the Building Societies Act 1986”;
(c) in subsection (3), at the end insert “and with the modifications made by Schedule 15A to the Building Societies Act 1986”.

Miscellaneous
34 Ignore section 155 of the 2009 Act (disqualification of directors).
35 (1) Ignore section 157 of the 2009 Act (other processes); this paragraph makes equivalent provision.
(2) Before exercising an insolvency power in respect of a residual building society the FSA must give notice to the Bank of England, which may participate in any proceedings arising out of the exercise of the power.
(3) In sub-paragraph (2)—
(a) “residual building society” means a building society all or part of whose business has been transferred to a commercial purchaser or to a bridge bank in accordance with section 11 or section 12 of the 2009 Act respectively (as applied with modifications by section 84 of the 2009 Act), and
(b) “insolvency power” means—
(i) the FSA’s power to apply to the court for an administration order (see paragraph 11(1) of Schedule 15A to the Building Societies Act 1986), and
(ii) the FSA’s power to present a petition for the winding-up of a building society (see sections 37(1) and 89(2) of the Building Societies Act 1986).
36 Ignore sections 158 (building societies), 159 (credit unions), 163 (partnerships) and 164 (Scottish partnerships) of the 2009 Act.
37 Subsections (4) and (5) of section 166 of the 2009 Act (interpretation: general) do not apply to expressions defined in this Schedule.