The Investment Bank Special Administration (England and Wales) Rules 2011

CHAPTER 5 Entitlement to vote at meetings

Entitlement to vote (creditors)

85.—(1) A creditor is entitled to vote at a meeting of creditors, or at a meeting of creditors and clients, only if—

(a) the administrator has been given written details of the debt which is claimed as due to that person from the investment bank, including any calculation for the purposes of rule 87 or rule 88;

(b) the details were given to the administrator—

(i) not later than 12.00 hours on the business day before the day fixed for the meeting, or

(ii) later than that time but the chair of the meeting is satisfied that that was due to circumstances beyond that person’s control; and

(c) the claim has been admitted for the purposes of entitlement to vote,

and there has been lodged with the administrator any proxy intended to be used on behalf of that person.

(2) For the purposes of this Chapter, written details of a claim, once lodged or given in accordance with this rule, need not be lodged or given again.

(3) The chair of a meeting of creditors, or at a meeting of creditors and clients, may call for any document or other evidence to be produced if the chair thinks it necessary for the purpose of substantiating the whole or any part of a claim.

FSCS and voting rights

86.—(1) For the purpose of voting at a meeting in a special administration (bank insolvency) (or in a special administration (bank administration ) if there are depositors), the FSCS may submit, instead of giving written details, a statement containing—

(a) the names of the creditors of the investment bank in respect of whom an obligation of the FSCS has arisen or may reasonably be expected to arise;

(b) the amount of each such obligation; and

(c) the total amount of all such obligations.

(2) The FSCS may from time to time submit a further statement; and each such statement supersedes any previous statement.

(3) Any voting rights which a creditor might otherwise exercise in the special administration in respect of a claim are reduced by a sum equal to the amount of that claim in relation to which the FSCS, by virtue of its having submitted a statement under this rule, is entitled to exercise voting rights at the meeting.

Calculation of voting rights (creditors)

87.—(1) Votes are calculated according to the amount of each creditor’s claim as at the date on which the investment bank entered special administration, less any payments that have been made to the creditor after that date in respect of the claim and any adjustment by way of set-off in accordance with rule 164 or 165 as if those rules were applied on the date on which the votes are counted.

(2) A creditor may vote in respect of a debt which is for an unliquidated amount or the value of which is not ascertained if the chair decides to put upon it an estimated minimum value for the purpose of entitlement to vote and admits the claim for that purpose.

(3) Paragraph (2) does not apply to a shortfall claim described in rule 90(4)(b).

(4) A creditor may not vote in respect of any claim or part of a claim—

(a) where the claim or part is secured, except where the vote is cast in respect of the balance (if any) of the debt after deduction of the value of the security as estimated by the creditor;

(b) where the claim is in respect of a debt wholly or partly on, or secured by, a current bill of exchange or promissory note, unless the creditor is willing—

(i) to treat as a security in the creditor’s hands the liability on the bill or note of every person who is liable on it antecedently to the investment bank, and—

(aa) in the case of a company, has not gone into liquidation, or

(bb) in the case of an individual, against whom a bankruptcy order has not been made or whose estate has not been sequestrated, and

(ii) to estimate the value of the security and for the purposes of voting (but not otherwise) to deduct it from the claim.

Calculation of voting rights: special cases (creditors)

88.—(1) An owner of goods under a hire-purchase or chattel leasing agreement, or a seller of goods under a conditional sale agreement, is entitled to vote in respect of the amount of the debt due and payable by the investment bank on the date on which it entered special administration.

(2) In calculating the amount of any debt for the purpose of paragraph (1), no account is to be taken of any amount attributable to the exercise of any right under the relevant agreement so far as the right has become exercisable solely by virtue of—

(a) the making of a special administration application; or

(b) the investment bank entering special administration.

Procedure for admitting creditors’ claims for voting

89.—(1) At a meeting of creditors, the chair must ascertain the entitlement of persons wishing to vote as creditors and admit or reject their claims accordingly.

(2) The chair may admit or reject a claim in whole or in part.

(3) If the chair is in any doubt whether a claim should be admitted or rejected, the claim must be marked as objected to and allow votes to be cast in respect of it, subject to such votes being subsequently declared invalid if the objection to the claim is sustained.

Entitlement to vote (clients)

90.—(1) A client is entitled to vote at a meeting of creditors and clients or clients only if—

(a) the administrator has been given written details of the client’s claim as to the total amount of client assets over which the client asserts—

(i) a beneficial right of ownership,

(ii) a right of ownership as bailor, or

(iii) another means of ownership; and

(b) the details were given to the administrator—

(i) not later than 12.00 hours on the business day before the day fixed for the meeting, or

(ii) later than that time but the chair of the meeting is satisfied that the delay was due to circumstances beyond that client’s control; and

(c) the claim for client assets has been admitted for the purposes of entitlement to vote,

and there has been lodged with the administrator any proxy intended to be used on behalf of that person.

(2) Subject to paragraph (4), for the purposes of this Chapter, written details of a claim for client assets, once lodged or given in accordance with this rule, need not be lodged or given again.

(3) The chair may call for any document or other evidence to be produced if the chair thinks it necessary for the purpose of substantiating the whole or any part of a claim for client assets.

(4) Where at the date of the meeting the client is aware that there will be a shortfall in respect of their claim to client assets, the client shall—

(a) submit a claim under paragraph (1), subtracting the value of the shortfall of assets from that claim (as calculated, in respect of securities, in accordance with rule 91); and

(b) submit a claim under rule 85 as to the debt owed to the client by the investment bank in respect of the shortfall.

(5) If at the time that the invitation to the initial meeting, or notice of a creditors and clients’ or a client’s meeting, is sent out, the administrator has become aware that there will be a shortfall in respect of a client’s claim to client assets, the administrator shall notify the client at the same time the invitation or notice is sent out.

(6) If after the time that the invitation to the initial meeting, or notice of a creditors and clients’ or a clients’ meeting, is sent out, the administrator becomes aware that there will be a shortfall in respect of a client’s claim to client assets, the administrator shall notify the client as soon as reasonably practicable prior to the meeting and take this shortfall into account in calculating the client’s entitlement to vote.

Calculation of voting rights (clients)

91.—(1) For the purposes of this Chapter, a client’s voting rights are calculated according to the value of the client’s claim submitted under rule 90, taking into account any shortfall identified prior to the meeting.

(2) Subject to paragraph (4), the chair is to value any securities making up the client’s claim under paragraph (1) by reference to the closing or settlement price for such securities of a particular description.

(3) In paragraph (2)—

“closing or settlement price” means—

(a)

in relation to securities traded on a relevant exchange, the closing or settlement price published by that exchange; and

(b)

in relation to securities traded elsewhere, the closing or settlement price published by an appropriate pricing source on the last business day before the date the investment bank entered special administration; but where such securities are traded outside the United Kingdom, the closing or settlement price shall be the most recent closing price before that date; and

“securities of a particular description” has the meaning set out in regulation 12(9);

and in this paragraph—

“appropriate pricing source” means a reputable source used by the investment bank immediately prior to the investment bank entering special administration for valuing or reporting in respect of those securities, unless the client asserts with good reason (and the chair agrees) that an alternative source should be used; and

“relevant exchange” means a recognised investment exchange or recognised overseas investment exchange used by the investment bank to trade such securities immediately prior to the investment bank entering special administration, unless the client asserts with good reason (and the chair agrees) that an alternative exchange should be used.

(4) Where the chair considers that it is not practicable to value a client asset by reference to a closing or settlement price published by a relevant exchange or an appropriate pricing source, the chair may put upon the asset an estimated minimum value for the purposes of the entitlement to vote.

(5) Where client assets are quoted in currencies other than sterling, in order to value the assets for the purposes of this chapter, the administrator shall convert the market price of the assets to sterling at the rate of exchange for that other currency as at the mean of the buying and selling spot rates prevailing in the London market as published at the close of business on the business day prior to the date the investment bank entered special administration or, in the absence of any such published rate, such rate as the court determines.

Procedure for admitting clients’ claims for voting

92.—(1) At a meeting of creditors and clients, or clients, the chair must ascertain the entitlement of persons wishing to vote as clients and admit or reject their claims accordingly.

(2) The chair may admit or reject a claim in whole or in part.

(3) If the chair is in any doubt whether a claim should be admitted or rejected, the claim must be marked as objected to and allow votes to be cast in respect of it, subject to such votes being subsequently declared invalid if the objection to the claim is sustained.

Voting at meetings of creditors and clients

93.—(1) This rule applies to meetings of creditors and clients.

(2) If the administrator thinks it appropriate, the creditors and clients may vote on the same resolution at the meeting, however the creditors and the clients shall vote separately on the resolution.

(3) In a special administration (bank insolvency) the FSCS shall be entitled to vote as a creditor under this rule and rule 86 has effect with respect to its voting rights.

Requisite majorities

94.—(1) Subject to paragraph (2), at a meeting of creditors or clients, or of creditors and clients, a resolution is passed when a majority (in value) of those present and voting, in person or by proxy, have voted in favour of it.

(2) Any resolution is invalid if those voting against it include more than half in value of the creditors, or, as the case may be, clients, to whom notice of the meeting was sent and who are not, to the best of the chair’s belief, persons connected with the investment bank.

Requisite majorities at contributories’ meetings

95.  At a meeting of contributories, voting rights are as at a general meeting of the investment bank, subject to any provision of the articles affecting entitlement to vote, either generally or at a time when the investment bank is in liquidation.

Appeals against decisions under this Chapter

96.—(1) The chair’s decisions under this Chapter are subject to appeal to the court by any creditor, client or contributory or member.

(2) If the chair’s decision is reversed or varied, or votes are declared invalid, the court may order another meeting to be summoned or make such order as it thinks just.

(3) An appeal under this rule may not be made later than 21 days after the date of the meeting.

(4) The chair is not personally liable for costs incurred by any person in respect of an appeal under this rule unless the court makes an order to that effect.