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The Investment Bank Special Administration (Scotland) Rules 2011

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CHAPTER 5Entitlement to vote at meetings

Entitlement to vote (creditors)

64.—(1) A creditor is entitled to vote at any creditors’ or creditors and clients’ meeting of the special administration if that creditor’s claim has been submitted to the administrator and that claim has been accepted in whole or in part in accordance with the rules in Part 6.

(2) A claim submitted by a creditor, which has been accepted in whole or in part by the administrator for the purpose of voting at a meeting shall be deemed to have been resubmitted for the purpose of obtaining an adjudication as to that creditor’s entitlement to vote at any subsequent meeting.

FSCS and voting rights

65.—(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, instead of complying with the requirements set out in rule 126(1)(d) may give 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)

66.  Section 50 of the 1985 Act(1) (entitlement to vote and draw dividend) (as applied by rule 127) applies with regard to a creditor’s entitlement to vote in the special administration.

Calculation of voting rights: special cases (creditors)

67.—(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.

Entitlement to vote (clients)

68.—(1) A client is entitled to vote at a meeting of creditors and clients or of 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 or a right of ownership where the investment bank has been acting as custodier of those assets, or

(ii)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)resubmit a claim under paragraph (1), subtracting the value of the shortfall of assets (as calculated, in respect of securities, in accordance with rule 69) from that claim; and

(b)submit a claim under rule 64 and under Part 6 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 as 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)

69.—(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 68(1)(a) 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 of the investment bank entering special administration, or in the absence of any such published rate, such rate as the court determines.

Procedure for admitting clients’ claims for voting

70.—(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

71.—(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 65 has effect with respect to its voting rights.

Requisite majorities

72.  At a meeting of creditors, 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.

Requisite majorities at members or contributories’ meetings

73.—(1) At a meeting of members or contributories of the investment bank, 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.

(2) References in this rule to a person’s share include any other interests which that person may have as a member of the investment bank.

Administrator voting

74.—(1) Where a resolution is proposed which affects a person in respect of that person’s remuneration or conduct as the administrator, the vote of that person, or of their firm or of any partner or employee of the administrator shall not be reckoned in the majority required for passing the resolution.

(2) Paragraph (1) applies with respect to a vote given by a person (whether personally or on their behalf by a proxy-holder) either as creditor or client, or contributory or as proxy-holder for a creditor, client or contributory.

(1)

Section 50 has been amended by the Bankruptcy and Diligence etc. (Scotland) Act 2007 (asp 3), section 226(2), schedule 6 Part 1, and S.I. 2003/2109.

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