Modifications etc. (not altering text)
80.—(1) This Part applies to the following descriptions of contract connected with a recognised investment exchange or recognised clearing house.
The contracts are referred to in this Part as “market contracts”.
[F1(2) Except as provided in paragraph (2A), in relation to a recognised investment exchange, this Part applies to—
(a)contracts entered into by a member or designated non-member of the exchange which are either—
(i)contracts made on the exchange or on an exchange to whose undertaking the exchange has succeeded whether by amalgamation, merger or otherwise; or
(ii)contracts in the making of which the member or designated non-member was subject to the rules of the exchange or of an exchange to whose undertaking the exchange has succeeded whether by amalgamation, merger or otherwise; and
(b)contracts subject to the rules of the exchange entered into by the exchange for the purposes of or in connection with the provision of clearing services.
A “designated non-member” means a person in respect of whom action may be taken under the default rules of the exchange but who is not a member of the exchange.
(2A) This Part does not apply to contracts falling within paragraph (2)(a) where the exchange in question is recognised overseas investment exchange.]
(3) In relation to a recognised clearing house, this Part applies to contracts subject to the rules of the clearing house entered into by the clearing house for the purposes of or in connection with the provision of clearing services for a recognised investment exchange.
(4) The Department may by regulations make further provision as to the contracts to be treated as “market contracts”, for the purposes of this Part, in relation to a recognised investment exchange or recognised clearing house.
(5) The regulations may add to, amend or repeal the provisions of paragraphs (2) and (3).
F1SR 1991/443
Modifications etc. (not altering text)
81.—(1) The general law of involvency has effect in relation to market contracts, and action taken under the rules of a recognised investment exchange or recognised clearing house with respect to such contracts, subject to the provisions of Articles 82 to 88.
(2) So far as those provisions relate to insolvency proceedings in respect of a person other than a defaulter, they apply in relation to—
(a)proceedings in respect of a member or designated non-member of a recognised investment exchange or a member of a recognised clearing house, and
(b)proceedings in respect of a party to a market contract begun after a recognised investment exchange or recognised clearing house has taken action under its default rules in relation to a person party to the contract as principal,
but not in relation to any other insolvency proceedings, not withstanding that rights or liabilities arising from market contracts fall to be dealt with in the proceedings.
(3) The reference in paragraph (2)(b) to the beginning of insolvency proceedings is to—
(a)the presentation of a bankruptcy petition, or
[F2(b)the application for an administration order or the presentation of a winding-up petition or the passing of a resolution for voluntary winding up,]
(c)the appointment of an administrative receiver.
[F3(3A) In paragraph (3)(b) the reference to an application for an administration order shall be taken to include a reference to—
(a)in a case where an administrator is appointed under paragraph 15 or 23 of Schedule B1 to the Insolvency Order (appointment by floating charge holder, company or directors) following filing with the Court of a copy of a notice of intention to appoint under that paragraph, the filing of the copy of the notice, and
(b)in a case where an administrator is appointed under either of those paragraphs without a copy of a notice of intention to appoint having been filed with the Court, the appointment of the administrator.]
(4) The Department may make further provision by regulations modifying the law of insolvency in relation to the matters mentioned in paragraph (1).
(5) The regulations may add to, amend or repeal the provisions mentioned in paragraph (1), and any other provision of this Part as it applies for the purposes of those provisions, or provide that those provisions have effect subject to such additions, exceptions or adaptations as are specified in the regulations.
F2Art. 81(3)(b) substituted (27.3.2006) by Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455 (N.I. 10)), arts. 1(3), 3(3), Sch. 2 para. 49(a); S.R. 2006/21, art. 2 (with transitional provisions and savings in S.R. 2006/22, arts. 2-7)
F3Art. 81(3A) inserted (27.3.2006) by Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455 (N.I. 10)), arts. 1(3), 3(3), Sch. 2 para. 49(b); S.R. 2006/21, art. 2 (with transitional provisions and savings in S.R. 2006/22, arts. 2-7)
82.—(1) None of the following shall be regarded as to any extent invalid at law on the ground of inconsistency with the law relating to the distribution of the assets of a person on bankruptcy or winding up or in the administration of an insolvent estate—
(a)a market contract,
(b)the default rules of a recognised investment exchange or recognised clearing house,
(c)the rules of a recognised investment exchange or recognised clearing house as to the settlement of market contracts not dealt with under its default rules.
(2) The powers of a relevant office-holder in his capacity as such, and the powers of the court under the Insolvency Order shall not be exercised in such a way as to prevent or interfere with—
(a)the settlement in accordance with the rules of a recognised investment exchange or recognised clearing house of a market contract not dealt with under its default rules, or
(b)any action taken under the default rules of such an exchange or clearing house.
This does not prevent a relevant office-holder from afterwards seeking to recover any amount under Article 86(3) or 87(3) or prevent the court from afterwards making any such order as is mentioned in Article 88(1) (but subject to paragraphs (2) and (3) of that Article).
(3) Nothing in the following provisions of this Part shall be construed as affecting the generality of the above provisions.
(4) A debt or other liability arising out of a market contract which is the subject of default proceedings may not be proved in a winding up or bankruptcy until the completion of the default proceedings.
A debt or other liability which by virtue of this paragraph may not be proved shall not be taken into account for the purposes of any set-off until the completion of the default proceedings.
[F4(4A) However, prior to the completion of default proceedings—
(a)where it appears to the chairman of the meeting of creditors that a sum will be certified under Article 85(1) to be payable, paragraph (4) shall not prevent any proof including or consisting of an estimate of that sum which has been lodged from being admitted for the purpose only of determining the entitlement of a creditor to vote at a meeting of creditors; and
(b)a creditor whose proof has been lodged and admitted for the purpose of determining the entitlement of a creditors to vote at a meeting of creditors and which has not been subsequently withdrawn, disallowed or rejected, is eligible as a creditor to be a member of a liquidation committee or, in bankruptcy proceedings, a creditors' committee.]
(5) For the purposes of[F4 paragraphs (4) and (4A)] the default proceedings shall be taken to be completed in relation to a person when a report is made under Article 85 stating the sum (if any) certified to be due to or from him.
F4SR 1991/443
83.—(1) It is the duty of—
(a)any person who has or had control of any assets of a defaulter, and
(b)any person who has or had control of any documents of or relating to a defaulter,
to give a recognised investment exchange or recognised clearing house such assistance as it may reasonably require for the purposes of its default proceedings.
This applies notwithstanding any duty of that person under the statutory provisions relating to insolvency.
(2) A person shall not under this Article be required to provide any information or produce any document which he would be entitled to refuse to provide or produce on grounds of legal professional privilege in proceedings in the High Court.
(3) Where original documents are supplied in pursuance of this Article, the exchange or clearing house shall return them forthwith after the completion of the relevant default proceedings, and shall in the meantime allow reasonable access to them to the person by whom they were supplied and to any person who would be entitled to have access to them if they were still in the control of the person by whom they were supplied.
(4) The expenses of a relevant office-holder in giving assistance under this Article are recoverable as part of the expenses incurred by him in the discharge of his duties; and he shall not be required under this Article to take any action which involves expenses which cannot be so recovered, unless the exchange or clearing house undertakes to meet them[F5 and for the purpose of determining the priority in which his expenses are payable out of the assets, sums in respect of time spent shall be treated as his remuneration and other sums shall be treated as his disbursements.]
There shall be treated as expenses of his such reasonable sums as he may determine in respect of time spent in giving the assistance.
(5) The Department may by regulations make further provision as to the duties of persons to give assistance to a recognised investment exchange or recognised clearing house for the purposes of its default proceedings.
(6) The Secretary of State may by regulations make further provision as to the duties of an exchange or clearing house with respect to information supplied to it.
(7) Regulations under this Article may add to, amend or repeal the provisions of paragraphs (1) to (4).
(8) In this Article “document” includes information recorded in any form.
F5SR 1991/443
84.—(1) If the court is satisfied on an application by a relevant office-holder that a party to a market contract with a defaulter intends to dissipate or apply his assets so as to prevent the office-holder recovering such sums as may become due upon the completion of the default proceedings, the court may grant such interlocutory relief as it thinks fit.
(2) A liquidator or trustee of a defaulter shall not—
(a)declare or pay any dividend to the creditors, or
(b)return any capital to contributories,
unless he has retained what he reasonably considers to be an adequate reserve in respect of any claims arising as a result of the default proceedings of the exchange or clearing house concerned.
(3) The court may on an application by a relevant office-holder make such order as it thinks fit altering or dispensing from compliance with such of the duties of his office as are affected by the fact that default proceedings are pending or could be taken, or have been or could have been taken.
(4) Nothing in[F6Article 106, 108, 110 or 258 of, or paragraph 43 or 44 (including paragraph 44(5) as applied by paragraph 45) of Schedule B1 to , the Insolvency Order](which restrict the taking of certain legal proceedings and other steps), shall affect any action taken by an exchange or clearing house for the purpose of its default proceedings.
F6Words in art. 84(4) substituted (27.3.2006) by Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455 (N.I. 10)), arts. 1(3), 3(3), Sch. 2 para. 50; S.R. 2006/21, art. 2 (with transitional provisions and savings in S.R. 2006/22, arts. 2-7)
85.—(1) [F7Subject to paragraph (1A),] a recognised investment exchange or recognised clearing house shall, on the completion of proceedings under its default rules, report to the[F8 Authority] on its proceedings stating in respect of each creditor or debtor the sum certified by it to be payable from or to the defaulter or, as the case may be, the fact that no sum is payable.
[F7(1A) A recognised overseas investment exchange or recognised overseas clearing house shall not be subject to the obligation under paragraph (1) unless it has been notified by the[F8 Authority] that a report is required for the purpose of insolvency proceedings in any part of the United Kingdom.]
(2) The exchange or clearing house may make a single report or may make reports from time to time as proceedings are completed with respect to the transactions affecting particular persons.
(3) The exchange or clearing house shall supply a copy of every report under this Article to the defaulter and to any relevant office-holder acting in relation to him or his estate.
(4) When a report under this Article is received by the[F8 Authority, it] shall publish notice of that fact in such manner as[F8 it] thinks appropriate for bringing[F8 the report] to the attention of creditors and debtors of the defaulter.
(5) An exchange or clearing house shall make available for inspection by a creditor or debtor of the defaulter so much of any report by it under this Article as relates to the sum (if any) certified to be due to or from him or to the method by which that sum was determined.
(6) Any such person may require the exchange or clearing house, on payment of such reasonable fee as the exchange or clearing house may determine, to provide him with a copy of any part of a report which he is entitled to inspect.
86.—(1) The following provisions apply with respect to the net sum certified by a recognised investment exchange or recognised clearing house, upon proceedings under its default rules being duly completed in accordance with this Part, to be payable by or to a defaulter.
(2) If a bankruptcy or winding-up order has been made, or a resolution for voluntary winding up has been passed, the debt—
(a)is provable in the bankruptcy or winding up or, as the case may be, is payable to the relevant office-holder, and
(b)shall be taken into account, where appropriate, under Article 296 of the Insolvency Order (mutual dealings and set-off) or the corresponding provision applicable in the case of winding up,
in the same way as a debt due before the commencement of the bankruptcy, the date on which the body corporate goes into liquidation (within the meaning of Article 6 of the Insolvency Order) or, in the case of a partnership, the date of the winding-up order.
(3) However, where (or to the extent that) a sum is taken into account by virtue of paragraph (2)(b) which arises from a contract entered into at a time when the creditor had notice—
(a)that a bankruptcy petition was pending, or
(b)that a meeting of creditors had been summoned under Article 84 of the Insolvency Order or that a winding-up petition was pending,
the value of any profit to him arising from the sum being so taken into account (or being so taken into account to that extent) is recoverable from him by the relevant office-holder unless the court directs otherwise.
(4) Paragraph (3) does not apply in relation to a sum arising from a contract effected under the default rules of a recognised investment exchange or recognised clearing house.
(5) Any sum recoverable by virtue of paragraph (3) ranks for priority, in the event of the insolvency of the person from whom it is due, immediately before preferential debts.
87.—(1) Articles 152, 157, 288 and 318 of the Insolvency Order (power to disclaim onerous property and court's power to order rescission of contracts, &c.) do not apply in relation to—
(a)a market contract, or
(b)a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to market contracts.
(2) Articles 107 and 257 of the Insolvency Order (avoidance of property dispositions effected after commencement of winding up or presentation of bankruptcy petition) do not apply to—
(a)a market contract, or any disposition of property in pursuance of such a contract,
(b)the provision of margin in relation to market contracts,
(c)a contract effected by the exchange or clearing house for the purpose of realising property provided as margin in relation to a market contract, or any disposition of property in pursuance of such a contract, or
(d)any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin.
(3) However, where—
(a)a market contract is entered into by a person who has notice that a petition has been presented for the winding up or bankruptcy of the other party to the contract, or
(b)margin in relation to a market contract is accepted by a person who has notice that such a petition has been presented in relation to the person by whom or on whose behalf the margin is provided,
the value of any profit to him arising from the contract or, as the case may be, the amount or value of the margin is recoverable from him by the relevant office-holder unless the court directs otherwise.
(4) Paragraph (3)(a) does not apply where the person entering into the contract is a recognised investment exchange or recognised clearing house acting in accordance with its rules, or where the contract is effected under the default rules of such an exchange or clearing house; but paragraph (3)(b) applies in relation to the provision of margin in relation to such a contract.
(5) Any sum recoverable by virtue of paragraph (3) ranks for priority, in the event of the involvency of the person from whom it is due, immediately before preferential debts.
88.—(1) No order shall be made in relation to a transaction to which this Article applies under—
(a)Article 202 or 312 of the Insolvency Order (transactions at an undervalue),
(b)Article 203 or 313 of that Order (preferences), or
(c)Article 367 of that Order (transactions defrauding creditors).
(2) This Article applies to—
(a)a market contract to which a recognised investment exchange or recognised clearing house is a party or which is entered into under its default rules, and
(b)a disposition of property in pursuance of such a market contract.
(3) Where margin is provided in relation to a market contract and (by virtue of paragraph (2)(a) or otherwise) no such order as is mentioned in paragraph (1) has been, or could be, made in relation to that contract, this Article applies to—
(a)the provision of the margin,
(b)any contract effected by the exchange or clearing house in question for the purpose of realising the property provided as margin, and
(c)any disposition of property in accordance with the rules of the exchange or clearing house as to the application of property provided as margin.
89.—(1) The powers conferred by this Article are exercisable in relation to a recognised UK investment exchange or recognised UK clearing house.
(2) Where in any case an exchange or clearing house has not taken action under its default rules—3832/2—O.I.C.[Companies No. 2 (NI) Order 1990]
(a)if it appears to the[F9 Authority] that it could take action,[F9 the Authority] may direct it to do so, and
(b)if it appears to the[F9 Authority] that it is proposing to take or may take action,[F9 the Authority] may direct it not to do so.
(3) Before giving such a direction the[F9 Authority] shall consult the exchange or clearing house in question; and[F9 it] shall not give a direction unless[F9 it] is satisfied, in the light of that consultation—
(a)in the case of a direction to take action, that failure to take action would involve undue risk to investors or other participants in the market, or
(b)in the case of a direction not to take action, that the taking of action would be premature or otherwise undesirable in the interests of investors or other participants in the market.
(4) A direction shall specify the grounds on which it is given.
(5) A direction not to take action may be expressed to have effect until the giving of a further direction (which may be a direction to take action or simply revoking the earlier direction).
(6) No direction shall be given not to take action if, in relation to the person in question—
(a)a bankruptcy order has been made, or
(b)a winding up order has been made, a resolution for voluntary winding up has been passed or an administrator, administrative receiver or provisional liquidator has been appointed;
and any previous direction not to take action shall cease to have effect on the making or passing of any such order, appointment or resolution.
(7) Where an exchange or clearing house has taken or been directed to take action under its default rules, the[F9 Authority] may direct it to do or not to do such things (being things which it has power to do under its default rules) as are specified in the direction.
The[F9 Authority] shall not give such a direction unless[F9 it is satisfied that the direction] will not impede or frustrate the proper and efficient conduct of the default proceedings.
(8) A direction under this Article is enforceable, on the application of the[F9 Authority], by injunction; and where an exchange or clearing house has not complied with a direction, the court may make such order as it thinks fit for restoring the position to what it would have been if the direction had been complied with.
F9SI 2001/3649
90.—(1) Where there has been made or passed in relation to a member or designated non-member of a recognised investment exchange or a member of a recognised clearing house—
(a)a bankruptcy order, or
(b)an administration or winding up order, a resolution for voluntary winding up or an order appointing a provisional liquidator,
and the exchange or clearing house has not taken action under its default rules in consequence of the order or resolution or the matters giving rise to it, a relevant office-holder appointed by, or in consequence of or in connection with, the order or resolution may apply to the[F10 Authority].
[F11(1A) In paragraph (1) a reference to an administration order shall be taken to include a reference to the appointment of an administrator under—
(a)paragraph 15 of Schedule B1 to the Insolvency Order (appointment by holder of qualifying floating charge), or
(b)paragraph 23 of that Schedule (appointment by company or directors).]
(2) The application shall specify the exchange or clearing house concerned and the grounds on which it is made.
(3) On receipt of the application the[F10 Authority] shall notify the exchange or clearing house, and unless within three business days after the day on which the notice is received the exchange or clearing house—
(a)takes action under its default rules, or
(b)notifies the[F10 Authority] that it proposes to do so forthwith,
then, subject as follows, the provisions of Articles 81 to 88 do not apply in relation to market contracts to which the member or designated non-member in question is a party or to anything done by the exchange or clearing house for the purposes of, or in connection with, the settlement of any such contract.
For this purpose a “business day” means any day which is not a Saturday or Sunday, Christmas Day, Good Friday or a bank holiday in any part of the United Kingdom under the Banking and Financial Dealings Act 1971F12.
(4) The provisions of Articles 81 to 88 are not disapplied if before the end of the period mentioned in paragraph (3) the[F10 Authority] gives the exchange or clearing house a direction under Article 89(2)(a) (direction to take action under default rules).
No such direction may be given after the end of that period.
(5) If the exchange or clearing house notifies the[F10 Authority] that it proposes to take action under its default rules forthwith, it shall do so; and that duty is enforceable, on the application of the[F10 Authority], by injunction.
F10SI 2001/3649
F11Art. 90(1A) inserted (27.3.2006) by Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455 (N.I. 10)), arts. 1(3), 3(3), Sch. 2 para. 51; S.R. 2006/21, art. 2 (with transitional provisions and savings in S.R. 2006/22, arts. 2-7)
Art. 91 rep. by SI 2001/3649