261.A bank liquidator has two statutory objectives. The first is to work with the FSCS to ensure that either the accounts of eligible depositors are transferred to another financial institution or payments are made to eligible depositors. The second objective provides that the bank liquidator is obliged to wind up the affairs of the failed bank in the interests of creditors as a whole.
262.Subsection (4) provides that while objective 1 takes precedence, the bank liquidator should also take all the immediate steps that he or she would in an ordinary liquidation to protect the interests of creditors generally, for example identifying and collecting in the assets of the failed bank.
263.To ensure that the objectives of the bank insolvency procedure may be met, as in an ordinary liquidation, joint bank liquidators may be appointed - see Section 103 which (among other provisions) applies section 231 of the Insolvency Act 1986.
264.Once objective 1 has been achieved, or has been substantially completed, the process of liquidation will continue in much the same way as a normal winding up with the liquidator calling a meeting of creditors, realising the assets of the failed bank and distributing the proceeds to creditors.
265.During the course of ordinary winding up proceedings creditors may resolve at a meeting to form a liquidation committee. That committee can require the liquidator to report to them on matters relating generally to the winding up of a company and the liquidator may take certain actions only with the committee’s approval.
266.In this modified procedure, to facilitate a bulk transfer of accounts or prompt payments to eligible depositors, the bank insolvency procedure provides for a two-stage committee process. In the first stage of the procedure, representatives from the Bank of England, the FSA and the FSCS are obliged to form a liquidation committee.
267.Once the initial liquidation committee has passed a “full payment resolution” – that is, it resolves that objective 1 has been achieved (or that process is substantially complete) the bank liquidator is obliged to call a meeting of creditors. At that meeting the creditors may resolve to elect new members to the liquidation committee. At this stage, the representatives from the Bank of England and the FSA will be obliged to stand down from the committee, although the FSCS (as it will be a significant creditor in the insolvency having taken over the claims of the eligible depositors) will have the option to retain its presence.
268.Subsection (1) provides that a meeting of the liquidation committee may be called by any of the members of the committee or the bank liquidator.
269.Subsection (2) specifies that a meeting of the initial liquidation committee (formed by representatives from the Bank of England, the FSA and the FSCS) is able to conduct its business only when all of the members are present.
270.To protect the interests of creditors and other stakeholders generally, subsection (3) enables the actions of the initial liquidation committee to be challenged in court. In addition, subsection (4) allows the bank liquidator to apply to the court for an order to deem that the committee has passed a full payment resolution option and subsection (5) provides further scope for the liquidator to apply to the court for an or order or directions where he believes that objective 1 has been achieved but the liquidation committee is failing to act accordingly.
271.Subsection (6) provides that the Bank of England, the FSA or the FSCS may replace their representative on the liquidation committee at any time.
272.Subsection (7) provides certain ongoing entitlements to the FSA and the Bank of England, for instance they will be able to attend future meetings of the liquidation committee and may participate in legal proceedings relating to the bank insolvency.
273.This section provides that the initial liquidation committee (made up of the Bank of England, the FSA and the FSCS) must advise the bank liquidator as to whether to pursue a bulk transfer of accounts or to work with the FSCS to enable prompt payments to eligible depositors. The committee may also recommend that certain accounts be transferred while others paid out. In reaching that decision, the liquidation committee must balance the need for quick action to achieve objective 1 with the general interests of creditors of the bank as a whole.
274.Subsection (3) provides that, if the liquidation committee thinks the bank liquidator is failing to comply with their recommendations it must apply to court for directions. The bank liquidator may also apply to the court for directions if the liquidation committee fails to make a recommendation as to how he should proceed to achieve objective 1.
275.Subsection (1) empowers the bank liquidator to do anything necessary or expedient for the pursuit of the objectives in section 99.
276.Subsections (2) to (5) provide that the powers and duties of a bank liquidator and the general process of winding up is in keeping with existing provisions of Part IV of the Insolvency Act 1986 by applying the general provisions relating to liquidators and winding up to bank liquidators and bank insolvency (subsection (2)).
277.In order to adhere to general insolvency law and practice, subsection (6) sets out an extensive table of applied provisions. Many of the existing sections of Part IV and other relevant sections of the Insolvency Act 1986 are applied directly to the bank insolvency procedure with minor modifications where necessary. Those modifications have been kept to a minimum, reflecting that the bank insolvency procedure has much in common with the process of an ordinary liquidation.
278.Changes have been made in order to support the unique objectives of the bank insolvency procedure and to reflect the roles of the Authorities and the FSCS in the early stages of the bank insolvency procedure up to the point that a full payment resolution has been passed.
279.As the bank liquidator can only be an insolvency practitioner, references to the Official Receiver have been removed or replaced throughout. The application, with modification, of section 135 of the Insolvency Act 1986 allows for the appointment of a provisional bank liquidator by the court in the period between the submission of an application for a bank insolvency order and the court hearing for the making of such an order.
280.An ordinary liquidator is able to bring action before the court to pursue certain antecedent recoveries such as transactions at an undervalue or unfair preferences made or given in specified periods prior to the commencement of the winding up proceedings. In order to support the high-level objectives of the special resolution regime, provisions have been made to prevent such actions being brought before the court by a bank liquidator where those relate to the prior exercise of any of the pre-insolvency stabilisation tools under Part 1 of the Act. This also applies to actions in respect of transactions defrauding creditors under section 423 of the Insolvency Act 1986.
281.A bank liquidator has the same general powers as a liquidator under Schedule 4 to the Insolvency Act 1986 (powers of a liquidator in a winding up) and for completeness and clarity this section sets out some additional specific powers drawn from Schedule 1 to that Act (powers of administrator or administrative receiver).
282.Subsection (2) adds the power to effect and maintain insurances.
283.Subsection (3) adds a power to do all things necessary for the realisation of property.
284.Subsection (4) adds a power to make certain payments.
285.This provision makes it clear that a bank liquidator, like any liquidator in a compulsory liquidation, is an officer of the court.
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