The Banks and Building Societies (Priorities on Insolvency) Order 2018

PART 5 Amendments of the Insolvency (Northern Ireland) Order 1989

Introduction

22.  The Insolvency (Northern Ireland) Order 1989(1) is amended in accordance with this Part.

Non-preferential debts in company voluntary arrangements

23.  In Article 17 (decisions of meetings), in paragraph (4)(2)—

(a) in the words before paragraph (a) omit “preferential”,

(b) in sub-paragraph (b), omit the final “or”;

(c) after sub-paragraph (c) insert—

“or

(d) in the case of a company which is a relevant financial institution (see Article 347A), any non-preferential debt is to be paid otherwise than in accordance with the rules in Article 150ZZA(2) or (3).”

Non-preferential debts in winding up of companies

24.  After Article 150 insert—

“Non-preferential debts

Non-preferential debts of financial institutions

150ZZA.— (1) This Article applies in the winding up of a company that is a relevant financial institution.

(2) The company’s ordinary non-preferential debts are to be paid in priority to its secondary non-preferential debts.

(3) The company’s secondary non-preferential debts—

(a) are to be paid in priority to its tertiary non-preferential debts, and

(b) rank equally among themselves after the ordinary non-preferential debts and are to be paid in full, unless the assets are insufficient to meet them, in which case they abate in equal proportions.

(4) See Article 347A for definitions relevant to this Article.”.

Non-preferential debts in individual voluntary arrangements

25.—(1) Article 232 (decisions of creditors’ meeting)(3) is amended as follows.

(2) In paragraph (6)—

(a) in sub-paragraph (b), omit the final “or”;

(b) after sub-paragraph (c) insert—

“or

(d) if the debtor is a relevant financial institution (see Article 347A), any non-preferential debt is to be paid otherwise than in accordance with the rules in Article 300(3A) (reading references to the bankrupt as references to the debtor).”.

(3) In paragraph (7), omit “preferential”.

Non-preferential debts in bankruptcy proceedings

26.—(1) Article 300 (priority of debts)(4) is amended as follows.

(2) After paragraph (3) insert—

“(3A) If the bankrupt is a relevant financial institution, paragraph (3) does not apply but—

(a) the bankrupt’s ordinary non-preferential debts are to be paid in priority to the bankrupt’s secondary non-preferential debts,

(b) the bankrupt’s ordinary non-preferential debts rank equally among themselves after the secondary preferential debts and are to be paid in full, unless the bankrupt’s estate is insufficient to meet them, in which case they abate in equal proportions,

(c) the bankrupt’s secondary non-preferential debts are to be paid in priority to the bankrupt’s tertiary non-preferential debts, and

(d) the bankrupt’s secondary non-preferential debts rank equally among themselves after the ordinary non-preferential debts and are to be paid in full, unless the bankrupt’s estate is insufficient to meet them, in which case they abate in equal proportions.

See Article 347A for definitions relevant to this paragraph.”.

(3) In paragraph (4)—

(a) for the words from “that” to “paragraph (3)” substitute—

“—

(a) where paragraph (3) applies, that are preferential or rank equally under that paragraph, or

(b) where paragraph (3A) applies, that are preferential or are referred to in that paragraph,”;

(b) for “period” substitute “periods”.

27.  In Article 302 (debts to spouse or civil partner)(5), in paragraph (2)(a)—

(a) omit “debts and”;

(b) for “300(3) and (4)” substitute “300(4)”.

Interpretation

28.  In the heading of Part 11, after “Preferential” insert “and non-preferential”.

29.  After Article 347 insert—

“Financial institutions and their non-preferential debts

347A.— (1) In this Order “relevant financial institution” means any of the following—

(a) a credit institution,

(b) an investment firm,

(c) a financial holding company,

(d) a mixed financial holding company.

(e) a financial institution which is—

(i) a subsidiary of an entity referred to in sub-paragraphs (a) to (d), and

(ii) covered by the supervision of that entity on a consolidated basis in accordance with Articles 6 to 17 of Regulation (EU) No 575/2013(6), or

(f) a mixed-activity holding company.

(2) The definitions in Article 4 of Regulation (EU) No. 575/2013(7) apply for the purposes of paragraph (1).

(3) In this Order, in relation to a relevant financial institution—

(a) “ordinary non-preferential debts” means non-preferential debts which are neither secondary non-preferential debts nor tertiary non-preferential debts;

(b) “secondary non-preferential debts” means non-preferential debts issued under an instrument where—

(i) the original contractual maturity of the instrument is of at least one year,

(ii) the instrument is not a derivative and contains no embedded derivative, and

(iii) the relevant contractual documentation and where applicable the prospectus related to the issue of the debts explain the priority of the debts under this Order, and

(c) “tertiary non-preferential debts” means all subordinated debts, including (but not limited to) debts under Common Equity Tier 1 instruments, Additional Tier 1 instruments and Tier 2 instruments (all within the meaning of Part 1 of the Banking Act 2009).

(4) In paragraph(3)(b), “derivative” has the same meaning as in Article 2(5) of Regulation (EU) No 648/2012(8).

(5) For the purposes of paragraph (3)(b)(ii) an instrument does not contain an embedded derivative merely because—

(a) it provides for a variable interest rate derived from a broadly used reference rate, or

(b) it is not denominated in the domestic currency of the person issuing the debt (provided that the principal, repayment and interest are denominated in the same currency).”.

Moratorium where directors propose voluntary arrangement

30.—(1) In Schedule A1 (moratorium where directors propose voluntary arrangement), paragraph 41 (approval of voluntary arrangement)(9) is amended as follows.

(2) In sub-paragraph (5)(b)(10), omit the final “or”.

(3) After sub-paragraph (5)(c) insert—

“or

(d) if the company is a relevant financial institution (see Article 347A), any non-preferential debt is to be paid otherwise than in accordance with the rules in Article 150ZZA(2) or (3).”.

(4) In sub-paragraph (6), omit “preferential”.

Administration and secondary non-preferential debts

31.—(1) Schedule B1 (administration)(11) is amended as follows.

(2) In paragraph 66 (distribution)(12), in sub-paragraph (2)—

(a) for “Article 149” substitute “Articles 149 and 150ZZA”, and

(b) for “it applies” substitute “they apply”.

(3) In paragraph 74 (protection for secured or preferential creditor)(13)—

(a) in the heading, for “secured or preferential” substitute “priority”;

(b) in sub-paragraph (1)(c), omit the final “or”;

(c) after sub-paragraph (1)(d) insert—

“or

(e) if the company is a relevant financial institution (see Article 347A), would result in any non-preferential debt being paid otherwise than in accordance with the rules in Article 150ZZA(2) or (3).”.

(1)

S.I. 1989/2405 (N.I. 19). Relevant amendments have been made by the Insolvency (Northern Ireland) Order 2002 (S.I. 2002 No. 3152 (N.I. 6), S.R. 2004 No. 307, the Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455 (N.I. 10)), S.I. 2014 No. 3486, paragraph 83 of schedule 29 to the Civil Partnership Act 2004 (c.33).

(2)

as amended by S.I. 2014/3486 Part 4 articles 16(a) and (b).

(3)

amended by S.I. 2014/3486, there is another amendment but it is not relevant.

(4)

amended by S.I. 2014/3486, Part 4, Article 19 (subject to transitional provisions specified in S.I. 2014/3486, Article 3).

(5)

amended by the Civil Partnership Act 2004 (c.33) Schedule 29, paragraph 83.

(6)

OJ L 176, 27.6.2013, p. 1; there are no relevant amendments; for corrigenda see OJ L 208, 2/9/13, p.68, OJ no L321, 30/11/2013 p. 6. and OJ L 20, 25.1.2017, p. 2.

(7)

OJ L 176, 27.6.2013, p. 1; there are no relevant amendments; for corrigenda see OJ L 208, 2/9/13, p.68, OJ no L321, 30/11/2013 p. 6. and OJ L 20, 25.1.2017, p. 2.

(8)

OJ L 201, 27.7.2012, p. 1; there are no relevant amendments; for corrigenda see OJ L 321, 30/11/2013, p.6.

(9)

Amended by S.R. 2004 No. 307.

(10)

Words revoked by S.I. 2014/3486.

(11)

added by S.I. 2005/1455 (N.I. 10), Schedule 1, paragraph 1.

(12)

added by S.I. 2005/1455 (N.I. 10), Schedule 1, paragraph 1.

(13)

added by S.I. 2005/1455 (N.I. 10), Schedule 1, paragraph 1; amended by S.I. 2014/3486.