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| Companies Act 1989 |
| 1989 c. 40 - continued
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| Companies Act Index |
Part VII |
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Financial Markets and Insolvency |
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Introduction
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Introduction.
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154. This
Part has effect for the purposes of safeguarding the operation of
certain financial markets by provisions with respect to
(a) the insolvency, winding up or default of a person
party to transactions in the market (sections 155 to 172),
(b) the effectiveness or enforcement of certain charges
given to secure obligations in connection with such transactions
(sections 173 to 176), and
(c) rights and remedies in relation to certain property
provided as cover for margin in relation to such transactions or
subject to such a charge (sections 177 to 181). |
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Recognised investment exchanges and clearing houses
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Market contracts.
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155.(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"
.
(2) 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 made on or otherwise subject
to the rules of the exchange; 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.
(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 Secretary of State 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 subsections (2) and (3) above. |
Additional requirements
for recognition: default rules, &c.
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156.(1) The
[1986 c. 60.] Financial Services Act 1986 shall have effect
as if the requirements set out in Schedule 21 to this Act (the "additional
requirements") were among those specified in that Act for recognition
of an investment exchange or clearing house.
(2) In particular, that Act shall
have effect
(a) as if the requirements set out in Part I of that
Schedule were among those specified in Schedule 4 to that Act (requirements
for recognition of UK investment exchange),
(b) as if the requirements set out in Part II of that
Schedule were among those specified in section 39(4) of that Act
(requirements for recognition of UK clearing house), and
(c) as if the requirement set out in Part III of that
Schedule was among those specified in section 40(2) of that Act
(requirements for recognition of overseas investment exchange or
clearing house).
(3) The additional requirements do not
affect the status of an investment exchange or clearing house recognised
before the commencement of this section, but if the Secretary of State
is of the opinion that any of those requirements is not met in the
case of such a body, he shall within one month of commencement give
notice to the body stating his opinion.
(4) Where the Secretary of State
gives such a notice, he shall not
(a) take action to revoke the recognition of such a body
on the ground that any of the additional requirements is not met,
unless he considers it essential to do so in the interests of investors,
or
(b) apply on any such ground for a compliance order under
section 12 of the Financial Services Act 1986,
until after the end of the period of six months beginning with the
date on which the notice was given.
(5) The Secretary of State may extend,
or further extend, that period if he considers there is good reason
to do so. |
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157.(1) A
recognised UK investment exchange or recognised UK clearing house
shall give the Secretary of State at least 14 days' notice of any
proposal to amend, revoke or add to its default rules; and the Secretary
of State may within 14 days from receipt of the notice direct the
exchange or clearing house not to proceed with the proposal, in whole
or in part.
(2) A direction under this section
may be varied or revoked.
(3) Any amendment or revocation of,
or addition to, the default rules of an exchange or clearing house
in breach of a direction under this section is ineffective. |
Modifications
of the law of insolvency.
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158.(1) The
general law of insolvency 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 sections 159 to 165.
(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, notwithstanding
that rights or liabilities arising from market contracts fall to be
dealt with in the proceedings.
(3) The reference in subsection (2)(b)
to the beginning of insolvency proceedings is to
(a) the presentation of a bankruptcy petition or a petition
for sequestration of a person's estate, or
(b) the presentation of a petition for an administration
order or a winding-up petition or the passing of a resolution for
voluntary winding up, or
(c) the appointment of an administrative receiver.
(4) The Secretary of State may make further
provision by regulations modifying the law of insolvency in relation
to the matters mentioned in subsection (1).
(5) The regulations may add to, amend
or repeal the provisions mentioned in subsection (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. |
Proceedings of
exchange or clearing house take precedence over insolvency procedures.
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159.(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, winding up or sequestration,
or in the administration of an insolvent estate
(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 [1986
c. 45.] Insolvency Act 1986 or the [1985 c. 66.]
Bankruptcy (Scotland) Act 1985 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 section 163(4) or 164(4) or prevent the
court from afterwards making any such order or decree as is mentioned
in section 165(1) or (2) (but subject to subsections (3) and (4) of
that section).
(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, or in Scotland
claimed in a winding up or sequestration, until the completion of
the default proceedings.
A debt or other liability which by virtue of this subsection may
not be proved or claimed shall not be taken into account for the
purposes of any set-off until the completion of the default proceedings.
(5) For the purposes of subsection
(4) the default proceedings shall be taken to be completed in relation
to a person when a report is made under section 162 stating the
sum (if any) certified to be due to or from him. |
Disclaimer of
property, rescission of contracts.
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164.(1) Sections
178, 186, 315 and 345 of the Insolvency Act 1986 (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.
In the application of this subsection in Scotland, the reference to
sections 178, 315 and 345 shall be construed as a reference to any
rule of law having the like effect as those sections.
(2) In Scotland, a permanent trustee
on the sequestrated estate of a defaulter or a liquidator is bound
by any market contract to which that defaulter is a party and by
any contract as is mentioned in subsection (1)(b) above notwithstanding
section 42 of the [1985 c. 66.] Bankruptcy (Scotland)
Act 1985 or any rule of law to the like effect applying in liquidations.
(3) Sections 127 and 284 of the Insolvency
Act 1986 (avoidance of property dispositions effected after commencement
of winding up or presentation of bankruptcy petition), and section
32(8) of the Bankruptcy (Scotland) Act 1985 (effect of dealing with
debtor relating to estate vested in permanent trustee), 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.
(4) 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 or sequestration of the estate 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.
(5) Subsection (4)(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 subsection (4)(b) applies
in relation to the provision of margin in relation to such a contract.
(6) Any sum recoverable by virtue
of subsection (4) ranks for priority, in the event of the insolvency
of the person from whom it is due, immediately before preferential
or, in Scotland, preferred debts. |
Adjustment of
prior transactions.
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165.(1) No
order shall be made in relation to a transaction to which this section
applies under
(a) section 238 or 339 of the Insolvency Act 1986 (transactions
at an under-value),
(b) section 239 or 340 of that Act (preferences), or
(c) section 423 of that Act (transactions defrauding
creditors).
(2) As respects Scotland, no decree shall
be granted in relation to any such transaction
(a) under section 34 or 36 of the [1985 c. 66.]
Bankruptcy (Scotland) Act 1985 or section 242 or 243 of the Insolvency
Act 1986 (gratuitous alienations and unfair preferences), or
(b) at common law on grounds of gratuitous alienations
or fraudulent preferences.
(3) This section 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.
(4) Where margin is provided in relation
to a market contract and (by virtue of subsection (3)(a) or otherwise)
no such order or decree as is mentioned in subsection (1) or (2) has
been, or could be, made in relation to that contract, this section
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. |
Powers of Secretary
of State to give directions.
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166.(1) The
powers conferred by this section 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
(a) if it appears to the Secretary of State that it could
take action, he may direct it to do so, and
(b) if it appears to the Secretary of State that it is
proposing to take or may take action, he may direct it not to do
so.
(3) Before giving such a direction the
Secretary of State shall consult the exchange or clearing house in
question; and he shall not give a direction unless he 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 or an award of sequestration of
his estate has been made, or an interim receiver or interim trustee
has been appointed, 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, award or appointment.
(7) Where an exchange or clearing
house has taken or been directed to take action under its default
rules, the Secretary of State 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 Secretary of State shall not give such a direction unless he
is satisfied that it will not impede or frustrate the proper and
efficient conduct of the default proceedings.
(8) A direction under this section
is enforceable, on the application of the Secretary of State, by
injunction or, in Scotland, by an order under section 45 of the
[1988 c. 36.] Court of Session Act 1988; 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. |
Application to
determine whether default proceedings to be taken.
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167.(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 an award of sequestration of
his estate, or an order appointing an interim receiver of his property,
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, award 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, award or
resolution may apply to the Secretary of State.
(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 Secretary of State 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 Secretary of State that it proposes
to do so forthwith,
then, subject as follows, the provisions of sections 158 to 165 above
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 [1971 c. 80.]
Banking and Financial Dealings Act 1971.
(4) The provisions of sections 158
to 165 are not disapplied if before the end of the period mentioned
in subsection (3) the Secretary of State gives the exchange or clearing
house a direction under section 166(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 Secretary of State 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 Secretary of State, by
injunction or, in Scotland, by an order under section 45 of the
[1988 c. 36.] Court of Session Act 1988. |
Delegation of
functions to designated agency.
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168.(1) Section
114 of the Financial Services Act 1986 (power to transfer functions
to designated agency) applies to the functions of the Secretary of
State under this Part in relation to a UK investment exchange or clearing
house, with the exception of his functions with respect to the making
of orders and regulations.
(2) If immediately before the commencement
of this section
(a) a designated agency is exercising all functions in
relation to such bodies which are capable of being transferred under
that section, and
(b) no draft order is lying before Parliament resuming
any of those functions,
the order bringing this section into force shall have effect as a
delegation order made under that section transferring to that agency
all the functions which may be transferred by virtue of this section.
(3) The Secretary of State may
(a) in the circumstances mentioned in subsection (3),
(4) or (5) of section 115 of the [1986 c. 60.] Financial
Services Act 1986, or
(b) if it appears to him that a designated agency is
unable or unwilling to discharge all or any of the functions under
this Part which have been transferred to it,
make an order under that section resuming all functions under this
Part which have been transferred to the agency.
This does not affect his power to make an order under subsection
(1) or (2) of that section with respect to such functions. |
Supplementary
provisions.
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169.(1) Section
61 of the Financial Services Act 1986 (injunctions and restitution
orders) applies in relation to a contravention of any provision of
the rules of a recognised investment exchange or recognised clearing
house relating to the matters mentioned in Schedule 21 to this Act
as it applies in relation to a contravention of any provision of such
rules relating to the carrying on of investment business.
(2) The following provisions of the
Financial Services Act 1986
section 12 (compliance orders), as it applies by virtue of section
37(8) or 39(8),
section 37(7)(b) (revocation of recognition of UK investment exchange),
and
section 39(7)(b) (revocation of recognition of UK clearing house),
apply in relation to a failure by a recognised investment exchange
or recognised clearing house to comply with an obligation under this
Part as to a failure to comply with an obligation under that Act.
(3) Where the recognition of an investment
exchange or clearing house is revoked under the Financial Services
Act 1986, the Secretary of State may, before or after the revocation
order, give such directions as he thinks fit with respect to the
continued application of the provisions of this Part, with such
exceptions, additions and adaptations as may be specified in the
direction, in relation to cases where a relevant event of any description
specified in the directions occurred before the revocation order
takes effect.
(4) The references in sections 119
and 121 of the [1986 c. 60.] Financial Services Act
1986 (competition) to what is necessary for the protection of investors
shall be construed as including references to what is necessary
for the purposes of this Part.
(5) Section 204 of the Financial
Services Act 1986 (service of notices) applies in relation to a
notice, direction or other document required or authorised by or
under this Part to be given to or served on any person other than
the Secretary of State. |
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Other exchanges and clearing houses
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Certain overseas
exchanges and clearing houses.
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170.(1) The
Secretary of State may by regulations provide that this Part applies
in relation to contracts connected with an overseas investment exchange
or clearing house which is approved by him in accordance with such
procedures as may be specified in the regulations, as satisfying such
requirements as may be so specified, as it applies in relation to
contracts connected with a recognised investment exchange or clearing
house.
(2) The Secretary of State shall
not approve an overseas investment exchange or clearing house unless
he is satisfied
(a) that the rules and practices of the body, together
with the law of the country in which the body's head office is situated,
provide adequate procedures for dealing with the default of persons
party to contracts connected with the body, and
(b) that it is otherwise appropriate to approve the body.
(3) The reference in subsection (2)(a)
to default is to a person being unable to meet his obligations.
(4) The regulations may apply in
relation to the approval of a body under this section such of the
provisions of the Financial Services Act 1986 as the Secretary of
State considers appropriate.
(5) The Secretary of State may make
regulations which, in relation to a body which is so approved
(a) apply such of the provisions of the Financial Services
Act 1986 as the Secretary of State considers appropriate, and
(b) provide that the provisions of this Part apply with
such exceptions, additions and adaptations as appear to the Secretary
of State to be necessary or expedient;
and different provision may be made with respect to different bodies
or descriptions of body.
(6) Where the regulations apply any
provisions of the Financial Services Act 1986, they may provide
that those provisions apply with such exceptions, additions and
adaptations as appear to the Secretary of State to be necessary
or expedient. |
Certain money
market institutions.
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171.(1) The
Secretary of State may by regulations provide that this Part applies
to contracts of any specified description in relation to which settlement
arrangements are provided by a person for the time being included
in a list maintained by the Bank of England for the purposes of this
section, as it applies to contracts connected with a recognised investment
exchange or recognised clearing house.
(2) The Secretary of State shall
not make any such regulations unless he is satisfied, having regard
to the extent to which the contracts in question
(a) involve, or are likely to involve, investments falling
within paragraph 2 of Schedule 5 to the Financial Services Act 1986
(money market investments), or
(b) are otherwise of a kind dealt in by persons supervised
by the Bank of England,
that it is appropriate that the arrangements should be subject to
the supervision of the Bank of England.
(3) The approval of the Treasury
is required for
(a) the conditions imposed by the Bank of England for
admission to the list maintained by it for the purposes of this
section, and
(b) the arrangements for a person's admission to and
removal from the list;
and any regulations made under this section shall cease to have effect
if the approval of the Treasury is withdrawn, but without prejudice
to their having effect again if approval is given for fresh conditions
or arrangements.
(4) The Bank of England shall publish
the list as for the time being in force and provide a certified
copy of it at the request of any person wishing to refer to it in
legal proceedings.
A certified copy shall be evidence (in Scotland, sufficient evidence)
of the contents of the list; and a copy purporting to be certified
by or on behalf of the Bank shall be deemed to have been duly certified
unless the contrary is shown.
(5) Regulations under this section
may, in relation to a person included in the list
(a) apply, with such exceptions, additions and adaptations
as appear to the Secretary of State to be necessary or expedient,
such of the provisions of the [1986 c. 60.] Financial
Services Act 1986 as he considers appropriate, and
(b) provide that the provisions of this Part apply with
such exceptions, additions and adaptations as appear to the Secretary
of State to be necessary or expedient.
(6) Before making any regulations under
this section, the Secretary of State shall consult the Treasury and
the Bank of England.
(7) In section 84(1) of the [1987
c. 22.] Banking Act 1987 (disclosure of information obtained
under that Act), in the Table showing the authorities to which,
and functions for the purposes of which, disclosure may be made,
at the end add
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"
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| A person included in the list maintained by the
Bank for the purposes of section 171 of the Companies
Act 1989. |
Functions under settlement arrangements to which
regulations under that section relate. |
" |
. |
Settlement arrangements
provided by the Bank of England.
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172.(1) The
Secretary of State may by regulations provide that this Part applies
to contracts of any specified description in relation to which settlement
arrangements are provided by the Bank of England, as it applies to
contracts connected with a recognised investment exchange or recognised
clearing house.
(2) Regulations under this section
may provide that the provisions of this Part apply with such exceptions,
additions and adaptations as appear to the Secretary of State to
be necessary or expedient.
(3) Before making any regulations
under this section, the Secretary of State shall consult the Treasury
and the Bank of England. |
| © Crown copyright 1989 |
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