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United Kingdom

The Financial Services and Markets Act 2000 (FSMA) came into force at midnight on November 30 2001, and includes new provisions controlling banking business transfer schemes.

The control of most banking business transfer schemes now falls under Part VII of FSMA. Under s.104 FSMA, no banking business transfer scheme may have effect unless a court order has been made in relation to it under s. 111(1). Under this section, the High Court may make an order sanctioning the business transfer scheme provided the following conditions are met:

  • the FSMA certificates set out in Parts I and II of Schedule 12 of FSMA, including certificates as to solvency and financial resources, have been obtained; and
  • the transferee has any authorization required to carry on the business being transferred.

A banking business transfer scheme is defined as being where:

  • the whole or part of the business carried on by a UK authorized person who has permission to accept deposits is to be transferred to another body; or
  • the whole or part of the business carried on in the UK by a person who is not a UK authorized person but who has permission to accept deposits is to be transferred to another body which will carry it on in the UK; and
  • the scheme is one under which the whole or part of the business to be transferred includes the acceptance of deposits.

For a Part VII banking business transfer scheme to have effect, an application must be made to the High Court to sanction the scheme.

The Control of Business Transfers (Requirements on Applicants) Regulations 2001 specify the requirements that applicants for approval of a transfer must meet.

Under Regulation 5, a person applying for an order to sanction a banking business transfer must publish a notice stating that the application has been made in the London, Edinburgh and Belfast Gazettes, and in two national newspapers in the UK (although the latter publication requirement may be waived by the court in any circumstances where the court considers it appropriate to do so). This notice must by approved by the FSA prior to its publication and must contain addresses where documents may be obtained or inspected.

A copy of the application must be open to inspection at offices in the UK of the parties, for a period of not less than 21 days beginning with the date of the first publication of the notice. In addition, a statement setting out the terms of the scheme must be sent free of charge to any person who requests it. Copies of both the application and the notice must be given to the Financial Services Authority (FSA).

If the court makes an order, it may by that or any subsequent order make provision (if any) as it thinks fit:

  • for the transfer to the transferee of the undertaking concerned;
  • for the allotment or appropriation by the transferee of any shares, debentures or similar interests which under the scheme are to be allotted to or for any other person;
  • for the continuation by (or against) the transferee of any pending legal proceedings by (or against) the authorized person concerned; and
  • with respect to such incidental, consequential and supplementary matters as are, in its opinion, necessary to secure that the scheme is fully and effectively carried out (s. 12(1)).

Once the order has been granted, the transferee must deposit two office copies of the order made by the court to the FSA within 10 days of the making of that order.

Richard Thompson

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