Explanatory note

These Rules set out the procedure for the building society insolvency process under Part 2 of the Banking Act 2009 (as applied to building societies by the Building Societies (Insolvency and Special Administration) Order 2009 (S.I. 2009/805, amended by S.I. 2010/1189).

The main features of building society insolvency are as follows. In the event of a building society becoming insolvent, it enables those depositors who are eligible for compensation under the Financial Services Compensation Scheme (“the FSCS”) to either—

This is the first objective of the building society insolvency process.

The procedure can only be initiated by the Bank of England or the Financial Services Authority (“the FSA”) by application to the court. The court then makes a building society insolvency order, appointing a building society liquidator. In the initial stages, the building society liquidator is accountable to a liquidation committee formed of the FSA, the Bank of England and the FSCS.

Once the building society liquidator considers that the first objective is achieved, the liquidation committee will pass a resolution to that effect and the building society insolvency will move to the second objective which is to wind up the affairs of the building society so as to achieve the best results for the creditors as a whole.

The Rules are based on the Insolvency (Scotland) Rules 1986 and certain provisions of the 1986 Rules are applied to these Rules, subject to a number of general and specific modifications.

Part 1 contains introductory provisions.

Part 2 of these Rules sets out the application process for a building society insolvency order.

Part 3 sets out the procedure for appointing a provisional bank liquidator.

Part 4 sets out provisions relating to the statement of affairs.

Part 5 makes provision in relation to creditors and contributories.

Part 6 sets out the procedure concerning meetings of contributories.

Part 7 sets out procedure concerning claims.

Part 8 sets out provisions relating to the liquidator.

Part 9 sets out provisions concerning the liquidation committee.

Part 10 set out provisions relating to the distribution of building society assets.

Part 11 set out provisions concerning the special manager.

Part 12 set out miscellaneous provisions.

Part 13 sets out provisions relating to meetings.

Part 14 contains general provisions.

An Impact Assessment relating to the rules for building society insolvency and special administration has been prepared and may be obtained from the Financial Regulatory Strategy Team, HM Treasury, 1 Horse Guards Road, London SW1A 2HQ. It is also available on HM Treasury’s website (www.hm-treasury.gov.uk).