Rule 127 Order of priority in distributionI1

Scotland

(1)

The funds of the institution’s assets must be distributed by the administrator to meet the following expenses and debts in the order in which they are mentioned—

(a)

the expenses of the special administration,

(b)

any preferential debts within the meaning of section 386(1) of the IA 1986^f1 (excluding any interest which has been accrued to the date on which the institution entered special administration),

(c)

ordinary debts, that is to say, a debt which is neither a secured debt nor a debt mentioned in any other sub-paragraph of this paragraph,

(d)

interest at the official rate, between the date on which the institution entered special administration and the date of payment, on—

(i)

the preferential debts,

(ii)

the ordinary debts,

(e)

any postponed debt.

(2)

In paragraph (1)—

(a)

“postponed debt” means—

(i)

a creditor’s right to any alienation which has been reduced or restored to the institution’s assets under section 242 of the IA 1986^f2 or to the proceeds of the sale of such an alienation,

(ii)

a claim arising by virtue of section 382(1)(a) of the Financial Services and Markets Act 2000^f3 (restitution orders), unless it is also a claim arising by virtue of sub-paragraph (b) of that section (a person who has suffered loss etc.), or

(iii)

in special administration, a claim which by virtue of the IA 1986 (as applied by F1regulation 37) or any other enactment is a claim the payment of which is to be postponed.

(3)

The expenses of the special administration mentioned in paragraph (1)(a) are payable in the order of priority mentioned in rule 95.

(4)

Subject to section 175 of the IA 1986^f4 (as applied by paragraph 65(2))—

(a)

any debt falling within either of sub-paragraphs (1)(b) or (1)(c) is to have the same priority as any other debt falling within the same sub-paragraph,

(b)

where the funds of the institution’s assets are inadequate to enable such debts to be paid in full, they are to abate in equal proportions.

(5)

Any surplus remaining, after all expenses and debts mentioned in paragraph F2(1) have been paid in full, must (unless the articles of the institution provide otherwise) be distributed among the members according to their rights and interests in the institution.

(6)

Nothing in this rule affects—

(a)

the right of a secured creditor which is preferable to the rights of the administrator, or

(b)

any preference of the holder of a lien over a title deed or other document which the administrator has taken into their custody or control in accordance with paragraph 67.

Annotations

Textual amendments

F1: Word in rule 127(2)(a)(iii) substituted (26.2.2025) by The Payment and Electronic Money Institution Insolvency (Scotland) (Amendment) Rules 2025 (S.I. 2025/110), rules 2, 4(10)(a)
F2: Word in rule 127(5) inserted (26.2.2025) by The Payment and Electronic Money Institution Insolvency (Scotland) (Amendment) Rules 2025 (S.I. 2025/110), rules 2, 4(10)(b)

Commencement

I1: Rule 127 in force at 19.12.2022, see rule 2

Footnotes

f1: Section 386(1) was amended by section 251(3) of the Enterprise Act 2002 (c. 40), section 13(2) of the Financial Services (Banking Reform) Act 2013 (c. 33), section 98(1)(a) of the Finance Act 2020 (c. 14), S.I. 2014/3486 and S.I. 2015/486.
f2: Section 242 was amended by section 248(3) of the Enterprise Act 2002 and S.I. 2016/1034.
f3: 2000 c. 8; section 382(1) was amended by Schedule 9 to the Financial Services Act 2012 (c. 21), paragraph 21(2).
f4: Section 175 was amended by section 2(1) of the Corporate Insolvency and Governance Act 2020 (c. 12) and S.I. 2014/3486.