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CIS 14.2 Winding up a solvent ICVC

Explanation of CIS 14.2

CIS 14.2.1G

An ICVC may be wound up by the court, but, provided the ICVC is solvent and the steps required by the OEIC regulations and the conditions contained in this chapter are fulfilled, the winding up may instead be carried out under this chapter. Under regulation 21 of the OEIC regulations the ICVC must give written notice to the FSA of a proposal to wind up the ICVC. This section lays down procedures to be followed and the obligations of the ACD and any other directors. A winding up may not be carried out under these rules if there is a vacancy in the position of ACD.

CIS 14.2.2G

This table belongs to CIS 14.2.2 G

Summary of the main steps in winding up a solvent ICVC under FSA regulations, assuming FSA approval

Step number

Explanation

When

Rule

1

Commence preparation of solvency statement

By N

14.2.4(2)

2

Send audited solvency statement to the FSA with copy to depositary

By N + 21 days

14.2.4(4) and (5)

3

Receive the FSA approval

N + one month

Regulation 21 of ICVC regulations

4

Normal business ceases; publish notices

E

14.2.5

5

Realise proceeds, wind-up, instruct depositary accordingly

ASAP after E

14.2.6

6

Inform the FSA of W/U completion

ASAP after W/U complete

14.2.6(8)

7

Prepare final account + have audited

On completion of W/U

14.2.7

8

Send final account and auditor's report to the FSA + shareholders

Within 2 months of FAP

14.2.7(6)

Notes: N = Notice to be given to the FSA under regulation 21 of OEIC regulations

E = Effective time (CIS 14.2.5 R (1))

W/U = winding-up

FAP = Final accounting period (CIS 14.2.7 R (4))

When an ICVC is to be wound up

CIS 14.2.3R
  1. (1)

    An ICVC must not be wound up except under this chapter or as an unregistered company under Part V of the Insolvency Act 1986.

  2. (2)

    An ICVC must not be wound up under this chapter:

    1. (a)
      1. (i)

        unless and until effect may be given, under regulation 21 of the OEIC regulations, to a proposal to wind up the affairs of the ICVC otherwise than by the court; and

      2. (ii)

        unless a statement has been prepared and sent or delivered to the FSA under CIS 14.2.4 R (Solvency statement) and received by the FSA prior to satisfaction of the condition in (a)(i); or

    2. (b)

      if there is a vacancy in the position of ACD at the effective time; or

    3. (c)

      if it is being wound up under Part V of the Insolvency Act 1986.

  3. (3)

    Subject to (2) and the subsequent provisions of this section (CIS 14.2), the appropriate steps to wind up an ICVC under this section must be taken:

    1. (a)

      if an extraordinary resolution to that effect is passed; or

    2. (b)

      when the period (if any) fixed for the duration of the ICVC by its instrument of incorporation expires or any event occurs, for which its instrument of incorporation provides that the ICVC is to be wound up; or

    3. (c)

      on the date stated in any agreement by the FSA in response to a request from the directors for the revocation of the authorisation order in respect of the ICVC, even if that agreement is subject to there being no material change in any relevant factor before the date of the revocation.

Solvency statement

CIS 14.2.4R
  1. (1)

    Before a notice being given to the FSA under regulation 21 of the OEIC regulations of the proposal referred to in CIS 14.2.3 R (2)(a), the directors must make a full enquiry into the ICVC's affairs so as to ascertain whether the ICVC will be able to meet its liabilities (including contingent and prospective liabilities).

  2. (2)

    On or before the giving of that notice, the ACD must prepare a statement, reflecting the results of the enquiry in (1), and either:

    1. (a)

      confirming that the ICVC will be able to meet all its liabilities within twelve months of the date of that statement; or

    2. (b)

      stating that such confirmation cannot be given.

  3. (3)

    The statement referred to in (2) must:

    1. (a)

      relate to the ICVC's affairs at a date which must not be more than 28 days before the date on which that notice is given to the FSA; and

    2. (b)

      if there is more than one director, be approved by the board of directors and be signed on their behalf by the ACD and, if it contains the confirmation under (2)(a), by at least one other director if there is one or, if there is no director other than the ACD, the ACD.

  4. (4)

    A statement which contains the confirmation under (2)(a) must annex a statement signed by the auditor appointed under Schedule 5 to the OEIC regulations to the effect that, in his opinion, the enquiry required by (1) has been properly made and is fairly reflected by the confirmation.

  5. (5)

    The statement referred to in (2) must be sent or delivered to the FSA and a copy sent to the depositary either before, or on, or within the 21 days following, the date on which notice is given to the FSA in accordance with regulation 21 of the OEIC regulations.

Consequences of commencement of winding up

CIS 14.2.5R
  1. (1)

    In this chapter the "effective time" means the time at which the conditions referred to in CIS 14.2.3 R (2)(a) are satisfied or, if later, the time, determined in accordance with CIS 14.2.3 R (3), at which the ICVC must be wound up.1

  2. (2)

    Immediately following the effective time:

    1. (a)

      CIS 4 (Single-pricing and dealing) and CIS 5 (Investment and borrowing powers) cease to apply to the ICVC;

    2. (b)

      the ICVC must cease to issue and cancel shares;

    3. (c)

      the ACD must cease to sell or redeem shares or to arrange for the ICVC to issue or cancel them;

    4. (d)

      no transfer of a share may be registered and no other change to the register of shareholders may be made without the sanction of the directors; and

    5. (e)

      the ICVC must cease to carry on its business, except so far as may be required for its beneficial winding up; however, the corporate status and corporate powers of the ICVC and (subject to the preceding provisions of this rule (CIS 14.2.5 R)) the powers of the directors continue until the ICVC is dissolved.

  3. (3)

    The ACD must as soon as practicable after the effective time:2

    1. (a)

      publish notice of the commencement of the winding up (if the head office of the ICVC is situated in England and Wales or Wales) in the London Gazette, or (if the head office of the ICVC is situated in Scotland) in the Edinburgh Gazette; and

    2. (b)

      if the ACD has not previously notified shareholders of the proposal to wind up, give written notice of the commencement of the winding up to the shareholders.

Manner of winding up

CIS 14.2.6R
  1. (1)

    The ACD must, as soon as practicable after the effective time, cause the scheme property to be realised and the liabilities of the ICVC to be met out of the proceeds.

  2. (2)

    The ACD must give instructions to the depositary how such proceeds (until utilised to meet liabilities or make distributions to shareholders) must be held and those instructions must be with a view to the prudent protection of creditors and shareholders against loss.

  3. (3)

    Provided there are sufficient liquid funds available after making adequate provision for the expenses of the winding up and the discharge of the ICVC's remaining liabilities, the ACD may arrange for the depositary to make one or more interim distributions out of those funds. Those distributions are to be to the shareholders proportionately to the right of their respective shares to participate in scheme property as at the effective time.

  4. (4)

    When the ACD has caused all the scheme property to be realised and all of the liabilities of the ICVC known to the ACD to be met, the ACD must arrange for the depositary to make a final distribution. That distribution is to be on or before the date on which the final account is sent to shareholders in accordance with CIS 14.2.7 R (6) (Final account), and to be of the balance remaining (net of a provision for any further expenses of the ICVC) to the shareholders in the same proportions as provided by (3).

  5. (5)

    Paragraphs (1) to (4) are subject to the terms of any scheme of arrangement sanctioned by an extraordinary resolution of the ICVC passed on or before the effective time.

  6. (6)

    Where the ICVC and one or more shareholders (other than the ACD) agree, the requirement in (1) to realise the schemeproperty does not apply to that part of the scheme property which is proportionate to the right to participate in scheme property of that or those shareholders.

  7. (7)

    In the case of (6), the ACD must cause the ICVC to distribute that part of the scheme property in specie to that or those shareholders in proportion to their respective rights to participate. The distribution is to be effected after making adjustments and retaining such provision as appears to the ACD appropriate to ensure that those shareholders bear the proportion of the liabilities of the ICVC and the expenses of the distribution attributable to their shares.

  8. (8)

    As soon as is reasonably practicable after the winding up of the ICVC (including compliance with CIS 14.2.7 R (Final account)) is complete, the ACD must notify the FSA of that fact.

  9. (9)

    Where any sum of money stands to the account of the ICVC at the date of its dissolution, the ACD must arrange for the depositary to pay or lodge that sum within one month after that date in accordance with regulation 33(4) or 33(5) of the OEIC regulations.

Final account

CIS 14.2.7R
  1. (1)

    As soon as the ICVC's affairs are fully wound up (including distribution or provision for distribution in accordance with CIS 14.2.6 R (4)), the ACD must prepare an account of the winding up showing:

    1. (a)

      how it has been conducted; and

    2. (b)

      how the scheme property has been disposed of.

  2. (2)

    The account in (1) must:

    1. (a)

      if there is more than one director, be approved by the board of directors and be signed on their behalf by the ACD and at least one other director; or

    2. (b)

      if there is no director other than the ACD, be signed by the ACD.

  3. (3)

    Once signed, this account is the "final account" for the purposes of this chapter.

  4. (4)

    The final account must state the date on which the ICVC's affairs were fully wound up and the date stated must be regarded as the final day of the accounting period of the ICVC then running ('final accounting period').

  5. (5)

    The ACD must ensure that the ICVC's auditor makes a report in respect of the final account, which states the auditor's opinion whether the final account has been properly prepared for the purpose of (1).

  6. (6)

    Within two months of the end of the final accounting period, the ACD must send a copy of the final account and the auditor's report on it to the FSA and to each person who was a shareholder (or the first named of joint holders) immediately before its end.

Duty to ascertain liabilities

CIS 14.2.8R
  1. (1)

    The ACD must use all reasonable endeavours to ensure that all the liabilities of the ICVC are discharged before the completion of the winding up.

  2. (2)

    The duty in (1) relates to all liabilities of the ICVC of which:

    1. (a)

      the ACD is, or becomes, aware before the completion of the winding up; or

    2. (b)

      the ACD would have become aware before the completion of the winding up had it used all reasonable endeavours to ascertain the liabilities of the ICVC.

  3. (3)

    If the ACD rejects any claim against the ICVC in whole or part, the ACD must immediately send to the claimant written notice of its reasons for doing so.

Reports and accounts

CIS 14.2.9R
  1. (1)

    While an ICVC is being wound up, the following continues to apply:

    1. (a)

      the annual and half-yearly accounting periods (required by CIS 9.2.1 R);

    2. (b)

      the rules in CIS 9 about annual and interim allocation of income; and

    3. (c)

      annual reports and half-yearly reports (the rules for which are in CIS 10).

  2. (2)

    The ACD need not (as would be required under CIS 10.5.2 R (2) (Publication of reports)) send to each shareholder a copy of any report relating to an annual accounting period or half-yearly accounting period which began after the effective time, if the directors of the ICVC, after consulting the FSA, have taken reasonable care to determine that the interests of shareholders are not such as to require the report to be sent to shareholders. However, a copy of the report must be supplied free of charge to any shareholder requesting one.

Liabilities of the ACD

CIS 14.2.10R
  1. (1)

    The ACD is personally liable to meet any liability of an ICVC wound up under this chapter (whether or not the ICVC has been dissolved) that was not discharged before the completion of the winding up, except to the extent that the ACD can show that it has complied with CIS 14.2.8 R (Duty to ascertain liabilities).

  2. (2)

    If the proceeds of the realisation of the assets attributable, or allocated in accordance with CIS 12.5.3 R (Allocation of scheme property), to a particular sub-fund of an umbrellaICVC are insufficient to meet the liabilities attributable or allocated to that sub-fund, the ACD must pay to the ICVC for the account of that sub-fund the amount of the deficit. This is subject to and to the extent that the ACD can show that the deficit did not arise as a result of any failure by the ACD to comply with the rules in CIS.

  3. (3)

    The liabilities of the ACD under this rule (CIS 14.2.10 R) create a debt (in England and Wales in the nature of a specialty) accruing due from it on the completion of the winding up and payable upon the demand of the creditor in question (including the ICVC in the circumstances described in (2)).

  4. (4)

    The obligations of the ACD under this rule (CIS 14.2.10 R) do not affect any other obligation of the ACD under these rules or the general law.

Additional provisions applicable to umbrella companies

CIS 14.2.11R
  1. (1)

    Liabilities of an umbrellaICVC attributable, or allocated in accordance with CIS 12.5.3 R (Allocation of scheme property), to a particular sub-fund must be met first out of the scheme property attributable or allocated to such a sub-fund.

  2. (2)

    If the liabilities to be met out of a particular sub-fund of an umbrellaICVC are greater than the proceeds of the realisation of the scheme property attributable or allocated to that sub-fund, the deficit must be met out of the scheme property attributable or allocated to the solvent sub-funds of that umbrellaICVC in which the proceeds of realisation exceed liabilities and divided between those sub-funds in a manner that is fair to the shareholders in those solvent sub-funds.

  3. (3)

    Paragraph (2) applies in respect of any deficit arising as a result of additional liabilities accruing to a sub-fund through the operation of (2).

  4. (4)

    In calculating the amount of liabilities for the purpose of (2), account must be taken of any payments received or to be received from the ACD under CIS 14.2.10 R (Liabilities of the ACD).

Miscellaneous

CIS 14.2.12R
  1. (1)

    If:

    1. (a)

      during the course, or as a result, of the enquiry referred to in CIS 14.2.4 R (1) (Solvency statement), the directors become of the opinion that it will not be possible to provide the confirmation referred to in (2)(a) of that rule; or

    2. (b)

      after the effective time, the ACD becomes of the opinion that the ICVC will be unable to meet all its liabilities within twelve months of the date of the statement provided under (a) of CIS 14.2.4 R (2);

    the directors must immediately present a petition or cause the ICVC to present a petition for the winding up of the ICVC as an unregistered ICVC under Part V of the Insolvency Act 1986.

  2. (2)

    If, after the commencement of a winding up under this chapter and before notice of completion of the winding up has been sent to the registrar of companies, there is a vacancy in the position of ACD, the directors must immediately present or cause the ICVC to present or, if there are no directors, the depositary must immediately present, a petition for the winding up of the ICVC as an unregistered ICVC under Part V of the Insolvency Act 1986.