COLL 7.3 4Winding up a solvent ICVC and terminating or winding up a sub-fund of an ICVC4

Explanation of COLL 7.3

COLL 7.3.1GRP

  1. (1)

    The winding up of an ICVC may be carried out under this section instead of by the court provided the ICVC is solvent and the steps required under regulation 21 the OEIC Regulations (The Authority's approval for certain changes in respect of a company) are fulfilled. This section lays down the procedures to be followed and the obligations of the ACD and any other directors of the ICVC.

  2. (2)

    The termination of a sub-fund may be carried out4 under this section, instead of by the court, provided the sub-fund is solvent and the steps required under4 regulation 21 of the OEIC Regulations are complied with4. Termination can only commence once the proposed alterations to the ICVC's instrument of incorporation and prospectus have been notified to the FCA and permitted to take effect. On termination, the assets of the sub-fund will normally be realised, and the unitholders in the sub-fund will receive their respective share of the proceeds net of liabilities and the expenses of the termination.

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  3. (3)

    A sub-fund or ICVC may also be terminated or wound up in connection with a scheme of arrangement. unitholders will become entitled to receive units in another regulated collective investment scheme in exchange for their units.

  4. (4)

    COLL 7.3.3 G gives an overview of the main steps in winding up a solvent ICVC or terminating a sub-fund under FCA rules, assuming FCA approval.3

Special meanings for termination of a sub-fund of an ICVC

COLL 7.3.2RRP

In this section, where a sub-fund of an ICVC is being terminated, references to:

  1. (1)

    units, are references to units of the class or classes related to the sub-fund to be terminated;

  2. (2)

    a resolution, or extraordinary resolution, are references to such a resolution passed at a meeting of unitholders of units of the class or classes referred to in (1);

  3. (3)

    scheme property, are references to the scheme property allocated or attributable to the sub-fund to be terminated; and

  4. (4)

    liabilities, are references to liabilities of the ICVC allocated or attributable to the sub-fund to be terminated.

Guidance on winding up or termination

COLL 7.3.3GRP

This table belongs to COLL 7.3.1 G (4) (Explanation of COLL 7.3)3

3

Summary of the main steps in winding up a solvent ICVC or terminating a sub-fund3 under FCA rules, assuming FCA approval.

Notes: N = Notice to be given to the FCA under regulation 21 of OEIC Regulations

E = commencement of winding up or termination

W/U = winding up

FAP = final accounting period (COLL 7.3.8 R(4))

Step number

Explanation

When

COLL rule (unless stated otherwise)

1

Commence preparation of solvency statement

N-28 days

7.3.5 (2)

2

Send audited solvency statement to the FCA with copy to depositary

By N + 21 days

7.3.5 (4) and (5)

3

Receive the FCA approval

N + one month

Regulation 21 of OEIC Regulations

4

Normal business ceases; notify unitholders3

3

E

7.3.6

5

Realise proceeds, wind up, instruct depositary accordingly

ASAP after E

7.3.7

6

Prepare final account or termination account & have account audited

On completion of W/U or termination

7.3.8

7

Send final account or termination account and auditor's report to the FCA & unitholders

Within 43 months of FAP

3

7.3.8(6)

8

Request FCA to revoke relevant authorisation order or update its records4

On completion of W/U or termination4

7.3.7(9)

When an ICVC is to be wound up or a sub-fund terminated or wound up

COLL 7.3.4RRP

  1. (1)

    An ICVC must not be wound up except:4

    4
    1. (a)

      under this section; or4

    2. (b)

      as an unregistered company under Part V of the Insolvency Act 1986.4

  2. (1A)

    4A sub-fund must not:

    1. (a)

      be terminated except under this section; or

    2. (b)

      wound up except under Part V of the Insolvency Act 1986 (as modified by regulation 33C of the OEIC Regulations) as an unregistered company.

  3. (2)

    An ICVC must not be wound up or a sub-fund terminated4 under this section if there is a vacancy in the position of ACD.

  4. (3)

    An ICVC must not be wound up or a sub-fund terminated under this section:

    1. (a)

      unless and until effect may be given, under regulation 21 of the OEIC Regulations, to proposals to wind up the affairs of the ICVC or to proposals to make the alterations to the ICVC's instrument of incorporation and prospectus that will be required if a sub-fund is terminated; and

    2. (b)

      unless a statement has been prepared and sent or delivered to the FCA under COLL 7.3.5 R (Solvency statement) and received by the FCA prior to satisfaction of the condition in (a).

  5. (4)

    Subject to (3) and the subsequent provisions of this section, the appropriate steps to wind up an ICVC or terminate a sub-fund 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 or the sub-fund by the instrument of incorporation expires or any event occurs, for which the instrument of incorporation provides that the ICVC or the sub-fund is to be wound up or terminated4; or

    3. (c)

      on the date stated in any agreement by the FCA in response to a request from the directors for the winding up of the ICVC or a request for the termination of the sub-fund; or5

    4. (d)

      on the effective date of a duly approved scheme of arrangement which is to result in the ICVC ceasing to hold any scheme property; or5

    5. (e)

      in the case of a sub-fund, on the effective date of a duly approved scheme of arrangement which is to result in the sub-fund ceasing to hold any scheme property; or5

    6. (f)

      in the case of an ICVC that is an umbrella, on the date on which all of its sub-funds fall within (e) or have otherwise ceased to hold any scheme property, notwithstanding that the ICVC may have assets and liabilities that are not attributable to any particular sub-fund.5

Solvency statement

COLL 7.3.5RRP

  1. (1)

    Before notice is given to the FCA under regulation 21 of the OEIC Regulations of the proposals referred to in COLL 7.3.4 R (3), the directors must make a full enquiry into the ICVC's or, in the case of termination of a sub-fund, the sub-fund's4 affairs, business and property4 to determine whether the ICVC or the sub-fund4 will be able to meet all its liabilities.

  2. (2)

    The ACD must then, based on the results of this enquiry, prepare a statement either:

    1. (a)

      confirming that the ICVC or the sub-fund4 will be able to meet all its liabilities within twelve months of the date of the statement; or

    2. (b)

      stating that such confirmation cannot be given.

  3. (3)

    This solvency statement must:

    1. (a)

      relate to the ICVC's or the sub-fund's4 affairs, business and property4 at a date no more than 28 days before the date on which notice is given to the FCA;

    2. (b)

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

    3. (c)

      if it contains the confirmation under (2)(a), be signed by at least one other director or, if there is no director other than the ACD, be signed by 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 (Auditors) 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 solvency statement must be sent or delivered to the FCA and the depositary no later than 21 days after notice is given to the FCA in accordance with regulation 21 of the OEIC Regulations.

Consequences of commencement of winding up or termination

COLL 7.3.6RRP

  1. (1)

    Winding up or termination must commence once the conditions referred to in COLL 7.3.4 R (3) are both satisfied or, if later, once the events in COLL 7.3.4 R (4) have occurred.

  2. (2)

    Once winding up or termination has commenced:

    1. (a)

      COLL 6.2 (Dealing), COLL 6.3 (Valuation and pricing) and COLL 5 (Investment and borrowing powers) cease to apply to the ICVC or to the units and scheme property in the case of a sub-fund;

    2. (b)

      the ICVC must cease to issue and cancel3 units, except in respect of the final cancellation under COLL 7.3.7 R (5);3

      3
    3. (c)

      the ACD must cease to sell or redeem units or to arrange for the issue or cancellation of units, except in respect of the final cancellation under COLL 7.3.7 R (5);3

    4. (d)

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

    5. (e)

      where winding up an ICVC, the ICVC must cease to carry on its business, except for its beneficial winding up; and

    6. (f)

      the corporate status and corporate powers of the ICVC and (subject to the preceding provisions of this rule) the powers of the directors continue until the ICVC is dissolved.

  3. (3)

    4If the ACD has not previously notified unitholders of the proposal to wind up the ICVC or terminate the sub-fund, the ACD must, as soon as practicable after winding up or termination has commenced, give written notice of the commencement of the winding up or termination to the unitholders.

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Manner of winding up or termination

COLL 7.3.7RRP

  1. (1)

    [deleted]4

    4
  2. (2)

    The ACD must, as soon as practicable after winding up or termination has commenced, cause the scheme property to be realised and the liabilities of the ICVC or the sub-fund to be met out of the proceeds.

  3. (3)

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

  4. (4)

    Where sufficient liquid funds are available after making adequate provision for the expenses of the winding up or termination and the discharge of the ICVC's or the sub-fund's remaining liabilities, the ACD may arrange for the depositary to make one or more interim distributions to the unitholders proportionately to the right of their respective units to participate in scheme property at the commencement of the winding up or termination.

  5. (5)

    On or before the date on which the final account is sent to unitholders in accordance with COLL 7.3.8 R (Final account and termination account), the ACD must arrange for all units in issue to be cancelled and for3 the depositary to make a final distribution to the unitholders, in the same proportions as provided by (4), of the balance remaining (net of a provision for any further expenses of the ICVC or sub-fund).

  6. (6)

    Paragraphs (2) to (5) are subject to the terms of any scheme of arrangement sanctioned by an extraordinary resolution passed on or before the commencement of the winding up or termination.

  7. (7)

    Where the ICVC and one or more unitholders (other than the ACD) agree, the requirement in (2) to realise the scheme property 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 unitholders

  8. (8)

    In the case of (7), the ACD must cause the ICVC to distribute that part of the scheme property in specie to that or those unitholders in proportion to their respective rights to participate, this distribution being effected after making adjustments and retaining such provision as appears to the ACD appropriate to ensure that those unitholders bear the proportion of the liabilities and the expenses of the distribution attributable to their units.

  9. (9)

    The depositary must notify the FCA once the winding up of the ICVC or the termination of a sub-fund (including compliance with COLL 7.3.8 R is complete and at the same time the ACD or the depositary must request the FCA to revoke the relevant authorisation order (on the winding up of an ICVC) or to update its records (on the termination of a sub-fund of an ICVC).4

  10. (10)

    Where any sum of money stands to the account of the ICVC at the date of its dissolution or a sub-fund at the date of its termination4, 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 (5) of the OEIC Regulations (Dissolution in other circumstances).

  11. (11)

    [deleted]4

    4
  12. (12)

    [deleted]4

    4
  13. (13)

    [deleted]4

    4
  14. (14)

    [deleted]4

    4
  15. (15)

    [deleted]4

    4
COLL 7.3.7AGRP

3For the purposes of this section an ICVC may be treated as having been wound up or a sub-fund terminated upon completion, where relevant, of all of the steps in (1) to (3):

  1. (1)

    payment or adequate provision being made (by the ACD) to cover the expenses relating to the winding up or termination and all liabilities of the scheme;

  2. (2)

    the scheme property being realised or distributed in accordance with COLL 7.3.7 R (8); and

  3. (3)

    the net proceeds being distributed to the unitholders named in the register on the date on which winding up or termination commenced, or provision being made in respect of the final distribution.

Final account and termination account

COLL 7.3.8RRP

  1. (1)

    Once the ICVC's affairs are wound up or termination of the sub-fund has been completed (including distribution or provision for distribution in accordance with COLL 7.3.7 R (5)),3 the ACD must prepare an account of the winding up or termination showing:

    3
    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 be, if there is:

    1. (a)

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

    2. (b)

      no director other than the ACD, signed by the ACD.

  3. (3)

    Once signed, this account is the "final account" for the purposes of the winding up of an ICVC and the "termination account" for the purposes of the termination of a sub-fund.

  4. (4)

    The final account must state the date on which the ICVC's affairs were 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') for the purpose of COLL 4.5.3

    3
  5. (4A)

    The termination account must state the date on which the sub-fund's affairs were terminated.3

  6. (5)

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

  7. (6)

    Within four3 months of the date of the completion of the winding up of the ICVC or termination of the sub-fund, the ACD must send a copy of the final account or termination account and the auditor's report on it to the FCA and to each person who was a unitholder (or the first named of joint unitholders) immediately before the winding up or termination commenced.3

    33

Duty to ascertain liabilities

COLL 7.3.9RRP

  1. (1)

    The ACD must use all reasonable endeavours to ensure that all the liabilities of the ICVC or the sub-fund4 are discharged before the completion of the winding up or termination.

  2. (2)

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

    1. (a)

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

    2. (b)

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

  3. (3)

    If the ACD rejects any claim against the ICVC or the sub-fund4 in whole or part or against the ICVC or the sub-fund4 in respect of a liability in whole or part, the ACD must immediately send to the claimant written notice of its reasons for doing so.

Reports and accounts

COLL 7.3.10RRP

  1. (1)

    [deleted]6

    33333333
  2. (1A)

    [deleted]6

    3
  3. (2)

    For any annual accounting period or half-yearly accounting period which begins after commencement of the winding up or termination6, a copy of the long report must be supplied free of charge to any unitholder upon request.

    3
  4. (3)

    The6 ACD must ensure that it keeps unitholders appropriately informed about the winding up or termination including, if known, its likely duration.3

  5. (4)

    The ACD must send a copy of the information required by (3) to each person who was a unitholder or the first named of joint unitholders immediately before the winding up or termination commenced, unless a final distribution has been made in accordance with COLL 7.3.7 R (5).3

COLL 7.3.10AGRP
  1. (1)

    3The effect of COLL 7.3.10R6 is that the ACD must continue to prepare annual and half-yearly6 long reports and to make them available to unitholders in accordance with COLL 4.5.14 R.

  2. (2)

    Where there are outstanding unrealised assets, keeping unitholders appropriately informed may, for example, be carried out by providing updates at six-monthly or more frequent intervals.

Liabilities of the ACD

COLL 7.3.11RRP

  1. (1)

    Except to the extent that the ACD can show that it has complied with COLL 7.3.9 R (Duty to ascertain liabilities), the ACD is personally liable to meet any liability of an ICVC or a sub-fund, of which it is the ACD, wound up or terminated under this section (whether or not the ICVC has been dissolved or, in the case of the sub-fund, termination has been completed) that was not discharged before the completion of the winding up or termination.4

    4
  2. (2)

    Where winding up an ICVC, if the proceeds of the realisation of the assets attributable, or allocated to a particular sub-fund of an umbrella ICVC 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, unless 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 COLL.

  3. (3)

    The liabilities of the ACD under this rule create a debt (in England and Wales in the nature of a specialty) accruing due from it on the completion of the winding up or termination 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 do not affect any other obligation of the ACD under these rules or the general law.

COLL 7.3.12R

[deleted]4

Miscellaneous

COLL 7.3.13RRP

  1. (1)

    If:

    1. (a)

      during the course, or as a result, of the enquiry referred to in COLL 7.3.5 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 winding up or termination has commenced, the ACD becomes of the opinion that the ICVC or the sub-fund4 will be unable to meet all its liabilities within twelve months of the date of the statement provided under (a) of COLL 7.3.5 R (2);

    the directors must immediately present a petition or cause the ICVC or sub-fund4 to present a petition for the winding up of the ICVC or sub-fund4 as an unregistered company4 under Part V of the Insolvency Act 1986.

    4
  2. (2)

    If, after the commencement of a winding up or termination4 under this chapter and before notice of completion of the winding up or termination4 has been sent to the FCA, there is a vacancy in the position of ACD:4

    4
    1. (a)

      4the directors of the ICVC must immediately present or cause the ICVC or sub-fund to present; or4

    2. (b)

      4if there are no directors, the depositary must immediately present;4

    a petition for the winding up of the ICVC or sub-fund 4as an unregistered company 4under Part V of the Insolvency Act 1986.

    4