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COLL 7.4 Winding up an AUT and terminating a sub-fund of an AUT

Explanation of COLL 7.4

COLL 7.4.1G

  1. (1)

    This section deals with the circumstances and manner in which an AUT is to be wound up or a sub-fund of an AUT is to be terminated. Under section 256 of the Act (Requests for revocation of authorisation order), the manager or trustee of an AUT may request the FCA to revoke the authorisation order in respect of that AUT. Section 257 of the Act (Directions) gives the FCA the power to make certain directions.

  2. (2)

    The termination of a sub-fund under this section will be subject to section 251 of the Act (Alteration of schemes and changes of manager or trustee). Termination can only commence once the proposed alterations to the trust deed and prospectus have been notified to the FCA in writing 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.

  3. (3)

    An AUT or a sub-fund of an AUT may also be wound up or terminated 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 7.4.2A G gives an overview of the main steps in winding up an AUT or terminating a sub-fund under FCA rules, assuming FCA approval.1

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

COLL 7.4.2R

In this section, where a sub-fund of an AUT 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 AUT allocated or attributable to the sub-fund to be terminated.

Guidance on winding up or termination

COLL 7.4.2AG

1This table belongs to COLL 7.4.1 G (4) (Explanation of COLL 7.4)

Summary of the main steps in winding up an AUT or terminating a sub-fund under FCA rules

Notes: N = Notice to be given to the FCA under section 251 of the Act.

E = commencement of winding up or termination

W/U = winding up

FAP = final accounting period (COLL 7.4.5 R (4))

Step number

Explanation

When

COLL rule (unless stated otherwise)

1

Receive FCA approval

N + one month

On receipt of notice from the FCA

Section 251 of the Act

2

Normal business ceases; notify Unitholders

E

7.4.3R

3

Trustee to realise and distribute proceeds

ASAP after E

7.4.4R(1) to (5)

4

Send annual long report of manager and trustee to the FCA

Within 4 months of FAP

7.4.5R(5)

5

Request FCA to revoke relevant authorisation order

On completion of W/U

7.4.4R(6)

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

COLL 7.4.3R

  1. (1)

    Upon the happening of any of the events or dates referred to in (2) and not otherwise:

    1
    1. (a)

      COLL 6.2 (Dealing), COLL 6.3 (Valuation and pricing) and COLL 5 (Investment and borrowing powers) cease to apply to the AUT or to the units and scheme property in the case of a sub-fund;1

    2. (b)

      the trustee must cease to issue and cancel1 units, except in respect of the final cancellation under COLL 7.4.4 R (1) or (2);1

      1
    3. (c)

      the manager must cease to sell and redeem units;

    4. (d)

      the manager must cease to arrange the issue or cancellation of units under COLL 6.2.7 R (Issue and cancellation of units through an authorised fund manager), except in respect of the final cancellation under COLL 7.4.4 R (1) or (2);1

      1
    5. (dA)

      no transfer of a unit may be registered and no other change to the register of Unitholders may be made without the approval of the person responsible for the register in accordance with COLL 6.4.4 R (1); and1

    6. (e)

      the trustee must proceed to wind up the AUT or terminate the sub-fund in accordance with COLL 7.4.4 R.

  2. (1A)

    If the manager has not previously notified Unitholders of the proposal to wind up the AUT or terminate the sub-fund, it 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.1

  3. (2)

    The events referred to in (1) are:

    1. (a)

      the authorisation order of the AUT is revoked;

    2. (b)

      alterations to the AUT's trust deed and prospectus that will be required if the sub-fund is terminated taking effect in accordance with section 251 of the Act;

    3. (c)

      the passing of an extraordinary resolution winding up the AUT or terminating the sub-fund, provided FCA's prior consent to the resolution has been obtained by the manager or trustee;

    4. (d)

      in response to a request to the FCA by the manager or the trustee for the revocation of the authorisation order, the FCA has agreed, subject to there being no material change in any relevant factor, that, on the conclusion of the winding up of the AUT, the FCA will agree to that request;

    5. (e)

      the expiration of any period specified in the trust deed as the period at the end of which the AUT is to be wound up or the sub-fund is to terminate;

    6. (f)

      the effective date of a duly approved scheme of arrangement, which is to result in the AUT or sub-fund that is subject to the scheme of arrangement being left with no property; or

    7. (g)

      the date on which a relevant pension scheme is notified in writing by The Pensions Regulator 3that the scheme is no longer registered under the Welfare and Pensions Reform Act 1999 as a stakeholder pension scheme.

  4. (3)

    This rule is without prejudice to COLL 7.2.1 R(Requirement) and to any order or direction made under section 257 or 258 of the Act.

Manner of winding up or termination

COLL 7.4.4R

  1. (1)

    Where COLL 7.4.3 R (2) (f) applies, the trustee must cancel all units in issue and1 wind up the AUT or terminate the sub-fund in accordance with the approved scheme of arrangement.

  2. (2)

    In any other case falling within COLL 7.4.3 R:

    1. (a)

      once the AUT falls to be wound up or sub-fund terminated, the trustee must realise the scheme property;

    2. (b)

      after paying out or retaining adequate provision for all liabilities payable and for the costs of the winding up or termination, the trustee must cancel all units in issue and1 distribute the proceeds of that realisation to the Unitholders and the manager proportionately to their respective interests in the AUT or sub-fund as at the date, or the date of the relevant event referred to in COLL 7.4.3 R; and

    3. (c)

      any unclaimed net proceeds or other cash (including unclaimed distribution payments) held by the trustee after one year from the date on which they became payable must be paid by the trustee into court (or, in Scotland, as the court may direct), subject to the trustee having a right to retain any expenses properly incurred by him relating to that payment.

  3. (3)

    For an AUT which is a relevant pension scheme, payments must not be made to Unitholders in the AUT, the realisation proceeds having to be paid by the trustee in accordance with the trust deed.

  4. (4)

    Where the trustee and one or more Unitholders agree, the requirement in (2) to realise the scheme property does not apply to that part of the property proportionate to the entitlement of that or those Unitholders.

  5. (5)

    The trustee must1 distribute the part of the scheme property referred to in (4) in the form of property, after making adjustments or retaining provisions as appears appropriate to the trustee for ensuring that, that or those Unitholders bear a proportional share of the liabilities and costs.

    1
  6. (6)

    On completion of the winding up in respect of the events referred to in COLL 7.4.3 R (2)(c), COLL 7.4.3 R (2)(d),1 COLL 7.4.3 R (2)(e) or COLL 7.4.3 R (2) (f),1 the trustee must notify the FCA in writing and at the same time the manager or trustee must request the FCA to revoke the relevant authorisation order.

COLL 7.4.4AG

1For the purposes of this section, an AUT 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 trustee after consulting the manager) 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 7.4.4 R (5); 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.

Accounting and reports during winding up or termination

COLL 7.4.5R
  1. (1)

    [deleted]2

    1111
  2. (1A)

    [deleted]2

    1
  3. (2)

    For any annual accounting period or half-yearly accounting period which begins after commencement of the winding up or termination2, a copy of the long report must be supplied free of charge to any Unitholder upon request.

    1
  4. (2A)

    The2 manager must ensure that it keeps Unitholders appropriately informed about the winding up or termination, including its likely duration.1

  5. (2B)

    The manager must send a copy of the information required by COLL 7.4.5 R (2A) 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 7.4.4 R (2)(b).1

  6. (3)

    [deleted]1

    1
  7. (4)

    At the conclusion of the winding up or termination, the accounting period then running is regarded as the final annual accounting period.

  8. (5)

    Within four1 months after the end of the final annual accounting period or the termination of the sub-fund, the annual reports of the manager and trustee must be published and sent to the FCA. 1

    1
  9. (6)

    The manager must, on publication of the annual long report in (5), write to each person who was a Unitholder or the first named of joint Unitholders immediately before the commencement of winding up or termination to inform them that the annual long report is available free-of-charge on request.1

COLL 7.4.6G
  1. (1)

    1The effect of COLL 7.4.5R2 is that the manager must continue to prepare annual and half-yearly 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 to Unitholders at six-monthly or more frequent intervals.