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COLL 7.4A Winding up a solvent ACS and terminating a sub-fund of a co-ownership scheme

Explanation of COLL 7.4A

COLL 7.4A.1G
  1. (1)

    1This section deals with the circumstances and manner in which an ACS is to be wound up or a sub-fund of a co-ownership scheme is to be terminated otherwise than by the court as an unregistered company under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (further rules regarding schemes of arrangement are found in COLL 7.6 (Schemes of arrangement)).

  2. (2)

    An ACS may be wound up under this section only if it is solvent. Under section 261W of the Act (Requests for revocation of authorisation order), the authorised contractual scheme manager or depositary of an ACS may request the FCA to revoke the authorisation order in respect of that ACS. The FCA may then indicate that, subject to there being no change in any relevant factor, on the conclusion of the winding up of the ACS, the FCA will agree to that request. Section 261X of the Act (Directions) gives the FCA the power to make certain directions.

  3. (3)

    A sub-fund of a co-ownership scheme may be terminated under this section only if it is solvent. The termination of a sub-fund under this section will be subject to section 261Q of the Act (Alteration of contractual schemes and changes of operator or depositary). Termination can only commence once the proposed alterations to the contractual scheme deed and prospectus have been notified to the FCA in writing and permitted to take effect. On termination, the assets of a 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.

  4. (4)

    An ACS or a sub-fund of a co-ownership scheme may also be wound up or terminated in connection with a scheme of arrangement. The requirements of section 261Q also apply in relation to a proposal that an ACS or a sub-fund of a co-ownership scheme be involved in a scheme of arrangement. Unitholders will become entitled to receive units in another regulated collective investment scheme in exchange for their units.

  5. (5)

    COLL 7.4A.3 G gives an overview of the main steps in winding up a solvent ACS or terminating a sub-fund of a co-ownership scheme under FCA rules, assuming FCA approval.

Special meanings in this section

COLL 7.4A.2R
  1. (1)

    In this section, where a sub-fund of a co-ownership scheme is being terminated, references to:

    1. (a)

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

    2. (b)

      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. (c)

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

    4. (d)

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

  2. (2)

    In this section:

    1. (a)

      a "section 261Q case" refers to:

      1. (i)

        a case where a sub-fund of a co-ownership scheme is to be terminated otherwise than in connection with a scheme of arrangement; or

      2. (ii)

        a case where an ACS or a sub-fund of a co-ownership scheme is to be wound up or terminated in connection with a scheme of arrangement; and

    2. (b)

      a "section 261W case" refers to a case where an ACS is to be wound up otherwise than in connection with a scheme of arrangement.

Guidance on winding up or termination

COLL 7.4A.3G

This table belongs to COLL 7.4A.1G (5) (Explanation of COLL 7.4A)

Summary of the main steps in winding up an ACS or terminating a sub-fund of a co-ownership scheme under FCA rules

Notes: N = Notice to be given to the FCA under section 261Q of the Act in a section 261Q case.

R = Request to wind up the scheme under section 261W of the Act in a section 261W case.

E = commencement of winding up or termination

W/U = winding up

FAP = final accounting period

Step number

Explanation

When

COLL rule, (unless stated otherwise)

1

Commence preparation of solvency statement

N-28 days or R-28 days

7.4A.5R(2)

2

Send audited solvency statement to the FCA with copy to depositary.

By N + 21 days or by R + 21 days

7.4A.5R(4) and (5)

3

In a section 261Q case:

- the authorised contractual scheme manager receiving FCA approval;

- or one month having passed after submitting the requisite notice under section 261Q of the Act without the authorised contractual scheme manager or depositary having received from the FCA a warning notice under section 261R in respect of the proposal.

In a section 261W case, the authorised contractual scheme manager or depositary receives an indication from the FCA that, subject to there being no change in any relevant factor, on the conclusion of the winding up of the ACS, the FCA will agree to the request to wind up the ACS.

N + one month or R + one month

Section 261Q of the Act (in a section 261Q case)

7.4A.4R(3)(c) to (e) (in a section 261W case)

4

Normal business ceases; notify Unitholders

E

7.4A.4R

5

Depositary to realise and distribute proceeds

ASAP after E

7.4A.6R(1)-(5)

6

Send annual long report of authorised contractual scheme manager, depositary and auditor to the FCA

Within 4 months of FAP

7.4A.9R(7)

7

Request FCA to revoke relevant authorisation order

On completion of W/U

7.4A.6R(6)

When an ACS is to be wound up or a sub-fund of a co-ownership scheme terminated

COLL 7.4A.4R
  1. (1)

    Upon the happening of any of the matters or dates referred to in (3), and subject to the requirement of (4) being satisfied, and not otherwise:

    1. (a)

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

    2. (b)

      the depositary must cease to issue and cancel units, except in respect of the final cancellation under COLL 7.4A.6R (1) or COLL 7.4A.6R (2) (Manner of winding up or termination);

    3. (c)

      the authorised contractual scheme manager must cease to sell and redeem units;

    4. (d)

      the authorised contractual scheme 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 7.4A.6R (1) or (2);

    5. (e)

      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) (Register: general requirements and contents); and

    6. (f)

      the depositary must proceed to wind up the ACS or terminate the sub-fund in accordance with COLL 7.4A.6 R.

  2. (2)

    If the authorised contractual scheme manager has not previously notified Unitholders of the proposal to wind up the ACS or terminate the sub-fund of the co-ownership scheme, 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.

  3. (3)

    The matters referred to in (1) are:

    1. (a)

      the authorisation order of the ACS is revoked;

    2. (b)

      alterations to the co-ownership scheme's contractual scheme deed and prospectus that will be required if the sub-fund is terminated taking effect in accordance with section 261Q (Alteration of contractual schemes and changes of operator or depositary) of the Act;

    3. (c)

      the passing of an extraordinary resolution winding up the ACS or terminating the sub-fund, provided the FCA's prior consent to the resolution has been obtained by the authorised contractual scheme manager or depositary;

    4. (d)

      in response to a request to the FCA by the authorised contractual scheme manager or the depositary 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 ACS, the FCA will agree to that request;

    5. (e)

      the expiration of any period specified in the contractual scheme deed as the period at the end of which the ACS 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 ACS or sub-fund that is subject to the scheme of arrangement being left with no property;

    7. (g)

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

  4. (4)

    An ACS must not be wound up nor a sub-fund terminated under this section unless the requirements of both (a) and (b) are satisfied:

    1. (a)

      An ACS must not be wound up nor a sub-fund terminated under this section unless and until:

      1. (i)

        in a section 261Q case either:

        1. (A)

          the FCA has given written approval to the proposal; or

        2. (B)

          one month has passed since the authorised contractual scheme manager gave notice under section 261Q without the authorised contractual scheme manager or depositary having received from the FCA a warning notice under section 261R in respect of the proposal; or

      2. (ii)

        in a section 261W case, the FCA indicates that, subject to there being no change in any relevant factor, on the conclusion of the winding up of the ACS, the FCA will agree to the request to wind up the ACS.

    2. (b)

      In addition an ACS must not be wound up nor a sub-fund terminated under this section unless a statement has been prepared and sent or delivered to the FCA under COLL 7.4A.5 R (Solvency statement) and received by the FCA prior to the satisfaction of the condition in (a).

  5. (5)

    This rule is without prejudice to:

    1. (a)

      COLL 7.2.1 R (Requirement); or

    2. (b)

      any order or direction made under section 261X (Directions) or 261Y (Applications to the court) of the Act; or

    3. (c)

      any alternative method (aside from the rules in this section) of winding up a limited partnership scheme provided for by the law.

Solvency statement

COLL 7.4A.5R
  1. (1)

    Either before notice is given under section 261Q of the Act or before a request is made under section 261W of the Act in relation to the proposals referred to in COLL 7.4A.4R (4), the authorised contractual scheme manager must make a full inquiry into the ACS's (or, in the case of the termination of a sub-fund of a co-ownership scheme, the sub-fund's) affairs, business and property to establish whether the ACS or the sub-fund will be able to meet all its liabilities.

  2. (2)

    The authorised contractual scheme manager must then, based on the results of this enquiry, prepare and sign a statement either:

    1. (a)

      confirming that the ACS or the sub-fund of the co-ownership scheme 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 relate to the ACS's or the sub-fund's affairs, business and property at a date no more than 28 days before the date on which notice is given to the FCA under section 261Q or a request is made under section 261W.

  4. (4)

    A statement which contains the confirmation under (2) must annex a statement signed by the auditor of the ACS 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 section 261Q of the Act or the request made in accordance with section 261W of the Act.

Manner of winding up or termination

COLL 7.4A.6R
  1. (1)

    Where COLL 7.4A.4R (3)(f) applies, the depositary must cancel all units in issue and wind up the ACS or terminate the sub-fund of the co-ownership scheme in accordance with the approved scheme of arrangement.

  2. (2)

    In any other case falling within COLL 7.4A.4 R:

    1. (a)

      once the ACS falls to be wound up or sub-fund terminated, the depositary 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 depositary must cancel all units in issue and distribute the proceeds of that realisation to the Unitholders and the authorised contractual scheme manager proportionately to their respective interests in the ACS or sub-fund as at the date, or the date of the relevant event referred to in COLL 7.4A.4 R; and

    3. (c)

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

  3. (3)

    For an ACS which is a relevant pension scheme, payments must not be made to Unitholders in the ACS. The realisation proceeds must be paid by the depositary in accordance with the contractual scheme deed.

  4. (4)

    Where the depositary 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 depositary must 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 depositary for ensuring that that or those Unitholders bear a proportional share of the liabilities and costs.

  6. (6)

    On completion of the winding up in respect of the matters referred to in COLL 7.4A.4R (3)(c) to (g), the depositary must notify the FCA in writing and at the same time the authorised contractual scheme manager or depositary must request the FCA to revoke the relevant authorisation order.

COLL 7.4A.7G

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

  1. (1)

    payment or adequate provision being made (by the depositary after consulting the authorised contractual scheme 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 7.4A.6R (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.

Duty to ascertain liabilities

COLL 7.4A.8R
  1. (1)

    The authorised contractual scheme manager must use all reasonable endeavours to ensure that all the liabilities of the ACS or the sub-fund of a co-ownership scheme are discharged before the completion of the winding up or termination.

  2. (2)

    The duty in (1) relates to all liabilities of which the authorised contractual scheme manager:

    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 authorised contractual scheme manager rejects any claim or liability against the ACS or the sub-fund in whole or part, the authorised contractual scheme manager must immediately send to the claimant written notice of its reasons for doing so.

Accounting and reports during winding up or termination

COLL 7.4A.9R
  1. (1)

    [deleted]2

  2. (2)

    [deleted]2

  3. (3)

    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.

  4. (4)

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

  5. (5)

    The authorised contractual scheme manager must send a copy of the information required by (4) 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 7.4A.6R (2)(b).

  6. (6)

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

  7. (7)

    Within four months after the end of the final annual accounting period or the termination of the sub-fund of the co-ownership scheme, the annual reports of the authorised contractual scheme manager and depositary must be published and sent to the FCA.

  8. (8)

    The authorised contractual scheme manager must, on publication of the annual long report in (7), 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.

COLL 7.4A.10G
  1. (1)

    The effect of COLL 7.4A.9R2 is that the authorised contractual scheme manager must continue to prepare annual and half-yearly long reports and to make them available to Unitholders in accordance with COLL 4.5.14R (Publication and availability of annual and half-yearly long report).

  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.

Liabilities of the authorised contractual scheme manager

COLL 7.4A.11R
  1. (1)

    Except to the extent that the authorised contractual scheme manager can show that it has complied with COLL 7.4A.8 R (Duty to ascertain liabilities), the authorised contractual scheme manager is personally liable to meet any liability of an ACS or a sub-fund of a co-ownership scheme, of which it is the authorised contractual scheme manager, wound up or terminated under this section (whether or not the winding up of the ACS or the termination of the sub-fund has been completed) that was not discharged before the completion of the winding up or termination.

  2. (2)

    Where winding up an ACS, if the proceeds of the realisation of the assets attributable or allocated to a particular sub-fund of an umbrella co-ownership scheme are insufficient to meet the liabilities attributable or allocated to that sub-fund, the authorised contractual scheme manager must pay to the ACS, for the account of that sub-fund, the amount of the deficit, unless and to the extent that the authorised contractual scheme manager can show that the deficit did not arise as a result of any failure by the authorised contractual scheme manager to comply with the rules in COLL.

  3. (3)

    The liabilities of the authorised contractual scheme manager under this rule create an accruing debt (in England and Wales in the nature of a specialty) due from it on the completion of the winding up or termination and payable upon the demand of the creditor in question (including the ACS in the circumstances described in (2)).

  4. (4)

    The obligations of the authorised contractual scheme manager under this rule do not affect any other obligation of the authorised contractual scheme manager under these rules or the law.

Miscellaneous

COLL 7.4A.12R

If:

  1. (1)

    during the course, or as a result, of the enquiry referred to in COLL 7.4A.5R (1) (Solvency statement), the authorised contractual scheme manager becomes of the opinion that it will not be possible to provide the confirmation referred to in (2)(a) of that rule; or

  2. (2)

    after winding up or termination has commenced, the authorised contractual scheme manager becomes of the opinion that the ACS or the sub-fund of a co-ownership scheme will be unable to meet all its liabilities within twelve months of the date of the statement provided under COLL 7.4A.5R (2)(a);

the authorised contractual scheme manager must immediately present a petition or cause the ACS or sub-fund to present a petition for the winding up of the ACS or sub-fund as an unregistered company under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, as modified by the Contractual Scheme Regulations.