629.Insolvency and winding up are relevant to regulation for two reasons.  First, there are implications for existing customers if a financial service business becomes insolvent.  Second, winding up may itself be part of the appropriate regulatory response to events.  Thus it may be desirable to wind up a company to protect not just the interests of customers who have entered into contracts with it, but also those who might do business with it in future, if it continued to trade.  Subject to the particular provisions of Part VII of the Companies Act 1989 for transactions carried out on regulated markets, the general law of insolvency applies, and will continue to apply, to most financial services businesses, as it does to other businesses.  However, it is supplemented by provisions which allow the regulators, alongside creditors, to petition the court for the winding up of an authorised business on the grounds of insolvency, and, alongside the Secretary of State, to petition the court to wind up an authorised business on the grounds that this would be just and equitable.
630.Different arrangements apply to certain mutual societies.  The arrangements under the relevant legislation, for example the Building Societies Act 1986, will continue to apply to relevant societies, with functions transferred in that case from the Building Societies Commission to the Authority in accordance with the provisions of Part XXI.
631.The insolvency provisions of the Act are intended to build upon these existing arrangements, establishing, so far as is practicable, a common approach across all sectors.  Sections 356, 357, 367 and 375 provide the Authority with the power to ask the court to initiate various insolvency procedures.  Sections 356, 362, 363, 365, 371 and 374 make clear that the Authority has the right to be heard by the court in insolvency proceedings instigated by third parties.  Sections 369, 376, 377, 378 and 379 carry forward provisions of the ICA 1982 dealing with the insolvency of insurance companies (which because of the particular nature of insurance business, must in some respects be dealt with in a different way to other authorised persons).
632.At the same time, the Part will fill a number of gaps in the coverage of the predecessor regimes.  Section 359 will allow the Authority to ask the court to make an administration order in respect of authorised businesses, as an alternative to winding up.  Section 372 will give the Authority powers to petition the court to declare bankrupt an insolvent sole trader providing financial services. Sections 360 and 366 make changes to the insolvency regime for insurers.
633.Part XV (Financial Services Compensation Scheme) is also relevant to customers of authorised firms in financial difficulties.
Commentary on Sections Part Xxiv: Insolvency