Commentary Depositor preference Section 13: Preferential debts: Great Britain
95.Section 13 makes amendments to the Insolvency Act 1986 and the Bankruptcy (Scotland) Act 1985 to add to the existing categories of preferential debts on insolvency in Great Britain. Subsection (1) amends Schedule 6 to the Insolvency Act 1986, to insert new paragraphs 15B and 15C. Paragraph 15B defines the new category of preferential debts. Where a deposit is within the scope of the financial services compensation scheme (“FSCS”), it will be a preferential debt. Where a deposit is not eligible for protection under the FSCS, it will not be a preferential debt. If a single depositor has a very large deposit, part of which is not eligible for protection under the FSCS, only the part of that deposit which is covered by the FSCS will be a preferential debt. The remainder of the deposit will not be a preferential debt: it will rank equally to other non-preferred unsecured debts. Paragraph 15C defines the terms “eligible deposit” and “deposit” for the purposes of the new category of preferential debts. Deposits which were held in dormant accounts and have been transferred to authorised reclaim funds under the Dormant Bank and Building Society Accounts Act 2008 are included in the definition of “deposit”.
96.Subsection (2) makes a consequential amendment to section 386 of the Insolvency Act 1986.
97.Subsection (3) amends Part 1 of Schedule 3 to the Bankruptcy (Scotland) Act 1985 to insert new paragraph 6B. The Insolvency Act 1986 covers corporate insolvency in both England and Wales and Scotland, but deals with bankruptcy only in England and Wales. Bankruptcy in Scotland is dealt with under the Bankruptcy (Scotland) Act 1985. This paragraph makes provision in relation to bankruptcy and sequestration proceedings in Scotland equivalent to the provision made in new paragraphs 15B of Schedule 6 to the Insolvency Act 1986 which will apply to England and Wales and corporate insolvency proceedings in Scotland. Subsection (4) amends Part 2 of Schedule 3 to the 1985 Act to insert new paragraph 9A. This paragraph contains equivalent definitions of “eligible deposit” and “deposit” to those set out in new paragraph 15C of Schedule 6 to the Insolvency Act 1986. A balance transferred to an authorised reclaim fund is not mentioned as the insolvency of a reclaim fund in Scotland is subject to the Insolvency Act 1986, not the 1985 Act.