144. Conditions for Resolution and general provisions

(1)         The AFSA may exercise its Resolution Powers or apply its Resolution Tools in relation to an Authorised Person only if it is satisfied that the following conditions (the “Resolution Conditions”) are met:

 

(a)         the Authorised Person is failing or is likely to fail;

 

(b)         having regard to timing and other relevant circumstances, it is not reasonably likely that any action that is taken by or in respect of the Authorised Person will prevent the failure or likely failure of the Authorised Person within a reasonable timeframe; and

 

(c)          the taking of Resolution Action is in the public interest.

 

(2)             For the purposes of paragraph (a) of subsection (1), an Authorised Person is failing or likely to fail if one or more of the following circumstances exist:

 

(a)         it no longer meets requirements under these Regulations or Rules or other legislation administered by the AFSA, such as prescribed capital or liquidity levels;

 

(b)         its access to market-based funding sources is seriously impaired;

 

(c)         there is a significant deterioration in the value of its assets;

 

(d)         there are serious governance issues or deficiencies in its risk management and controls that may have a significant impact on the Authorised Person’s financial condition; or

 

(e)         it is unable to pay its debts or other liabilities as they fall due.

 

However, an Authorised Person is not failing or likely to fail merely because one or more Early Intervention Powers have been exercised in relation to it.

 

(3)             Subject to paragraph (a) of subsection (1) and subsection (2), the AFSA may take into account the likely impact on the Authorised Person of the failure or likely failure of another entity in the Authorised Person’s Group.

 

(4)             For the purposes of paragraph (c) of subsection (1), an action is in the public interest if:

 

(a)         it is necessary and proportionate to achieve one or more of the AFSA’s objectives; and

 

(b)         winding up the Authorised Person under the AIFC Insolvency Regulations or other applicable insolvency laws would not meet the AFSA’s objectives to the same extent.

 

(5)             An Authorised Person must immediately notify the AFSA if its senior management reasonably considers or is aware that:

 

(a)             it is failing or likely to fail;

 

(b)             another entity in its Group is failing or likely to fail;

 

(c)             in the case of an Authorised Person operating as a branch in the AIFC, the Resolution Authority in the jurisdiction of its head office is considering, or has initiated, Resolution Action in relation to the Authorised Person;

(d)             a Resolution Authority, in a jurisdiction where another entity in its Group is present is considering, or has initiated, Resolution Action in relation to that entity; or

 

(e)             a Resolution Authority in the jurisdiction of the head office of the legal entity of which the Authorised Person is a subsidiary is considering, or has initiated, Resolution Action in relation to the head office.

 

(6)             If the AFSA determines that the Resolution Conditions are met in respect of an Authorised Person, it:

 

(a)             must record its decision together with the reasons for that decision and the actions that it intends to take as a result of the decision;

 

(b)             must give written notice of the decision to:

 

(i)               the Authorised Person;

 

(ii)             if applicable, the financial services regulator and Resolution Authorities of jurisdictions in which any relevant Group entity or significant branches are located; and

 

(iii)            if applicable, any scheme for the protection of depositors or Clients that is relevant to the Authorised Person; and

 

(c)             may publish information about the decision if it appears to the AFSA to be desirable to do so in the public interest.

145. Appointment of Independent Valuer

(1)         The AFSA may arrange for an independent valuer to be appointed to carry out a valuation of the assets and liabilities of an Authorised Person for the purposes of this Chapter.

 

(2)         The AFSA may prescribe in the Rules the eligibility requirements for a person to be appointed as an independent valuer.

 

(3)         A valuation by an independent valuer must be carried out in such manner as the AFSA may prescribe in the Rules.

 

(4)         The AFSA:

 

(a)             may require the Authorised Person to pay the cost of any valuation; or

 

(b)             may recover those costs from the Authorised Person.

146. Valuations

(1)             Before the AFSA exercises a Resolution Power in respect of an Authorised Person, it must cause a valuation to be carried out to assess the value of the assets and liabilities of the Authorised Person (a “Pre-Resolution Valuation”).

 

(2)             Despite subsection (1), if the urgency of the case makes it appropriate for a Resolution Power to be exercised in respect of an Authorised Person before a Pre-Resolution Valuation can be carried out, the AFSA may cause a provisional valuation to be carried out of the assets and liabilities of the Authorised Person (a “Provisional Valuation”).

 

(3)             If the AFSA causes a Provisional Valuation to be carried out, it shall cause a further valuation (a “Definitive Valuation”) to be carried out on the assets and liabilities of the Authorised Person as soon as practicable after the Provisional Valuation.

 

(4)             A Pre-Resolution Valuation, Provisional Valuation and Definitive Valuation must be carried out in such manner as the AFSA may prescribe in the Rules.

147. Resolution Powers

(1)             If the AFSA is satisfied that the Resolution Conditions have been met, it may, by written notice, exercise one or more of the following Resolution Powers in relation to an Authorised Person:

 

(a)             remove and replace any director or member of senior management (regardless of whether they are responsible for the failure);

 

(b)             appoint one or more individuals to act as a Temporary Administrator in accordance with section 150;

 

(c)             recover monies from any person whose acts or omissions materially contributed to the failure, including by the claw-back of variable remuneration such as bonuses;

 

(d)             terminate contracts, continue or assign contracts or purchase or sell assets;

 

(e)             write down or convert any instrument or liability;

 

(f)              ensure continuity of essential services and functions by:

 

(i)               requiring other entities in the Group to continue to provide essential services or facilities to the Authorised Person or any successor or an acquiring entity; or

 

(ii)             procuring the essential services or facilities from unaffiliated third parties;

 

(g)             override rights of shareholders of the Authorised Person, including requirements for approval by shareholders of particular transactions, in order to permit a merger, acquisition, sale of business operations, recapitalisation or other measures to restructure and dispose of the Authorised Person’s business, liabilities or assets;

 

(h)             apply the Sale of Business Tool;

 

(i)               apply the Bail-In Tool;

 

(j)               require the Authorised Person to prepare and implement a Business Reorganisation Plan;

 

(k)             temporarily suspend the exercise of early termination rights under any contracts or agreements that may otherwise be triggered upon entry of the Authorised Person into Resolution or in connection with the exercise of Resolution Powers or application of a Resolution Tool;

 

(l)               impose a moratorium with a suspension of payments to unsecured creditors and Clients (except for payments to central counterparties, payment, clearing and settlements systems and central banks) and a stay on creditor actions to attach assets or otherwise collect money or property from the Authorised Person, while protecting the enforcement of eligible netting and collateral agreements;

 

(m)           take any action necessary to effect the restructure or closure and orderly wind-down of the whole or part of the business of the Authorised Person while facilitating prompt access to transaction accounts and to segregated Client Assets;

 

(n)             require the Authorised Person or any of the entities in the Group to provide any services or facilities;

 

(o)             require the Authorised Person to promptly return Client Assets to Clients;

 

(p)             suspend any payment or delivery obligations pursuant to any contract to which the Authorised Person is a party; or

 

(q)             restrict secured creditors of the Authorised Person from enforcing security interests in relation to any assets of the Authorised Person.

 

(2)             In addition to the powers specified in subsection (1), the AFSA may:

 

(a)             require any person to provide any information required for the AFSA to decide upon and prepare Resolution Action, including to update or supplement information provided in the Resolution Plan;

 

(b)             remove rights to acquire further Shares, such as shareholders’ pre-emption rights in the case of a new Share issue under the AIFC Companies Regulations;

 

(c)             cancel or modify the terms of a contract to which the Authorised Person is a party or substitute a purchaser under the Sale of Business Tool as a party;

 

(d)             in relation to Debenture and other Eligible Liabilities issued by the Authorised Person:

 

(i)               amend or alter the maturity;

 

(ii)             amend the amount of interest payable; or

 

(iii)            amend the date on which the interest becomes payable, including by suspending payment for a temporary period;

 

(e)             close out and terminate financial contracts or derivative contracts for the purposes of the application of the Bail-In Tool;

 

(f)              require a person to discontinue or suspend the admission to trading of financial instruments relating to the Authorised Person; and

 

(g)             apply powers to allocate losses and allocate or terminate contracts of an Authorised Market Institution taking into account the particular circumstances of the Authorised Market Institution.

 

(3)             The AFSA may exercise its Resolution Powers when the Resolution Conditions are met under section 144:

 

(a)             regardless of any restriction on, or requirement to obtain consent for, the transfer of the financial instruments, rights, assets or liabilities in question that might otherwise apply;

 

(b)             without the requirement to obtain approval or consent from any person either public or private, including the shareholders or creditors of the Authorised Person; and

 

(c)             without the requirement to notify any person, including any requirement to publish any notice or Prospectus or to file or register any document with any other authority.

 

(4)             The AFSA may consult and cooperate with a central bank when planning or carrying out the Resolution of an Authorised Market Institution if that Authorised Market Institution is linked to the systems operated by the central bank.

 

(5)             The procedures in Schedule 2 apply to a decision of the AFSA under subsections (1) and (3).

148. Sale of Business Tool

(1)             The AFSA may apply the Sale of Business Tool to an Authorised Person by effecting a sale of all or part of the business of the Authorised Person to one or more purchasers. The Sale of Business Tool is effected by:

 

(a)             making one or more property transfer instruments for the transfer of all or any rights, assets or liabilities of the Authorised Person; and

 

(b)             if an Authorised Person is not a branch, making one or more Share transfer instruments for the transfer of all or part of the Shares of the Authorised Person.

 

(2)             The AFSA may apply the Sale of Business Tool to an Authorised Person without complying with any procedural requirements under the AIFC Companies Regulations or the constitutional documents of the Authorised Person.

 

(3)             The AFSA may prescribe Rules relating to the application of the Sale of Business Tool.

 

(4)             The procedures in Schedule 2 apply to a decision of the AFSA under this section.

149. Bail-In Tool

(1)             The Bail-In Tool is a Resolution Tool that may be applied by the AFSA in relation to an Authorised Person that is not a branch:

 

(a)             to recapitalise the Authorised Person:

 

(i)               to the extent sufficient to restore the Authorised Person’s ability to comply with the authorisation requirements as applicable;

 

(ii)             to continue to carry out the activities for which the Authorised Person is authorised under these Regulations; or

 

(iii)            to sustain sufficient market confidence in the Authorised Person;

 

(b)             to convert to Shares or reduce the principal amount of claims or Debenture that are transferred under the Sale of Business Tool.

 

(2)             In applying the Bail-In Tool the AFSA may use the Write Down or Conversion Power in such manner as may be prescribed in the Rules.

 

(3)             The AFSA may prescribe Rules relating to the application of the Bail-In Tool.

(4)             The procedures in Schedule 2 apply to a decision of the AFSA under this section.

150. Temporary Administrator

(1)             The AFSA may appoint a Temporary Administrator to replace the management of an Authorised Person.

 

(2)             The Temporary Administrator has such powers of the shareholders and management of the Authorised Person, as are specified by the AFSA in the instrument of appointment.

 

(3)             The Temporary Administrator has a duty to take all measures necessary to promote the AFSA’s objectives in relation to Resolution. The duty may, if necessary, override any other duty placed upon the management of the Authorised Person under Acting Law of the AIFC and the Authorised Person’s constitutional documents.

 

(4)             The person appointed to be the Temporary Administrator may be an individual (or one or more individuals acting jointly) or a body corporate.

 

(5)             Before appointing a person to be a Temporary Administrator, the AFSA must be satisfied that the person has sufficient qualifications, experience, and the fitness and propriety necessary to carry out the functions of a Temporary Administrator.

 

(6)             A Temporary Administrator must not be treated as a director (formally or de facto) of the Authorised Person.

 

(7)             The instrument of appointment must specify the date on which the appointment takes effect and the period of the appointment. The period of appointment must be for an initial period of not more than 12 months, but the AFSA may extend that appointment for a further period not more than 12 months.

 

(8)             The instrument of appointment may require the Temporary Administrator to report to the AFSA on any matter specified in the instrument and at the time or at intervals specified in the instrument.

 

(9)             The instrument of appointment may provide for the AFSA to pay the remuneration and costs of the Temporary Administrator or for the remuneration and costs of the Temporary Administrator to be paid by the Authorised Person, its parent or another entity in its Group.

 

(10)          The AFSA may vary the terms of appointment of a Temporary Administrator.

151. Resolution Safeguards

The AFSA must, when exercising a Resolution Power or applying a Resolution Tool in relation to an Authorised Person, aim to meet the following safeguards:

 

(a)             no shareholder, creditor or Client (including depositor and Policyholder) should be worse off under the Resolution Action than if the Authorised Person had been wound up under ordinary insolvency proceedings; and

 

(b)             any other Resolution Safeguards that may be prescribed in the Rules.

152. Costs of Resolution

(1)             The AFSA:

 

(a)             may require the Authorised Person to pay the costs of exercising a Resolution Power or applying a Resolution Tool; or

(b)             may recover those costs from the Authorised Person.

 

(2)             Without limiting subsection (1), the AFSA may recover the costs:

 

(a)             as a deduction from any consideration paid by a transferee to the Authorised Person (in the case of a transfer of property under paragraph (a) of subsection (1) under section 148);

 

(b)             as a deduction from the owners of the Shares (in the case of a transfer of Shares under paragraph (b) of subsection (1) under section 148); or

 

(c)             from the Authorised Person, as a preferred creditor.