The applicant company applied for an order pursuant to Part VII of the Financial Services and Markets Act 2000 sanctioning an insurance business transfer scheme transferring its entire insurance business to M Ltd. As a requirement of membership of the Institute of London Underwriters (“the ILU”) two companies (“the guarantors”) entered into guarantees in favour of the ILU for the benefit of policyholders whose policies were signed and issued through the ILU (“the ILU guarantees”). The applicant proposed that the two ILU guarantees should be varied by way of a specific provision in the order sanctioning the scheme to the effect that the references to the applicant should be deemed to be references to M Ltd. The guarantors objected to the proposed order, disputing whether such an order could be made under section 112 of the 2000 Act and submitting that modification of the ILU guarantees could not be “necessary to secure that the scheme is fully and effectively carried out” within the meaning of section 112(1)(d).
Held Application granted. Section 112 of the Financial Services and Markets Act 2000 was a broad section providing the court with extensive powers to facilitate the carrying out of the scheme which it had sanctioned and, in section 112(1)(d) to make orders that were supplementary to the scheme to that end. The scheme was for the transfer to M Ltd of the whole of the applicant’s insurance business. The writing of policies with the benefit of the ILU guarantees was an integral part of that business, and doubtless enhanced the ability of such policies to be sold on behalf of the applicant. The continued existence of the ILU guarantees was also an integral part of the commercial benefits conferred upon the relevant policyholders of the applicant and it was part of their legitimate expectations that such ILU guarantees should continue to be available. In such circumstances, it was an entirely natural use of language, and in accordance with the overall purpose of Part VII of the 2000 Act, which clearly required the court to have regard to the interests of policyholders, to conclude that the scheme would not be fully and effectively carried out if the benefit to policyholders of the ILU guarantees associated with their policies was lost as a result of the transfer. Section 112(1)(d) empowered the court to do what was necessary to secure an insurance business transfer scheme was “fully” carried out. The power to secure that a scheme was “fully” carried out indicated that the court had jurisdiction to go beyond the bare minimum without which the independent expert would withdraw his support for the scheme. Whether it should do so was a matter of discretion. There was no reason to decline to make the order in relation to the ILU guarantees in the form sought by the applicant and the ILU under section 112(1)(d) of the 2000 Act (paras 41–43, 49, 59).
Martin Moore QC (instructed by Hogan Lovells International LLP) for the applicant.