Re AS LHV Pank (UK Branch) & Anor

A banking business transfer scheme may be sanctioned where it satisfies the statutory definition, the required regulatory certificate has been obtained, and sanction is appropriate in all the circumstances. The court must assess the particular scheme, including any material adverse effect on affected persons and the security of depositors’ rights. Ancillary orders are available where they are incidental, consequential or supplementary to the scheme and necessary for its full and effective implementation.

AS LHV Pank (UK Branch), an Estonian bank, and LHV UK Ltd sought sanction under section 111(1) of the Financial Services and Markets Act 2000 for the transfer of the branch’s UK deposit-taking, banking and regulated payment-services business to LHV UK.

The application also sought ancillary orders under section 112. The Prudential Regulation Authority and Financial Conduct Authority had overseen the process. No person appeared to object, although agreed technical amendments concerning payment-system memberships were to be made under the scheme’s amendment procedure.

1. The scheme satisfied the definition of a banking business transfer scheme under section 106(1), including section 106(2)(b), and was not excluded.
2. The statutory conditions under section 111(1) were met. The Prudential Regulation Authority had issued the certificate required by Schedule 12, confirming adequate financial resources.
3. The court adapted the principles developed in insurance-business-transfer cases in light of Re Prudential Assurance Company Limited [2020] EWCA Civ 1626. The relevant evaluations depended on the circumstances of the particular scheme. A crucial question was whether there would be any material adverse effect on affected persons. The security of depositors’ rights was important: Re ING Direct NV [2013] EWHC 1697 (Ch).
4. Section 112(1)(d) permitted incidental, consequential or supplementary orders necessary to secure that the scheme was fully and effectively carried out. The proposed technical amendments and ancillary orders fell within that jurisdiction, with support from Re Barclays Bank Plc [2018] EWHC 2868 (Ch).
5. The scheme had a reasonable commercial objective, had been subject to regulatory oversight and extensive communication, complied with the statutory requirements, and attracted no objections. The court sanctioned the scheme in its current form and granted the ancillary orders. The agreed technical amendments were to follow under paragraph 15.2 of the scheme.