Entire Section

  • Chapter 4 – Resolution

    • 84K. Conditions for Resolution

      (1) The DFSA may exercise its Resolution Powers or apply its Resolution Tools in relation to an Authorised Firm only where it is satisfied that the following conditions (the “Resolution Conditions”) are met:
      (a) the Authorised Firm is failing or is likely to fail;
      (b) having regard to timing and other relevant circumstances, it is not reasonably likely that any action will be taken by or in respect of the Authorised Firm that will prevent the failure or likely failure of the Authorised Firm within a reasonable timeframe; and
      (c) the taking of resolution action is in the public interest.
      (2) For the purposes of this Article, an Authorised Firm is failing or likely to fail where one or more of the following circumstances exist:
      (a) it no longer meets requirements under the Law or Rules or other legislation administered by the DFSA, 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 Firm’s financial condition; or
      (e) it is unable to pay its debts or other liabilities as they fall due,
      but an Authorised Firm is not failing or likely to fail merely because one or more Early Intervention Powers have been exercised in relation to it.
      (3) In determining whether (1)(a) and (2) are met, the DFSA may take into account the likely impact on the Authorised Firm of the failure or likely failure of another entity in the Authorised Firm’s Group.
      (4) For the purposes of (1)(c), an action is in the public interest where:
      (a) it is necessary and proportionate to achieve one or more of the DFSA’s objectives; and
      (b) winding up the Authorised Firm under the Insolvency Law or other applicable insolvency laws would not meet the DFSA’s objectives to the same extent.
      (5) An Authorised Firm must immediately notify the DFSA 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 Firm operating as a branch in the DIFC, the Resolution Authority in the jurisdiction of its head office is considering, or has initiated, resolution action in relation to the Authorised Firm;
      (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 Firm is a subsidiary is considering, or has initiated, resolution action in relation to the head office.
      (6) If the DFSA determines that the Resolution Conditions are met in respect of an Authorised Firm, it:
      (a) shall 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) shall give written notice of the decision to:
      (i) the Authorised Firm;
      (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 Firm; and
      (c) may publish information about the decision if it appears to the DFSA to be desirable to do so in the public interest.

    • 84L. Appointment of Independent Valuer

      (1) The DFSA may arrange for an independent valuer to be appointed to carry out a valuation of the assets and liabilities of an Authorised Firm for the purposes of this Part.
      (2) The DFSA may prescribe in the Rules the eligibility requirements for a person to be appointed as an independent valuer under (1).
      (3) A valuation by an independent valuer shall be carried out in such manner as the DFSA may prescribe in the Rules.
      (4) The DFSA may require the Authorised Firm to pay, or recover from the Authorised Firm, the costs of any valuation.

    • 84M. Valuations

      (1) Before the DFSA exercises a Resolution Power or applies a Resolution Tool in respect of an Authorised Firm, it shall cause a valuation to be carried out to assess the value of the assets and liabilities of the Authorised Firm (a “Pre-Resolution Valuation”).
      (2) Notwithstanding (1), where the urgency of the case makes it appropriate for a Resolution Power or Resolution Tool to be exercised or applied in respect of an Authorised Firm before a Pre-Resolution Valuation can be carried out, the DFSA may cause a provisional valuation to be carried out of the assets and liabilities of the Authorised Firm (a “Provisional Valuation”).
      (3) Where the DFSA causes a Provisional Valuation to be carried out under (2), it shall cause a further valuation (a “Definitive Valuation”) to be carried out on the assets and liabilities of the Authorised Firm as soon as practicable after the Provisional Valuation.
      (4) A Pre-Resolution Valuation, Provisional Valuation and Definitive Valuation shall be carried out in such manner as the DFSA may prescribe in the Rules.

    • 84N. Resolution Powers

      (1) Where the DFSA is satisfied that the Resolution Conditions have been met, it may, by written notice, exercise one or more of the following Resolution Powers with respect to an Authorised Firm:
      (a) remove and replace any director or member of senior management (irrespective of whether they are responsible for the failure);
      (b) appoint one or more individuals to act as a Temporary Administrator in accordance with Article 84Q;
      (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 Firm or any successor or an acquiring entity; or
      (ii) procuring the necessary services or facilities from unaffiliated third parties;
      (g) override rights of shareholders of the Authorised Firm, 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 Firm’s business, liabilities or assets;
      (h) apply the Sale of Business Tool;
      (i) apply the Bail-in Tool;
      (j) require the Authorised Firm 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 Firm 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 customers (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 Firm, 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 Firm while facilitating prompt access to transaction accounts and to segregated client assets;
      (n) require the Authorised Firm or any of the entities in the Group to provide any services or facilities;
      (o) require the Authorised Firm to promptly return client assets to clients;
      (p) suspend any payment or delivery obligations pursuant to any contract to which the Authorised Firm is a party; or
      (q) restrict secured creditors of the Authorised Firm from enforcing security interests in relation to any assets of the Authorised Firm.
      (2) In addition to the powers specified in (1), the DFSA may:
      (a) require any person to provide any information required for the DFSA 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 Companies Law;
      (c) cancel or modify the terms of a contract to which the Authorised Firm is a party or substitute a purchaser under the Sale of Business Tool as a party;
      (d) in relation to debt instruments and other eligible liabilities issued by the Authorised Firm:
      (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; and
      (f) require a person to discontinue or suspend the admission to trading of financial instruments relating to the Authorised Firm.
      (3) The DFSA may exercise its Resolution Powers:
      (a) irrespective 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 Firm; 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.

    • 84O. Sale of Business Tool

      (1) The DFSA may apply the Sale of Business Tool to an Authorised Firm by effecting a sale of all or part of the business of the Authorised Firm to one or more purchasers by making:
      (a) one or more property transfer instruments for the transfer of all or any rights, assets or liabilities of the Authorised Firm; and
      (b) if an Authorised Firm is not a branch, one or more share transfer instruments for the transfer of all or part of the shares of the Authorised Firm.
      (2) The DFSA may apply the Sale of Business Tool to an Authorised Firm without:
      (a) the consent of the shareholders of the Authorised Firm or any third party other than the purchaser; and
      (b) complying with any procedural requirements under the Companies Law or the constitutional documents of the Authorised Firm.
      (3) The DFSA may prescribe Rules relating to the application of the Sale of Business Tool.

    • 84P. Bail-in Tool

      (1) The DFSA may apply the Bail-in Tool in relation to an Authorised Firm that is not a branch:
      (a) to recapitalise the Authorised Firm:
      (i) to the extent sufficient to restore the Authorised Firm’s ability to comply with the authorisation requirements as applicable:
      (ii) to continue to carry out the activities for which the Authorised Firm is authorised under the Law; or
      (iii) to sustain sufficient market confidence in the Authorised Firm; or
      (b) to convert to shares or reduce the principal amount of claims or debt instruments that are transferred under the Sale of Business Tool.
      (2) The DFSA may, in applying the Bail-in Tool under (1), use the Write Down or Conversion Power in such manner as may be prescribed in the Rules.
      (3) The DFSA may prescribe Rules relating to the application of the Bail-in Tool.

    • 84Q. Temporary Administrator

      (1) The DFSA may appoint a Temporary Administrator to replace the management of an Authorised Firm.
      (2) The Temporary Administrator shall have such powers of the shareholders and management of the Authorised Firm, as are specified by the DFSA in the instrument of appointment.
      (3) The Temporary Administrator shall have a duty to take all measures necessary to promote the DFSA’s objectives in relation to that Resolution which duty may, where necessary, override any other duty placed upon a director under DIFC Law and the Authorised Firm’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 DFSA 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 shall not be treated as a director (formally or de facto) of the Authorised Firm.
      (7) The instrument of appointment shall specify the date on which the appointment takes effect and the period of the appointment, which shall be for an initial period of not more than twelve months and the DFSA may extend that appointment for a further period not exceeding twelve months.
      (8) The instrument of appointment may require the Temporary Administrator to report to the DFSA 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 DFSA 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 Firm, its Parent or another entity in its Group.
      (10) The DFSA may vary the terms of appointment of a Temporary Administrator.

    • 84R. Resolution Safeguards

      The DFSA shall, when using a Resolution Power or Resolution Tool with respect to an Authorised Firm, aim to meet the following safeguards:

      (a) no shareholder or creditor shall be worse off under the resolution action than if the Authorised Firm had been wound up under ordinary insolvency proceedings; and
      (b) any other Resolution Safeguards that may be prescribed in the Rules.

    • 84S. Costs of Resolution

      (1) The DFSA may require the Authorised Firm to pay, or recover from the Authorised Firm, any costs of using a Resolution Power or Resolution Tool.
      (2) Without limiting (1), the DFSA may recover the costs:
      (a) as a deduction from any consideration paid by a transferee to the Authorised Firm (in the case of a transfer of property under Article 84O(1)(a)), or from the owners of the shares (in the case of a transfer of shares under Article 84O(1)(b)); or
      (b) from the Authorised Firm, as a preferred creditor.