UT/2023/000092 - [2024] UKUT 00035 (TCC)

The terms of this requirement are that Nvayo must not:

“without the prior written consent of the Authority, in any way dispose of, withdraw, transfer, deal with or diminish the value of any of its own assets”.

It is provided that the requirement may be lifted when:

“i)

The Authority’s concerns in respect of the UBO, such as are set out within the SSN and FSSN, have been adequately mitigated; and

ii)

[Nvayo] has remediated any systems and controls failings to the satisfaction of the Authority. The Authority’s findings will take into account any findings of the appointed Skilled Person.”

The requirement is subject to exceptions. It does not apply to “the disposal of assets made by [Nvayo] in the ordinary course of business, amounting to not more than £5000…and also does not apply to i) Usual and proper salary payments made by [Nvayo]; and ii) Payment of Nvayo’s legal fees made by Nvayo. (Footnote: ¹)

The requirement also specifies a list of payments that will not be regarded as payments in the ordinary course of business namely:

“i.

Payments of unusual or significant amounts to the [Nvayo]’s controllers, shareholders, directors, officers, employees or any connected persons.

ii.

The making of any capital distribution.

iii.

The making of any gift or loan by the Nvayo to any party.

iv.

Payments made as part of any financial restructuring or reorganisation of its business, of from the sale of any part of the [Nvayo]’s business (whether share or asset based).”

The Authority maintain an assets requirement will normally be imposed where there is a risk of the firm being wound down. Mr Temple explained that while the regulatory framework ensured that client money was safeguarded, the purpose of this assets requirement was to ensure as much money as possible remained to facilitate any wind down while allowing ordinary business expenses to be paid. The persons sought to be protected are thus existing accountholders who will want to be assured that should Nvayo wind down it will have the resources to effect the return of their funds. Nvayo argue the requirement is inappropriate, disproportionate and unnecessary. There has been no assets dissipation, nor is there any risk of asset dissipation.

I take account of the finding above to the effect there is no reasonable certainty at this point that the Bank will not, contrary to its notification, close Nvayo’s account on 28 March 2024. The implication of that would be that Nvayo would not be able to carry on in business (because it will be unable to comply with the relevant safeguarding obligations). I therefore agree with the Authority’s assessment of risk: despite Nvayo’s arguments that it can resolve the matter I conclude that there is an impending risk of wind-down. With that backdrop in mind, and particularly given the short timeframe in which the risk may materialise, I am unable to be satisfied that there would be no prejudice to existing consumers (who will expect sufficient funds to be available to administer an orderly return of their safeguarded funds) if the assets requirement were lifted. (While Mr Auld sought to argue the assets requirement was unfair by analogy with assets freezing orders in the courts, that analogy does not hold good for the reasons Mr Temple explained. These include that the dispute is between a regulated entity and its regulator as opposed to between two litigants and the assets are restricted for the benefit of consumers not for the party imposing the restrictions.)