8.66 Delivery up of assets by officers or bankrupt
Company officers and bankrupts have a duty to co-operate with the official receiver. Under section 291 a bankrupt also has a duty to deliver up possession of his estate to the official receiver. Section 234 does not impose any duty on company officers to co-operate with the official receiver but rather gives the court jurisdiction to order the delivery up of property, books, papers and records to an administrator, administrative receiver, liquidator or provisional liquidator. Where company officers and bankrupts fail to co-operate, reference should be made to chapter 13. That chapter also outlines the procedure for making an application to court for the search and/or seizure of an insolvent’s property.
Notes: [s234 and 235 or 291, 312 and 333]
Before taking action in relation to any item the official receiver should be reasonably satisfied that it is owned by the insolvent. Reference should be made to Part 8 of this chapter in relation to items belonging to third parties.
8.68 Assets subject to agreement with finance company
Assets may be subject to the terms of an agreement with a third party. These agreements may vary from simple rental agreements to agreements under which ownership of the item is intended to pass to the insolvent. Subject to any express terms of the agreement, the rights of the insolvent both to exercise rights over the asset (e.g. to use it) and to acquire ownership on the fulfilment of any specified condition will become exercisable by a liquidator or pass to a trustee in bankruptcy. Further details on specific types of agreement are provided in chapter 31.2 (Realisation of motor vehicles) which may also be applied to other items.
8.69 Assets covered by charge(s)
Reference should be made to paragraph 3.64 and Chapter 9 Part 1, Appointment of receiver or administrative receiver and Chapter 56, Part 2, Receivers and administrative receivers regarding the action the official receiver should take to establish the intentions of a chargeholder to realise his security. It should be noted that whilst the official receiver has an obligation to protect any charged assets when he is receiver and manager of a bankrupt's estate, and to take such assets into his custody and control where he is the liquidator of an insolvent company, once he has informed the charge holder of the insolvency, he may be justified in taking minimum steps to protect such property if there is no prospect of there being a surplus for the unsecured creditors once the security is realised. Any realisation of the property will be for the chargeholder to undertake. In certain circumstances, however, it may be necessary to insure assets covered by a fixed charge (see following paragraph) and to deal with them.
Notes: [s287] [s144]
The official receiver should, at an early stage, ensure that adequate insurance is in place to cover the property forming part of the insolvent's estate (which it is his duty to protect) and, where appropriate, public and employer's liability. This may be achieved by having his interest noted on an existing policy or by arranging new policies. The official receiver may have to insure property in the care of the insolvent (see paragraph 8.82) and also any assets charged under a fixed charge if, for some reason, the official receiver cannot immediately contact the third party or chargeholder to inform him of the proceedings and invite him to consider obtaining his own cover. The official receiver should not insure third party or fully charged assets at the expense of the estate except in special circumstances, such as where he cannot contact the third party/chargeholder and the estate could be liable if he failed to take action to insure the assets. Where this insurance will result in a high premium the matter should be discussed with Technical Section in advance (see also paragraph 8.82). For further details concerning insurance generally, see Chapter 49.
Where it is considered practicable and commercially worthwhile to do so, agents should be employed without delay to collect and store assets pending their disposal. A valuation may be commissioned from the agents to enable the official receiver to decide the best method of disposal of assets. This course of action should only be followed when the official receiver has no knowledge of the value of the assets e.g. due to their unusual nature. The official receiver should not incur a debit balance on the estate of more than £500 for this purpose without the approval of Technical Section. Reference should be made to Part 1 of chapter 32.3 regarding the employment of agents generally.
8.72 Disposal of assets - general
The official receiver should dispose of any assets that are likely to diminish in value e.g. seasonal goods such as Christmas stock, even where an insolvency practitioner is likely to be appointed (see also paragraph 31.6.50). If, for example, storage charges of an item will have a material effect on the net proceeds of sale available for the estate, the assets should be sold without delay. If it is likely that an insolvency practitioner will be appointed, any agents employed may be requested to hold the proceeds of sale pending such an appointment. Reference should be made to chapter 31 regarding the realisation of specific assets and chapter 32.1, paragraph 7, regarding the bonding of auctioneers/valuers.
8.73 Disposal of assets where official receiver is receiver and manager (bankruptcy only)
In bankruptcy cases, the official receiver acting as receiver and manager should exercise care that he does not exceed his powers when disposing of assets. The term ‘goods’ used in section 287(2)(b) is not defined by the Insolvency Act but should be taken to mean ‘goods and chattels’ and to include all moveable property. Therefore items such as land, and fixtures annexed to it, would be excluded. If the official receiver is in doubt regarding the disposal of assets of significant value, he can apply to the court for directions and detail his views as to the best method of disposal. The bankrupt and petitioning creditor’s solicitor should be notified of the application and that notification should be brought to the court’s attention.
Notes: [s287(2) (b)] [R10.3]
8.74 Dealing with assets and other property at premises generally
Normally assets and other property of the estate should be removed from business premises as a matter of urgency where a business is not to be continued. In addition to obtaining adequate insurance cover (see paragraph 8.70), the official receiver should ensure that all reasonable steps are taken to prevent any delay in removal of items from unattended premises. If the cost of removal is likely to have a substantially adverse effect on the realisation, the official receiver should consider disposal of items of stocks, machinery etc in situ. However, the official receiver may then be considered to be in occupation of the premises for the convenience of the liquidation (see below).
8.75 Occupation of premises for the convenience of the insolvency proceedings
The official receiver should exercise extreme care when considering whether to remain in possession of premises to enable assets to be realised to better advantage. The consequences of doing so were considered fully in the case of ABC Coupler and Engineering Co Limited (No.3) ([1970] 1 All ER 650). If the official receiver retains premises for the convenience of a liquidation or bankruptcy and not for the benefit of the landlord, the rent may be considered to be payable in full to the landlord as part of the expenses of the liquidation or bankruptcy. If this is the case, rent will be payable from the date of the winding-up or bankruptcy order to the date of vacation of the premises where, for example, assets are stored on the premises. In addition, a landlord or local authority may distrain upon the property of the insolvent at the premises for rent (if it is payable as part of the expenses of the winding up) or rates respectively accruing after the date of the winding-up or bankruptcy order. The official receiver should therefore ensure that where occupation is to continue, rent and rates are paid promptly. If the official receiver remains in occupation by arrangement with the landlord and for the benefit of the landlord as well as for the company or estate of the bankrupt, and there is no agreement that the official receiver should pay the rent, the rent will not be an expense of the insolvency and the landlord will not be entitled to distrain. Also, if the official receiver simply retains the property without using it but abstains from disposing of it, rent will not be an expense but a provable debt. Reference should be made to paragraphs 3.24 and 4.19 regarding any continuance of the electricity or gas supply.
8.76 Assets outside England and Wales
Assistance in enforcing court orders obtained by the official receiver in the courts of England and Wales, in the courts of other parts of the United Kingdom and certain other countries, is found in section 426. For further details, reference should be made to chapter 52 - Co-operation of courts.
Notes: [s426]
The official receiver may encounter problems in dealing with assets abroad, as his appointment with regard to the insolvent’s affairs may not be recognised there and there may be local creditors claiming the assets under local laws. However, the official receiver can seek the insolvent’s assistance in realising overseas assets. The company’s officers, and the bankrupt, have a duty to co-operate with the official receiver. If they fail to co-operate, the official receiver should remind them of the enforcement procedures available to him - see chapter 13.
Notes: [s235 or 291]
8.78 Information or property in the possession of third parties
There are various powers available to the official receiver and the courts for obtaining information relevant to the insolvent and property belonging to the insolvent. If a third party is in possession of, or is believed to be in possession of, property which is part of the insolvent’s estate, or is believed to have information about the insolvent or the insolvent’s business, affairs, dealings or property, the official receiver should seek to obtain such information or the delivery up of such property at an early stage. Note that in a liquidation certain persons in addition to the company officers have a duty to give information under section 235, subject to fines for non-compliance. Where a third party is unwilling to co-operate, the official receiver should consider making an application to the court for a private examination of the person in question - see chapter 23. The court has enforcement powers relating to private examinations and on the application of the official receiver can order delivery up of property of the insolvent, payment of money due or re-examination of persons.
In addition, where the official receiver is liquidator or provisional liquidator, he can apply to the court for an order to require any person to pay, deliver, convey, surrender or transfer the property, books, papers or records of the company to the official receiver.
In a bankruptcy, any banker, agent or other person who holds property on account of or for the bankrupt is required to pay or deliver up to the trustee all property in his possession which belongs to the bankrupt’s estate, subject to any legal right to retain the property. If any person defaults in this obligation when the official receiver is acting as trustee, the official receiver should inform them that he may be in contempt of court and liable to penalties accordingly if he is being unco-operative without reasonable excuse.
Also, in a bankruptcy, the court has the power in certain circumstances to issue a warrant for the seizure of property, which carries with it the right for the person executing the warrant to break open any premises necessary for its execution and the court can also issue search warrants.
Notes: [s235(3)] [s236 or 366] [s237 or 367] [s234(2)] [s312(3)&(4)] [s365]
A company’s registered office will often be at the offices of its solicitor or accountant and the company’s books and registers should be kept there. The solicitor or accountant may be entitled to a lien over those books in respect of unpaid fees but note that a lien to retain possession of any books, papers or other records (other than those giving title to property) of the company is unenforceable against its liquidator or provisional liquidator. Similarly, a lien to retain possession of any books, papers or other records of a bankrupt (except those giving title to property) is unenforceable against the official receiver as trustee. Liens are discussed further in chapter 9 Part 6.
Notes: [s246] [s349]
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