October 2006
Introduction
i What is an insolvency practitioner?
A person who is both authorised and has the necessary security to act as an insolvency practitioner (IP) may be appointed in place of the official receiver as trustee or liquidator of an insolvent estate. He/she must be authorised by the Secretary of State (SoS) or a recognised professional body.
ii How is an IP appointed?
An IP can be appointed as a result of a meeting of creditors (or contributories, in company matters) or by the Secretary of State on the application of the official receiver.
Where the creditors fail to appoint an IP at a meeting, the official receiver may consider asking the Secretary of State for the appointment of an IP who will be selected from the rota. For more information on Secretary of State appointments see Case Help Manual part :Appointment of Trustees and Liquidators by the Secretary of State.
iii Handover to IP
The IP becomes responsible for the administration of a case on the date that the appointment becomes effective and the official receiver should seek to handover as soon as possible after the IP's appointment. In most cases it is normal practice to handover on the day of the meeting or the date of appointment.
iv Effective date of appointment
The effective date of an IP's appointment as trustee or liquidator is important, as this is when he/she becomes personally responsible for the assets of the estate.
In cases where an IP has been appointed at a creditors' meeting, a consent to act must be given for each individual case. The date that this form is received by the official receiver becomes the IP's effective date of appointment as trustee/liquidator. In Secretary of State appointments, the IP does not need to provide a written form of consent in connection with a Secretary of State appointment, as his verbal consent would have been obtained before any application is made. Insolvency Practitioner Unit (IPU) will insert the effective date of the trustee's/liquidator's appointment on form IPSSC.
v Official Receiver's duty
The official receiver owes both a common law and a statutory (Rules 4.107 and 6.125) 'duty of care' to an IP when providing the trustee or liquidator with the information required to deal effectively with the estate. The official receiver should ensure that the IP is supplied with proper, complete and accurate information regarding the insolvent's estate.
Where appropriate, the examiner should provide notes for the IP encompassing any relevant information which the trustee/liquidator may need to know of. Such as, for example, concerning any urgent disclaimers required, or other possible recoveries, ongoing investigations or uncorroborated information, etc.
An estate may only be handed over to a trustee or liquidator where the IP is duly authorised and qualified to act, i.e. he/she is a licensed insolvency practitioner and holds a current insurance bond. Individual official receivers remain responsible for ensuring that IPs included on their rota are duly authorized and qualified to act, in order to accept an appointment as trustee or liquidator.
vi What should be handed over?
The official receiver should prepare a form IPHBP, which gives the official receiver the option to enclose various papers/orders to send both to the Court and the IP and or remind/enclose further papers. The form will also produce a list of all the items to be handed over to the trustee/liquidator and can be edited by the official receiver according to the circumstances of the case. The IP (or his/her representative) must sign this list by way of general receipt, together with a signed copy of the IP's undertaking (form IPUND- see paragraph viii below)) and copies should be retained on the office file.
The list is only intended as a guide as any other items to be handed over (with the exception of the estate cash book) should be agreed with the examiner before they are given.
The official receiver may retain the insolvent's records where there is a prosecution or disqualification pending or further investigation into the insolvent's affairs is being carried out. In such matters, the IP would be invited to attend the official receiver's office to inspect the records when required. Any relevant documentation may be copied upon his request.
vii Trustee’s/Liquidator’s undertaking
The IP appointed trustee or liquidator must also sign form IPUND on handover of the estate. By signing this form, the trustee/liquidator formally acknowledges that the official receiver’s fees, costs and expenses must be paid first out of any realisations. This form must also be completed in cases where a credit balance is being handed over. Once signed, the form should be placed on the office file.
viii Trustee's/Liquidator's record book
A trustee's or liquidator's record book (form IPROH) must be prepared in every case that is to be handed over and should include the 15 digit reference number (insolvent's estate account number) since the IP will need to quote this number in his transactions relating to the Insolvency Services Account.
The record book must include details of the assets comprised in the estate and their expected realisable values. It must include details of any potential civil claims such as preferences, transactions at an undervalue or wrongful trading. The official receiver should ensure that the attention of the insolvency practitioner is specifically drawn to the employment and payment of any agents, solicitors etc retained by the official receiver prior to handover, ensuring that he/she is aware that the liquidator or trustee is responsible for post appointment charges.
The official receiver should inform by letter all agents who have been instructed that an insolvency practitioner has been appointed (form NACT).
Details of insurance effected by the official receiver should be included in the record book and the insolvency practitioner should be given details of any premium payments made. Immediately after handing over the estate any insurance effected by the official receiver should be cancelled (subject to any instructions the practitioner may have given the insurer). For further information see Case Help Manual : Official Receiver's Insurance.
The examiner should provide a note for inclusion in the record book of any other matters of concern for the trustee/liquidator not already covered.
ix Estate cash book
The IP must also be provided with a cashbook showing the resultant balance being transferred to him/her as trustee/liquidator. This is a system generated event, but is only activated when the handover date has been input onto LOIS Screen 23. Estate Accounts Directorate is responsible for producing the cashbook and will forward it to the relevant official receiver, normally between 2-3 days after the handover. It is no longer necessary to have the cashbook signed by an assistant official receiver or any other member of staff.
Any invoice received after handover, e.g. insurance premium due, will be charged to the estate with the resultant debit balance being transferred to the IP.
Where a remittance is received after the case has been handed over to an IP it should be posted to the appropriate trustee/liquidator with a covering letter. A standard letter is available on Shared Drives for this purpose. A copy of the letter and the cheque should be filed in the non-banked correspondence file in case of a query at a later stage.
x Preliminary information questionnaire (PIQ)
Copies of PIQs and statements should be supplied to insolvency practitioners on handover, provided that the matter has been duly considered and a note to that effect is made on the CAR B. Therefore, in every case where an insolvency practitioner is appointed as liquidator or trustee, the official receiver must consider, based on the facts of the case, whether or not the information in the PIQ and any narrative statement taken is reasonably required by the liquidator or trustee. The official receiver should also bear in mind that as the insolvency practitioner could, in any event, obtain the relevant information from the company officer or bankrupt through other means at his/her disposal. It would be an unusual case in which the PIQ and initial statements obtained at the early stages of a case contain information that is not reasonably required by the insolvency practitioner.
The company officer or bankrupt is informed in the PIQ that the PIQ will be disclosed to any liquidator or trustee subsequently appointed. The following paragraph appears below the interviewee's signature box:
"If an insolvency practitioner is appointed as liquidator/trustee of your estate in place of the official receiver, the liquidator/trustee will have separate powers to require you to provide information. However, a copy of this completed questionnaire will be given to any such practitioner and this should reduce considerably his or her need to contact you again for information."
A similar paragraph should be added to any narrative statement taken.
Where statements are obtained after a handover has taken place, the same consideration should be given to them and the interviewee notified that they will be handed over to an insolvency practitioner, either as part of the statement or separately. If considered appropriate copies should be supplied to the insolvency practitioner and a corresponding note placed on the file. If a statement contained information relating solely to further investigation matters, it might not contain information of use to an insolvency practitioner in carrying out his/her duties, but if the further investigation relates to the whereabouts or non disclosure of an asset, it would be likely to contain such information.
xi Handover immediately after the meeting of creditors
Ideally, official receivers should aim to hand over cases to IPs within 8 working days of their nomination, appointment or subsequent agreement to act.
With the majority of meetings, once the deadline for lodging proofs and proxies has passed, it should become evident that a particular IP will be appointed. In such cases, the practitioner should be contacted so that arrangements can be made for the handover to take place immediately after the meeting. Even if all the papers cannot be assembled in time, the important documents can be handed over, the handover being at that date, with the remaining items following at a later date.
For details of the meeting forms also to be issued please see Case Help Manual part:Meetings - part iv - Day of the Meeting.
Any items, requiring the attention of the trustee/liquidator, received after the handover of the estate, should be forwarded to the IP without delay.
xii Handover by post
A handover can be effected by post with the IP's approval. Rather than waiting for the IP or his/her representative to attend the office and collect the items, the relevant documents together with his/her certificate of appointment can be posted directly to the IP. The practitioner must acknowledge receipt of those articles handed over by returning the handover list, trustee/liquidator's undertaking (IPUND), and any other specific receipt, duly signed. Any problems that you have concerning this should be referred to the examiner.
xiii Book Debt Collection Contractor
Where a trustee or liquidator is appointed, details of the involvement of the Service's book debt collection contractor, Clarke Willmott, will be include in the forms IPHBP and IPROH. Clarke Willmott should also be made aware of the IP’s appointment (NACT) urgently, since Clarke Willmott may wish to re-negotiate their employment with IP. The official receiver will be invoiced for any recoveries up to the date of the IP’s appointment.
xiv Applications for sanction
Official receiver's staff may receive applications or enquiries regarding a sanction. A brief explanation follows of the background to such applications.
The function of a liquidation or creditors’ committee is to ensure that the actions of the liquidator or trustee are not beyond his/her powers and that he/she carries out his/her functions in accordance with the provisions of the Insolvency Act. Where an IP is acting and no liquidation or creditors’ committee is appointed, IPU carries out the functions of that committee on behalf of The Secretary of State.
Where sanction is required by an IP an application should be submitted in writing or electronically directly to IPU. For example, the insolvency practitioner may wish to apply for authority to take or defend legal proceedings, to obtain an order for possession and sale of a property. Any applications or requests received by the official receiver should be passed to IPU.
Notes:
Where can I find out more?
Insolvency Act 1986
Part XIII: Section 388 - 391
Insolvency Rules 1986
4.107 Handover of assets to liquidator
6.125 Handover of estate to trustee
Technical Manual
Chapter 11 - Interviews and Statements - part 1 -paragraph 11.17
Chapter 17- Appointment of Liquidators and trustees -Part 7
Case Help Manual
Appointment of Trustees and Liquidators by the Secretary of State
Meetings:Part IV - Day of Meeting
Forms to be used:
IPCAM Certificate of appointment of trustee/liquidator at a meeting
IPSSC Certificate of appointment by Secretary of State
IPUND Trustee’s/liquidator’s undertaking on handover of estate
FAC OR’s notice to court filing copy of certificate of appointment of Trustee/Liquidator
IPROH OR’s report to trustee/liquidator on handover of estate (record book)
IPIB/D OR's notice to bankrupt/director of appointment of Insolvency Practitioner as Trustee/Liquidator
IPHBP - OR's letter to IP/Court forwarding certificate
NACT - Notifying agent of case transfer
Click HERE to view the Flowchart for Handover to IP
LOIS screen references are given in brackets eg (D073).
Before the handover.
1 Agree with the appointed IP whether the handover will be in person or by post. If the IP has been appointed as a result of a meeting a consent to act will need to be provided.
2 Prepare all the items for handover (see para vi) and ensure that copies are made where necessary. Check any unusual items with the examiner.
3 Ensure that you have 3 copies of the trustee/liquidator's certificate of appointment (photocopy where necessary). Certificates would have been signed by the chairman where the IP was nominated at a meeting (IPCAM) or by IPU in a Secretary of State appointment( IPSSC).
4 Prepare 2 copies of the trustee or liquidator's record book by completing all the relevant information regarding the case on LOIS, form IPROH (D073). Check LOIS (CA08) for any additional matters that the examiner has asked should be included in the IPROH. Obtain a signature, according to local office practice.
5 Pass one copy of the trustee/liquidator's record book with the list of items to be handed over to the IP and place one copy on the office file.
6 Check that all proofs received have been entered on LOIS (CA31) and a list is made of the number of proofs handed over. OR59U may be used for this purpose.
7 Make a final check of the list of items to be handed over and edit if necessary.
8 Prepare 2 copies of the trustee/liquidator's undertaking, form IPUND and place both with form IPHBP to be handed over, ready to be signed by the IP.
9 Check with the examiner whether the books and papers are to be handed over. If so, retrieve them from storage and note LOIS (CA27) accordingly.
Day of handover
10 Enter details of appointment and handover date on LOIS. (CA23).
N. B. It is not possible to print some of the LOIS forms in advance of the appointment date and these can only be produced on or after the date of appointment has been entered onto Screen 23.
11 If the handover is to be effected in person, check off each item on list with IP or his/her representative. Ensure that he/she signs and acknowledges receipt of all papers.
12 Ensure that the IP signs the IPUND (trustee/liquidator's undertaking) and then place it on the office file. The date of handover should also be entered in the IPROH.
13 Place all signed copies on the office file and ensure that all records have been updated with the details of the IP.
14 Ensure that the bankrupt/director has been informed of the IP's appointment as trustee, by sending form IPIB/D (DO73).
15 Where the handover is to be done by post the IP will sign and return the handover list, IPUND and any other specific receipt requested. These items should be placed securely on the office file.
If you are unsure whether any item should be sent to the IP, check with the examiner before doing so.
16 The estate cashbook will be prepared by Estate Accounts Directorate and dispatched to the relevant OR's office. Upon receipt, the cashier will enclose an up to date ledger sheet from LOLA and forward to the IP appointed as trustee/liquidator.