January 2006
Introduction
i Why does the official receiver issue reports to creditors?
The official receiver is required, by the legislation, at least once after the making of a winding-up or bankruptcy order to report to creditors on the proceedings and on the state of the insolvent’s affairs. In the case of a winding up, the report will also be sent to the contributories. By providing informative and relevant information to creditors, the official receiver encourages them to provide useful feedback that may aid decision-making and further investigation efforts. An information sheet is attached to the report which provides details of the type of information that might be useful to the official receiver for investigation purposes. The report will also provide creditors and contributories with a contact name and address and advise them at an early stage that the official receiver is dealing with the insolvency proceedings.
In certain circumstances (usually non-surrender cases) the official receiver sends out a first report to creditors which does not contain much information about the reason for the insolvency other than details of the petition and bankruptcy/winding-up order and the extent of any other known debts. In these circumstances the official receiver will also comment on what further action is now to be taken. When material new information is received, possibly after the publication of the gazette or advertisement or subsequent surrender of the bankrupt or director, the official receiver should send a further report to creditors. Additionally, where an investigation has resulted in a successful conclusion of prosecution proceedings, or an application for a disqualification order or bankruptcy restrictions order, the official receiver should generally further report this success to the creditors. For exceptions, however, please see Technical Manual Chapter 18, part 2, paragraph 18.20.
If the official receiver considers that the cost of reporting, having regard to the number of creditors (and/or contributories), their interest in the proceedings and the amount of assets available, is likely to be excessive, he/she should consider applying to the court either to relieve him/her of his/her duty to report or to authorise him/her to report in a different way, for example by advertising where a copy of the report can be obtained. The official receiver should only consider making such an application where he/she is dealing with a case which has an exceptionally large number of creditors/contributories. The application should also cover the seeking of relief from sending out individual notice of a meeting/no meeting.
ii When should the report to creditors be issued?
The report to creditors/contributories should be issued as soon as possible since early dispatch will reduce the number of routine enquiries received, though a balance should be struck between this and providing adequate information to creditors. For example, if you knew that the bankrupt/director was to attend the office for an interview when the case was 5 weeks old, you would not issue a non-surrender report to creditors (CAR A) with little information for creditors prior to this time.
The report must be completed by the examiner, using the appropriate CAR A form and issued with, either the notice convening a first meeting (form NFM) or a notice stating that no meeting will be held (form NNM). There is no statutory time limit within which the official receiver is required to issue a report to creditors, but The Insolvency Service aims to issue the majority of reports to creditors within 8 weeks of the making of the order.
iii What if the proceedings are annulled, stayed or rescinded?
If the proceedings have been annulled, stayed or rescinded, the official receiver no longer has a duty to issue a report to the creditors. In a bankruptcy, however, the official receiver must contact everyone already notified of the making of the bankruptcy order to inform them that it has been annulled (form NABO). Whilst the official receiver is not compelled by the Rules to notify creditors in a winding-up of a stay of proceedings or the rescission of the winding-up order, an early letter informing them of the position is likely to reduce the number of queries received.
iv Who will receive a copy of the official receiver’s report?
The report is sent to the creditors, the contributories of a company and the liquidator or trustee (if other than the official receiver). "Creditors" means those who are known to the official receiver as such, i.e. are on the list of creditors, are listed in the preliminary information questionnaire (PIQ) or, where a statement of affairs has been submitted, are disclosed on that document. Where someone states that they are a creditor or contributory, and they are not recorded in the proceedings as such, they should be asked to provide details in writing prior to a copy of the report being sent to them. Once such details have been received, they should be treated as a creditor. The official receiver’s report should only be given or copied to creditors or contributories (or, alternatively, their representatives, provided they have written authority from the creditor or contributory they represent, or the official receiver is otherwise satisfied that they have been retained by the creditor or contributory concerned). It should be noted that the Rules do not provide for other office-holders, for example an administrative receiver, to be provided with a copy of the report. Reports should never be given or copied to journalists or press agencies.
A copy of the report must be filed in court by the official receiver and this should be done at the same time as the report is sent to creditors. Please note that the court copy of the form NNM is automatically generated when form NNM is specified.
Any requests under the Freedom of Information Act 2000 for a report to creditors or a list of creditors from companies that are not creditors of any specific insolvent should be referred to the examiner.
For more information see Technical Manual: Chapter 81 - Freedom of Information and Data Protection and Case Help Manual part: Freedom of Information and Data Protection Act.
v What information is included in the report?
The report to creditors must include full details of the assets and liabilities in the insolvency and an indication of whether there is any realistic prospect of a payment to creditors. It must be made known why certain property disclosed in the proceedings cannot or will not be realised for the benefit of the creditors (this includes exempt property). Reference should also be made as to whether an income payments agreement/income payments order (IPA/IPO) is being obtained and, if so, for how much and for what period, but please see paragraph vi for the procedure in debtor’s petition cases.
The bankrupt’s or director’s reasons for the insolvency should also be disclosed so that creditors can make an assessment as to whether these match their knowledge of events and can inform the official receiver of matters of which he/she may not be aware and that would be relevant as to how he/she proceeds. If the official receiver disagrees with the reasons given for the insolvency there should be a statement to that effect giving the official receiver’s views as to the reasons for the insolvency.
Although the report to creditors makes no mention of discharge in bankruptcy cases, it should also contain sufficient information to enable creditors to form a view as to whether they wish to make representations as to a bankrupt’s unsuitability for an early discharge from the proceedings. This will be of use later when creditors receive the official receiver’s letter regarding the early discharge process.
For further information see Case Help Manual part: Discharge From Bankruptcy
vi Who prepares the report?
The Case Assessment Record (CAR) form incorporates a report to creditors (CAR A). The CAR A form provides details of the information which is to be included and further guidance can be found in Part 4 of the Case Assessment Record (Revised Guidance Notes) which can be found on the OROS intranet site. (Also see: Technical Notices T9/04 and T21/04).
However, in order to streamline the process in debtor’s petition cases only, there are two further shortened CAR A forms available. These forms are to be used in specific circumstances as follows:
These revised CARA forms will only be suitable for use in appropriate type 0 and type 1 cases. In all meeting cases, type 0 and type 1 cases that do not fit the criteria above and type 2 cases, the standard CAR A form should be used.
For further information see Case Help Manual part: Initial Contact and Technical Notice - T36/05.
The CAR form will continue to be completed electronically by the examiner and submitted, where appropriate, see Management Notice - M1-05, for approval by the AOR. The CAR A form should be saved by the examiner in an individual electronic case folder on the local shared drive and stored according to local office practice.
Once approved, the appropriate CAR A form is passed to the case clerk for issue with form NNM/NFM (notice of no meeting / first meeting) to all known creditors (LOIS screen 31). Where a meeting is to be held a proof of debt form and proxy form should also be issued (POD, PROXY). The meeting decision and date of issue of the report to creditors should be recorded on LOIS Screen 21.
For further information see Case Help Manual parts:Meetings
vii Partnerships
Where there is a winding-up order only against a partnership without insolvency orders against any of the members, the report should only contain details of the assets and liabilities of the partnership/a summary of the partnership statements of affairs, if appropriate, and the official receiver’s report on the partnership, which is treated as an unregistered company. Details of the partners’ separate affairs should not be given in the report.
Where there is a winding-up order against a partnership and an insolvency order against one or more of the partners, separate reports must be prepared for each estate (i.e. the partnership and each member) for issue to the respective creditors. This ensures that creditors only receive information to which they are entitled.
For further information see Case Help Manual parts: Partnerships and Meetings- part vii
viii What is qualified privilege?
Due to the nature and source of the information contained in the report to creditors, and because the official receiver has a statutory duty to issue the report, he/she retains a benefit known as qualified privilege which protects him/her from being sued for defamation.
It means that as long as the information contained within the report is believed by the official receiver to be true and has not been included for any malicious reasons or with a desire to injure, the official receiver cannot be sued for defamation. The best way is to adopt a fair and reasonable approach to every case. It is also important that third parties such as banks, accountants, solicitors and creditors are not named in the report, as this could result in legal action being taken against the official receiver.
Notes
Where can I find out more?
Insolvency Rules 1986 - Rules 4.43 - 4.49 Information to creditors and contributories
Rule 4.59 Notice of meetings by advertisement only
Rule 4.107(8) Hand-over of assets to liquidator
Rule 6.212(1) Notice to creditors
Rules 6.73 to 6.78 Information to Creditors
Rule 6.85 Notice of meetings by advertisement only
Rule 6.125(8) Hand-over of estate to trustee
Insolvent Partnerships Order 1994 Articles 7-11
Technical Manual
Chapter 6 - Appeals, Stays, Rescissions and Annulments
Chapter 18 - Reports to Creditors and Contributories
Chapter 81 – Freedom of Information and Data Protection
Case Help Manual
Freedom of Information and Data Protection
Insolvency Casework Standard
Notices
M1-05 – Change To Screen 85 – Introduction Of Examiner “Self Sign-Off”
T9-04 – Introduction of The Case Assessment Record (CAR) Incorporating A Revised Report To Creditors
T21-04 - Revision Of The Case Assessment Record
T36-05 – Revised Procedures for dealing with Debtor’s petition cases
Forms to be used:
CAR A, CARAS, CARASIPA – Case Assessment Record – report to creditors
FAC - filing at court
LCAD - letter covering advertisement
NABO - Notice of annulment of bankruptcy order
NFM – Notice of first meeting
NFN(1) - Notice for newspaper
NNM – Notice of no meeting
PROXY - Proxy
POD - Proof of debt
Click HERE to view the flowchart for Reports to Creditors
Procedure
LOIS screen references are given in brackets e.g. (DO73)
1 Receive papers from examiner, which will include details of CAR A, form report to creditors. In debtor’s petition type 0 or type 1 cases this may be a CARAS or CARASIPA form. (Standard CAR A forms may still be used in these cases where appropriate to do so).
2 Ensure all known creditors including those listed in the PIQ and/or statement of affairs are listed on LOIS (CA31).
3 In bankruptcy only, if the proceedings have been annulled, stayed or rescinded form NABO (notice of annulment of bankruptcy order) must be issued to everyone already notified of the bankruptcy order. In company cases check with examiner as to what notification, if any, should be issued.
4 In bankruptcy only, check whether instructions have been given to amend the description and action accordingly. See Case Help Manual part: Amend Description
N.B. The meetings decision must be entered onto LOIS (CA21) before the report to creditors will be generated.
5 If no meeting arrange for the issue of the report together with form NNM (notice of no meeting) to all known creditors (CA31), according to local office practice. A notice to court will be automatically generated.
6 File copy of report at court and note date of issue of report and meeting decision on LOIS (CA21).
7 If meeting required fix the meeting date. A minimum of 21 days notice must be given and in practice 28 days is given to allow for dispatch and posting. In a few cases this date may fall outside the Service's aim of notices issued within 8 weeks of the date of the insolvency order. In these circumstances refer matter to examiner to see whether an extension of time needs to be applied for. In all other cases arrange for issue of the report together with form NFM (notice of first meeting), POD (proof of debt) and PROXY to all known creditors(CA31), according to local office practice (DO73).
8 File copy of report at court and note date of issue of report and meeting decision on LOIS (CA21). Send letter LACD (letter covering advertisement) and form NFN1 (notice for newspaper (1))(DO73).
9 When copy of advert received file at court using form FAC (filing at court) (DO73). Enter date of publication on LOIS (CA03, CA21).
For further information see Case Help Manual part: Meetings- all parts