Guidance Notes for the Completion of Statutory Reports and Returns

These notes are important and should be read before completion of any report or return under section 7 of the Act.

Appendix 1

Key points of Statement of Insolvency Practice 2 - A liquidator’s investigation into the affairs of an insolvent company

This is a summary of the key points from SIP2 which will affect the discharge of the liquidator's duty to report under the CDDA.

Report to creditors

At the initial creditors' meeting, and in the subsequent report to creditors, the liquidator should invite creditors to bring to his notice any particular matters which they consider require investigation.

Liquidation committee

The liquidator should also specifically invite members of the liquidation committee to bring to his attention any matters requiring investigation.

Questioning directors and other key personnel

At the outset of the winding-up, the liquidator should arrange to make enquiries of company officers and other senior officials, as to the company's affairs, including the reasons for failure and the location of its records and property. The liquidator should consider carefully which individuals are relevant to his investigation, having regard to the information which he believes they may have. The individuals who may be relevant will normally include all directors (by whatever name called), the company secretary, and other senior officials and employees, but may also include others from among those persons listed in section 235(3) of the Insolvency Act 1986.

Records

At the outset of his appointment, the liquidator should ascertain the location of and safeguard and list the books, records and other accounting information belonging to the company. He should examine the records of the company covering the period since the date of the last audited or filed accounts to ensure that changes in the financial position of the company can be accounted for.

Trading

The liquidator should consider preparing trading and profit and loss accounts if there is a material difference between the deficiency disclosed in the Statement of Affairs and the last audited or filed accounts, after taking into account matters such as writing down asset values. However, the liquidator should have regard to the likely costs which would be incurred and the benefits which might accrue to creditors from carrying out such an exercise.

Comparison of assets with last audited or filed accounts

For the purpose of discovering company property, the liquidator should compare the Statement of Affairs with the last audited or filed accounts. The liquidator should satisfy himself that material movements in fixed and current assets can be properly explained.

Transactions with associated companies or connected persons

The liquidator should examine the books and records of the company to ensure that any transactions with associated companies or connected persons were carried out at arm's length. Material transactions should be examined in detail. Particular attention should be paid to transactions involving directors, including any reduction in loan accounts, overdrafts, or other debts supported by personal guarantee.

Criminal offences

During a voluntary winding-up, if the liquidator finds that any past or present officer (or member) of the company may have been guilty of any offence in relation to the company for which he is criminally liable, he must report the matter to the Director of Public Prosecutions or, in Scotland to the Lord Advocate (section 218, Insolvency Act 1986).

Appendix 2

Documents and information to be included with a report

This list shows items of information which should be submitted with every report. Producing one or more of these after submitting a report - and following a specific request to do so by the Unit - will not be considered additional work for which a Practitioner would expect to receive payment.

1. Copy Statement of Affairs. Where none is submitted, the report should include an estimate of the financial position of the company by listing known assets and liabilities.

2. A copy of the office-holder's report to creditors. If this is not available, please attach a report detailing the company's history.

3. A copy of any notes issued to creditors for the purposes of the meeting and of any record taken of the proceedings at the meeting.

4. Copy accounts as available - last two sets of audited accounts and any draft or management accounts for periods thereafter.

5. Copies of any questionnaires which have been completed by the directors.

6. The present position of the insolvency and dividend prospects.

7. Copies of specific documents referred to which provide evidence of the unfit conduct reported. If there are many documents they need not all be provided at the time of reporting. But you should give full details of what is available and where it is.

8. Aged creditors' analysis - if readily available from the company's records. Within the body of a report, you should fully cover the following matters:

9. Position on any civil recovery actions, including statement of claim, legal advice etc.

10. Details of the nature of evidence available in support of insolvent trading - not, for example, detailed schedules of claims at this stage.

11. References to professional advice taken by the directors, and to specific correspondence which sheds light on directors' conduct, for example with banks, solicitors, accountants, creditors.

Appendix 3

Flowchart: How a practitioner's report is processed:

Click Here for the flowchart in PDF format, or Here for an alternative in Jpeg format.

Appendix 4

Flowchart: The reporting decision:

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[CONTENTS ] [ PART 1 ] [ PART 2 ] [ PART 3 ] [ PART 4 ] [ PART 5 ] [ PART 6 ] [APPENDICES]