Following consideration of reports made under Section 218(4) (and otherwise), a criminal investigation may result. Frequently the criminal investigation is carried out by the Department of Trade and Industry, and one of the Department’s officials (an investigation officer) is likely to contact the practitioner as part of that investigation. Often the investigation officer will wish to review the company’s books, papers, etc. Should a criminal prosecution ensue, the company’s records, etc will be required so it is imperative that where a practitioner is aware of a criminal investigation he/she should not destroy those records until the position has been discussed with the investigation officer.

2.   Disclosure of Statements and Preliminary Investigation Questionnaires 

Until now the legal advice given to The Service in connection with the disclosure of statements, including preliminary investigation questionnaires (PIQs), supplied by directors and bankrupts has been to the effect that copies of such statements should not be passed to insolvency practitioners appointed as liquidator or trustee without the written permission of the person who gave the statement.

This matter has recently been discussed with Counsel, who now advises that the Official Receiver is able to, and, as part of his obligations to insolvency practitioners appointed as liquidators and trustees, normally should pass copies of such statements to them.  Counsel’s reasoning is based on the dual role of the Official Receiver as a gatherer of initial information both for the purposes of his statutory duties and for the protection and realisation of the estate.  The Insolvency Rules (4.107 and 6.125) require the Official Receiver, on handing over the estate to a person other than himself appointed as liquidator or trustee, to supply to that person such information as is reasonably required by the liquidator/trustee for the effective discharge of his duties in that capacity.

This means that in every case there has to be what Counsel has termed “a thinking consideration” of the matter by the Official Receiver, based on the facts of the case, as to whether or not the information in the statement or PIQ is “reasonably required” by the liquidator or trustee.  It needs to be borne in mind that the insolvency practitioner, as trustee or liquidator, could in any event, through other means at his disposal, obtain or require the relevant information from the bankrupt or director   Counsel therefore considers that it would be an extremely unusual case in which the conclusion would be that the information contained in statements and PIQs obtained in the early stages of a case was not reasonably required by the liquidator or trustee.  Such statements and PIQs will contain details of assets and liabilities and may contain information which would lead the insolvency practitioner to consider whether a claim lies against any third party.

From now on, copies of statements and PIQs will therefore normally be supplied to insolvency practitioners on handover.

Where statements are obtained after a handover has taken place, the same consideration will be applied to them and, if considered appropriate, copies will be supplied to the insolvency practitioner.  If a statement is obtained solely for the purposes of further investigation, it might not contain information of use to an insolvency practitioner in carrying out his duties.  However, if the further investigation relates to the whereabouts or non-disclosure of an asset, it would be likely to contain such information.  This will be a matter for the Official Receiver’s judgement according to the facts of the case.

As a concession, in existing cases where handover has already taken place, copies of statements and PIQs will similarly be passed to an insolvency practitioner acting as liquidator or trustee on request.  Practitioners are asked to keep such requests to a minimum and the matter may need to be reviewed if Official Receivers are inundated with requests in older cases.

The Service’s Protracted Realisations Unit in Birmingham deals entirely with older cases and in the context of statements and PIQs will normally only hand over material that is readily available among the papers it has to hand.

Any enquiries about this article may be addressed to Sam Roberts, OR Operations, telephone number 020 7291 6824.

3. Destruction of an insolvent’s accounting books and records.

 Available from The Insolvency Service's web-site is Form BPDC (formerly form BL54.01). The form is a checklist of matters to be considered before destruction of the books and records of a company subject to a winding-up order or a bankrupt. Insolvency Practitioners are asked to submit the completed form to the appropriate Official Receiver together with any request for authority to destroy the accounting records.

Any enquiries regarding the above should be directed towards Shona Manson, Technical Section, Area 4.1, 21 Bloomsbury Street, London, WC1B 3QW: 020 7291 6778: shona.manson@insolvency.gsi.gov.uk

4. Collection and preservation of company records 

The Insolvency Service has encountered some difficulties in evidencing accounting records allegations in director disqualification proceedings in cases where an insolvency practitioner is the office holder. These problems have arisen mainly because it has not been possible to collect sufficient evidence to show that adequate efforts were made to collect in the records from the director(s) by the insolvency practitioner. As a minimum requirement, to evidence an allegation of failure to deliver up, maintain or preserve accounting records, The Service needs to show that the insolvency practitioner has written to the director(s) at an early stage of the proceedings requiring that the records be delivered up and explaining the reasons why they are required, sent a reminder outlining the director’s duty to comply, and set a deadline for delivery.  Ideally, further follow up reminders should be sent out, particularly if the failure to deliver up has hampered the administration of the case. 

Once a case has been allocated for investigation, it is likely that the investigator will follow up the insolvency practitioners letter(s) with further requests for delivery of the records.  If these requests are ignored, this will provide more support of such an allegation. 

Any enquiries regarding the above should be directed to Beverley Walker, Enforcement Directorate, Tel: 0207 637 6542, e-mail: Beverley.Walker@insolvency.gsi.gov.uk