Article withdrawn June 2008

(First published in Dear IP no.27, August 1993, followed by a second publication in Dear IP no 39, October 1997)

1. Rota Appointments: If you are on the court rota for a particular Official Receiver office, it would be helpful if you could lodge with that OR a certified copy of your enabling bond each year on its renewal. This would obviate the need for the OR to confirm renewal of your enabling bond with you, removing a possible obstacle to your appointment in a case, and reducing delays in its handover to you.
2. Amount of specific penalty: Due to the way in which premium rates have been published by insurers it would appear that some brokers, and in turn practitioners, believe that the minimum amount of specific penalty no longer applies. Practitioners should note that the minimum of specific penalty to be obtained in each and every matter is £5,000. The maximum amount of specific penalty remains at £5,000,000.

3.    Insolvency Bond 

Queries have been raised about the insolvency bond:

17. Where a practitioner has an automatic specific penalty cover limit (ASPCL) of £5 million (the maximum), and the assets in a particular matter exceed that amount, is it necessary to confirm with the insurer that cover will be given?

1. There is no requirement for prior authorisation to be sought by a practitioner with an ASPCL of £5 million for cases with an asset value in excess of £5 million.

4. Ceasing to Act – enabling bond requirements in cases to which the security provisions of The Insolvency Practitioners Regulations 1990 apply 

Prior to the issue of the Millennium edition of Dear IP, in August 1993 the Insolvency Service suggested that an insolvency practitioner who was closing cases, prior to his retirement, did not need to renew his enabling bond.  The suggestion was made as the wording of Regulation 12(1) (a) of the Insolvency Practitioner Regulations 1990 required the existence of a bond “at the time when an IP is appointed to act” and a strictly literal interpretation appears to have been placed on the text of the regulation when the 1993 article was issued. The article was subsequently reproduced as one of the questions in article 3 of the Millennium edition. 

However, the Insolvency Service has recently received advice which concludes that  the information provided in that article was incorrect, and that a purposive interpretation of the regulation should be used in order to give effect to section 390 (3)(a) of the Insolvency Act 1986 which provides that an insolvency practitioner can only be authorised where "there is in force, at any time security, or in Scotland, caution for the proper performance of his functions ..." . In order to give effect to the primary legislation (being the higher authority) an insolvency practitioner is therefore required to have an enabling bond until he ceases to act as an office holder in relation to any estate.

The earlier article has been withdrawn.   

Any enquiries regarding the above should be directed to telephone: 0207 291 6765; Email:  IPPolicy.Section@insolvency.gsi.gov.uk