25. Assets - identification, protection and realisation
General guidance on securing, protecting and realising insolvent estates
25.1 Introduction
One of the functions of the official receiver, following a winding-up or bankruptcy order, is to identify all the potential assets of the insolvent to maximise the return to creditors after the payment of the fees, costs and other expenses of the bankruptcy or liquidation. This chapter provides general guidance on the identification, protection, collection and disposal of the assets of a bankrupt or company. It also provides advice on identifying and dealing with property belonging to third parties.
More detailed guidance is provided regarding specific assets in the chapters contained in chapters 26 to 40.
25.2 Companies – identifying the assets
On the making of the winding-up order the functions of the official receiver, as liquidator; include securing and realising the assets of the company [Section 143(1)]. The official receiver should use the information obtained from their initial enquiries, Preliminary Information Questionnaire (PIQC), the company director(s), the company’s financial records and third parties e.g. creditors to identify its assets.
25.3 Liquidator’s function to realise the company’s assets
The liquidator’s functions include securing the assets, realising them and distributing the proceeds to the creditors [Section 143(1)]. The liquidator (including the official receiver where appropriate) should realise the company’s assets for the best possible price to maximise the distribution to creditors after the payment of the fees, costs and expenses of the liquidation. A failure to fulfil this duty may result in the court ordering the liquidator to pay compensation for the benefit of the estate [Section 212(3)].
25.4 A company officer’s duty to co-operate with the official receiver
Company officers have a duty to co-operate with the official receiver and to provide such information regarding the company’s property (amongst other things) as may be reasonably required [Section 235(2)]. The court has the power to order a company officer to deliver up any property, books, papers or records of the company to the official receiver, administrator, administrative receiver, liquidator or provisional liquidator [Section 234(2)].
25.5 Bankruptcy – Identifying the assets
On the making of the bankruptcy order the official receiver, as trustee, should use the information available from the initial contact form (ICON), the bankruptcy application_,_ the bankrupt’s financial records, an inspection (if conducted), Preliminary Information Questionnaire (PIQB) (if completed), interviewing the bankrupt and information from third parties to identify those assets which comprise the estate and will be available to the trustee.
25.6 A bankrupt’s duty to co-operate
A bankrupt has a duty to deliver up to the trustee possession of any property, books, papers or other records of which he has possession or control [Section 312(1)] and has a general duty to cooperate with the trustee [Section 333(1)].
25.7 Ownership
The official receiver should take reasonable measures to ensure that any property in the possession of the company, bankrupt or a third party is owned by the company, or is owned by the bankrupt, and is included in the bankruptcy estate. The official receiver has a statutory duty to protect all property held by the company or bankrupt for example by insuring it until such time has they establish ownership by a third party [Sections 144(1) and 305(2)].
25.8 Trustee’s duty to realise the assets for the benefit of creditors
The bankrupt’s assets vest in the trustee on appointment [Section 306(1)]. The trustee has a duty to realise the bankrupt’s assets for the best possible price to maximise the value of the estate for the benefit of the creditors after payment of the fees, costs and expenses of the proceedings. A failure to fulfil this duty may result in the court ordering the trustee to pay compensation for the benefit of the estate [Section 304(1)].
25.9 Failure to co-operate
If a company officer or bankrupt fails to co-operate with the official receiver, an application may be made to the court for an order to examine them in court or for property to be delivered up. Further details can be obtained from chapter 19.
25.10 Information held by third parties
A third party may have information about the company or bankrupt which may assist the official receiver in identifying potential assets. If a third party is believed to have information about the insolvent or the insolvent’s business, affairs, dealings or property, the official receiver should seek to obtain such information at an early stage. If the third party does not co-operate the official receiver may make an application to the court for a private examination of the person in question [Section 236 or 366], for further information see chapter 21. The court upon the application of the official receiver may order delivery up of property of the company or bankrupt, payment of monies due or the re-examination of third parties [Section 237 or 367].
25.11 Information held by third parties - Companies
In liquidation in addition to company officers certain other persons associated with the company, for example, those in its employment, have a duty to give information to the official receiver. Failure to do so may result in a fine for non-compliance [Section 235(3) and (5)]. In addition the official receiver may apply for the private examination of the third party [Section 236(2)].
25.12 Inspection
In a number of insolvencies the official receiver should carry out an inspection (see chapter 11) of the premises of the company or bankrupt. An inspection allows the official receiver to clearly identify and secure any assets. An inspection may result in the official receiver identifying assets that have not been previously disclosed. Where an inspection is undertaken an inventory should be taken and the official receiver should follow the advice in chapter 11 to identify third party property during the inspection. In certain cases an agent may be employed to carry out the inspection and/or inventory.
25.13 Introduction
The official receiver after identifying the assets belonging to the company or bankrupt will need to take the necessary measures to collect and/or protect them. This may involve, amongst other things, obtaining insurance, removing goods from the premises of the company or bankrupt and dealing with assets held by third parties.
25.14 Insurance
The official receiver should, at an early stage, ensure that adequate insurance is in place to cover the property belonging to the company or forming part of the bankrupt’s estate, and, where appropriate, obtain public and employer’s liability. This may be achieved by having their interest noted on an existing policy or by arranging new policies (see chapter 14).
25.15 Removal of assets
Where the official receiver considers it practicable and commercially worthwhile to do so, agents should be employed without delay to collect and store assets pending their disposal. The official receiver should obtain adequate insurance cover and take all reasonable steps to remove assets from unattended premises as soon as possible. Where incurring removal costs will have a substantial adverse effect on the net monies realised the official receiver should consider instructing their agent to sell the items of stock, machinery, etc. from the premises.
25.16 Selling assets from the premises of a company or bankrupt
In order to maximise the sale price of assets the official receiver may wish to sell them from leased or rented premises of a company or bankrupt. Care is needed as rent may become payable in full to the landlord as part of the expenses of the liquidation or bankruptcy as a result of a sale at the premises [ABC Coupler and Engineering Co Limited (No.3) [1970] 1 All ER 650]. The official receiver should fully consider the likely costs when deciding whether to sell the assets from the company’s or bankrupt’s premises.
25.17 Selling assets from premises where no rent becomes payable
The official receiver may remain in occupation of leased/rented premises for the mutual benefit of the landlord and themselves in order to sell the assets of a company or bankrupt. In this instance any rent accruing will not be an expense of the liquidation or bankruptcy unless the official receiver has agreed to pay rent to the landlord, although it will be a provable debt. The landlord will not be able to distrain on the assets where a winding-up order has been made [Section 128]. The landlord can still distrain on the assets for unpaid rent due prior to a bankruptcy order [Section 347]. In a bankruptcy the official receiver should consider the potential risk to the assets from distraint. If in any doubt, and where possible, the assets should be removed from the premises without delay.
25.18 Selling assets from premises where rent becomes payable
Where the official receiver occupies the premises to sell the assets for the best price and there is no benefit for the landlord the official receiver is said to be retaining the premises “for the convenience of the” liquidation or bankruptcy. If this is the case it is likely that rent will be payable in full to the landlord as part of the expenses of the liquidation or bankruptcy. Rent only becomes due when the official receiver occupies the premises “for the convenience of the” liquidation or bankruptcy. Valuing the assets, leaving them on the premises or taking no steps to surrender the interest of the company or bankrupt in the premises do not constitute occupying the premises “for the convenience of the” liquidation or bankruptcy [ABC Coupler and Engineering Co Limited (No.3) [1970] 1 All ER 650]. A landlord may be able to lodge a claim in the proceedings, see chapter 43 for further details. The official receiver should ensure that rent and rates are paid promptly as both the landlord and the local authority may distrain on the assets for unpaid rent and rates accruing after the relevant date, i.e. when the official receiver occupied the premises “for the convenience of the” liquidation or bankruptcy.
25.19 Occupation of premises – Continuing services
The official receiver when occupying premises for the sale of assets should decide whether they require gas, electricity, water and/or telecommunication services to continue.
25.20 Assets secured by charges
Assets owned by a company or a bankrupt, may be subject to a mortgage, charge, lien, debenture or other type of security. The various types of security are explained in chapter 43. The official receiver has an obligation to take such assets into their custody and control when liquidator of an insolvent company[Insolvency Act 1986, section 144].
25.21 Initial contact with the charge-holder
The official receiver should inform the charge-holder of the bankruptcy order or winding-up order and establish their intentions with regard to the assets covered by their security. Where the official receiver cannot immediately contact the charge-holder to inform them of the proceedings they should consider obtaining insurance cover regarding the secured assets (see paragraph 25.31). Where the official receiver has informed the charge-holder of the liquidation or bankruptcy they may be justified in taking minimum steps to protect the secured assets if there is no prospect of there being a surplus for the unsecured creditors.
25.22 Seizure and/or sale of third party property
If the official receiver believes that third party property belongs to the company, or belongs to the bankrupt and comprises part of their estate, and takes possession or sells the property they have some protection if that belief is reasonable [Sections 234 (3),(4) and 304(3)]. The official receiver will not be able to rely on this protection where they have had notice of a claim by a third party unless there are reasonable grounds for rejecting the claim. If the official receiver, acting as liquidator or trustee, is held to have acted negligently, for example, by selling the property after receiving notification from a third party, they may be personally liable for any loss or damage resulting from the seizure or sale of the property [Sections 234 (3),(4) and 304(1)].
25.23 Costs incurred from the seizure and/or sale of third party property
Where the official receiver acts in good faith any costs incurred in the seizure and sale of property subsequently claimed by a third party can be claimed by them as a lien on the property or sale proceeds [Sections 234 (3),(4) and 304(3)].
25.24 Property secured by a third party
In a number of instances the official receiver will encounter property owned by the company or owned by the bankrupt and comprising part of their estate subject to a legal claim by a third party, for example assets covered by a charge, such as a mortgage, assets covered by a finance agreement, such as hire purchase, or assets claimed under distress, under an execution or pursuant to a lien. Further guidance for these scenarios is covered later in this chapter.
25.25 Retention of title
A third party may claim goods under a retention of title clause. A retention of title clause is a form of security used by a supplier of goods to protect against a buyer’s failure to pay or insolvency. The official receiver should ensure that the supplier is entitled to claim retention of title (see chapter 13 for what needs to be done to establish the claim and how they should be dealt with). The official receiver should ensure that claims by parties connected to or associated with the company or bankrupt are valid [Sections 249 or 435]. The official receiver should seek to avoid claims for damages by wrongfully taking actual or constructive possession of property to which the company or bankrupt has no title.
25.26 Statutory declaration (bankruptcy cases only)
The official receiver may ask a third party to complete a statutory declaration, Form ATCP, as evidence of their ownership of property. The declaration should be tested by careful scrutiny of the supporting documentation where the third party is associated with the bankrupt [Section 435]. If the official receiver is satisfied that a claim by a third party should be rejected the claimant should be asked to withdraw their claim within seven days. If the third party fails to withdraw the claim they should be told the official receiver may apply to the court for a private examination [Section 366(1)] at which they will ask for an order by the court that the disputed property form part of the bankrupt’s estate [Section 367(1)]. The official receiver if successful will then make an application for costs to be awarded against the third party [Rule 12.22].
25.27 Notice to the third party owners of property
Where the names and addresses of third party owners of property are known the official receiver should send them Form NTPG. Where the official receiver intends to obtain insurance on third party property Form NTPG should be amended accordingly.
25.28 Third party property – official receiver’s duty of care
Once the official receiver becomes aware that property belongs to, or is likely to belong, to a third party the statutory duty to protect may, in certain circumstances, be replaced by a common law duty of care in negligence, i.e. a duty to take reasonable care of the property until such time as it is claimed by the owner.
25.29 Insurance and third party property
The official receiver would not normally arrange insurance for third party property. Where the official receiver does not intend to obtain any insurance Form NTPG should be issued to third party owners of property informing them that insurance will not be obtained and the goods may be sold if not collected within 90 days, see paragraph 25.39 for further details.
25.30 When insurance on third party goods should be obtained
In those cases where there is a risk of public liability the official receiver should obtain public liability insurance. This includes those buildings where there is unlikely to be any surplus sale proceeds. The official receiver may wish to obtain insurance cover where the third party goods are valuable, where they are unable to contact the owner of the property or to obtain cover against any claim that they failed to exercise adequate care as a bailee.
25.31 How to obtain insurance
Where the premium is likely to be high the official receiver should discuss the matter with ORS Advice in advance. Further guidance on obtaining insurance is contained in chapter 14. The official receiver in obtaining insurance as trustee becomes or may become an involuntary bailee (see paragraph 25.37).
25.32 Bailment and third party property
The official receiver as trustee does not have a duty to protect property that is not part of the estate. A duty of care may arise if the official receiver becomes, either voluntarily or involuntarily, a bailee of third party property. Bailment is the delivery of goods by one person to another for some purpose, under a contract, express or implied that after the purpose has been fulfilled, they shall be returned to the bailor, or otherwise dealt with according to their directions, or kept until reclaimed. A bailee is under a common law duty to take reasonable care of third party goods and not to sell or destroy them.
25.33 Companies in liquidation and bailment
A company in possession of third party property is a bailee. The liquidator has no duty to protect third party property however the company may become liable for damages under common law for failing to fulfill its duty to the third party. The official receiver in protecting the estate against potential claims for damages should take no steps that would put them personally in the position of a bailee. When the liquidator insures third party goods (see paragraph 25.31) they do not personally become bailee.
25.34 Bankruptcy and bailment
A bankrupt in possession of third party property is a bailee. The official receiver, as trustee, has no duty to protect third party property and should, in general, take no action which would put them in the position of being an involuntary or voluntary bailee. In certain circumstances the official receiver may become a voluntary (see paragraph 25.38) or involuntary bailee (see paragraph 25.37).
25.35 Collection of property by third parties
Wherever possible, owners should be requested to collect their property from the former trading address or from other premises of the company or bankrupt without delay. The official receiver should arrange insurance cover where appropriate (see paragraph 25.31).
25.36 Bankruptcy and unclaimed third party property
There are a number of occasions where the official receiver will take possession of third party property, see paragraphs 25.38 and 25.39 for details. Where the official receiver does not become bailee of unclaimed goods they may be left for the landlord or mortgagee of the premises to deal with. In some cases unclaimed goods will be left with the bankrupt.
25.37 The official receiver as involuntary bailee
The official receiver becomes an involuntary bailee when, to protect assets, they secure premises which are leasehold or where the mortgagee does not intend to realise their security. The official receiver may become bailee as a result of third party goods being removed from the premises along with other assets. The duty of care of an involuntary bailee is low. The official receiver must not wrongfully dispose of the property or take any positive steps to damage or destroy it. Whilst the official receiver does not have to protect the third party property they can be held to be negligent in certain instances. The official receiver should take into account the circumstances of each case when considering their obligations.
25.38 The official receiver as voluntary bailee
The official receiver may become a voluntary bailee when they accept responsibility for protecting and dealing with third party property. This may occur, for example, when dealing with valuable property, livestock or animals, or by removing (or instructing agents to remove), third party property to store pending its return to its owners. The official receiver may wish to remove third party property where the property is exceptionally valuable, where there are risks attached to leaving it in the premises, where the official receiver wishes to vacate the premises to reduce their potential liability to visitors and trespassers or if the company or bankrupt has a lien on the property for sums due from the third party, for example, for repairs or storage costs.
25.39 The official receiver’s duties as voluntary bailee
The official receiver as bailee is under a common law duty to take reasonable care of third party goods and generally not to sell or destroy them. The official receiver may sell third party property where certain conditions are fulfilled (see paragraphs 25.42 and 25.44).
Where the company or the official receiver is the bailee of goods they may have the right to sell those goods in certain circumstances [Torts (Interference with Goods) Act 1977 section 12 and Schedule 1, Parts I and II].
25.40 The official receiver’s costs as voluntary bailee
The official receiver may wish to consider charging the owners of the property concerned for the costs incurred in this activity and/or for insuring the property where the company or bankrupt does not have an interest in it. The official receiver or their agents should, where possible, inform third parties that their property is to be moved.
25.41 What can the official receiver charge?
Where the official receiver, as liquidator, interim receiver or trustee, performs a task for which there is no fee applicable [Insolvency Regulations 1994, regulation 35 and Schedule 2, Tables 2 and 3], such as protecting third party goods, they can charge remuneration at the time and rate fee together with their agent’s costs and any other incidental expenses.
25.42 Selling unclaimed third party property
The official receiver should give proper notice of their intention to sell the goods to the owner (the bailor), giving them a set time within which to collect their goods. If they do not collect them within this time, the official receiver will be entitled to sell the goods and account to the bailor for the net sale proceeds. The amount paid will be after deductions are made, for example for any sum owed to the insolvent for any repair etc. to the goods, and the agent’s costs of disposal. The official receiver may be able to recover their costs and, in some instances, remuneration from the owner, see paragraph 25.41.
25.43 Unclaimed third party property where the owner cannot be traced
After making reasonable efforts to find the owners of third party property (i.e. asking the director(s) or bankrupt, searching the accounting records, internet searches, etc.) the official receiver may be left with some unclaimed property. The official receiver should consider advertising in an appropriate trade journal or newspaper for claims to be submitted by a specific date. The official receiver needs to balance the costs of advertising against the likely sale proceeds.
25.44 The sale of unclaimed third party property
Where the official receiver decides to sell unclaimed property, either after or without advertising, the net sale proceeds should be paid into a suspense account. If a person comes forward within six years of the sale [Limitation Act 1980, section 2] and the official receiver accepts their claim to ownership the net funds resulting from the sale of the asset should be paid to them. Legal advice has been obtained that if the sale proceeds remain unclaimed at the end of the six year period ownership passes to the bailee (either the company or the official receiver as trustee) and the monies may be paid into the estate account and, used to pay/defray the costs of the insolvency, distributed to creditors, etc. in the usual way.
If a claim is received from the former owner after the expiry of the six year period and exceptional circumstances existed which prevented a claim being made during that time (e.g. absence from the country), ORS Advice should be consulted as to whether it may be appropriate to make a payment to the former owner.
25.45 Goods of bankrupt held by a pawnbroker - General
A pawn-broking business is, in essence, a system whereby monies are lent against the value of goods surrendered by the borrower (the pawnor). This is known as a pledge, for which a receipt, which is known as a pawn receipt, must be given [Consumer Credit Act 1974 section 114].
If the loan (and pre-agreed interest) is not repaid within the period agreed (which must be a minimum of six months [Consumer Credit Act 1974 section 116(1)] the lender (the pawnee) gains the right to sell the goods and apply the funds to the repayment of the loan. The redemption period can be extended by agreement. If the goods are sold and there are surplus funds after repayment of the loan and interest, the funds are returned to the pawnor.
25.46 Goods of bankrupt held by a pawnbroker – Dealing with the goods – Pawnbroker to be instructed to sell
The basic principle for the official receiver, as trustee, when dealing with goods of a bankrupt held by a pawnbroker is to establish the value of the goods (using agents where necessary), the amount of any loan (including interest) in relation to the goods and the pawnbroker’s likely costs of sale. If the value of the goods exceeds the amount of the loan and interest and the costs of sale, the official receiver should ask the pawnbroker to sell the goods and remit the surplus funds to the bankruptcy estate.
In most cases it will be possible to deal with this on an informal basis, but there are legislative provisions to assist the official receiver when dealing with an obstructive pawnbroker (see paragraph 25.49).
25.47 Goods of bankrupt held by a pawnbroker – dealing with the goods – where pawnbroker will not sell
If the pawnbroker will not sell the goods, an official receiver may make a payment from the estate account to redeem the pledge so that the goods may be dealt with by their agents if there is a demonstrable benefit to the estate in doing so.
If the payment required is over £2,500, the guidance in chapter 1, regarding the requirement to obtain the permission of the Senior Official Receiver, should be followed before committing to any expenditure.
It is an offence for a pawnbroker to refuse to allow a pawnor to redeem a pledge [Consumer Credit Act 1974, section 119].
25.48 Net realisable value of goods less than amount of outstanding debt
Where the net realisable value of the goods is less than the amount of the outstanding debt, the official receiver should inform the pawnbroker that they do not wish to redeem the pledge. The pawnbroker will then sell the goods to discharge some of the debt.
25.49 Goods of bankrupt held by a pawnbroker – Legislative provisions to assist the official receiver
The official receiver may, after giving notice of their intention to do so [PAWNI], inspect any of the bankrupt’s goods which are held by any person by way of pledge or pawn. Where such a notice is issued, the person on whom the notice is served is not entitled, without leave of court, to realise their security unless they have given the official receiver, as trustee, reasonable opportunity to inspect the goods and redeem the pledge [Insolvency Act 1986, section 285(5)].
It is anticipated that the official receiver would use these powers only where the pawnbroker is being obstructive (see paragraph 25.46).
A trustee in bankruptcy has similar powers to those available to the official receiver [Insolvency Act 1986, section 311(5)].
25.50 Loss of pawn receipt
Where the bankrupt has goods in pawn but has lost the pawn receipt, it will still be possible for the official receiver, as trustee, to sell the goods. This is achieved by tendering the pawnee with a statutory declaration or, where the amount of the loan was under £75 and the pawnee agrees, a statement in writing [Consumer Credit Act 1974 section 118; The Consumer Credit (Loss of Pawn-Receipt) Regulations 1983].
Before undertaking this, the official receiver should establish if the pawnbroker is prepared to allow the official receiver to deal with the goods without the production of the statutory declaration or, as the case may be, the statement.
25.51 Time period of pawn agreement expires during bankruptcy
If the time period of the pawn agreement (see paragraph 25.45) expires during the period of bankruptcy, the pawnbroker may sell the goods after giving the pawnor a minimum of 14 days notice of their intention to sell. Such notice is not required where the loan was less than £75 [Consumer Credit (Realisation of Pawn) Regulations 1983, regulation 2; Consumer Credit Act 1974, section 121].
On receipt of such a notice, the official receiver will need to decide promptly whether they wish to redeem the pledge prior to sale, taking into account the guidance in paragraph. Where necessary, the official receiver may, prevent the sale by service the appropriate notice under the Act (see paragraph 25.49).
25.52 Notice to pawnor of sale of goods
Where the pawnbroker sells goods they hold under a pledge, they have to give notice, within 20 days of the sale, to the pawnor of the sale. The notice should give details of the proceeds and expenses. The price obtained at the sale, or the expenses of the sale, may be challenged as appropriate [Consumer Credit Act 1974, section 121(2),(6),(7); Consumer Credit (Realisation of Pawn) Regulations 1983, regulation 5 and schedule 2].
25.53 Administrative receivers, receivers and Law of Property Act receivers
The charge-holder may have the power to appoint an administrative receiver, a receiver and/or a Law of Property Act receiver to realise their security. Where the charge-holder has appointed, or appoints, a receiver the official receiver should write to that person requesting amongst other things, copies of the documents appointing them and an estimate of anticipated realisations. A template letter, is available, to send to an administrative receiver is available (ADMREC). The official receiver should check the documents received to ensure the appointment is valid. See chapter 12 for further information on the appointment of a receiver or administrative receiver.
25.54 Charge-holders and receivers to account for any surplus monies
The official receiver when writing to the charge-holder, or, where applicable, the administrative receiver, receiver or Law of Property Act receiver should ask for any surplus proceeds to be paid to them. If asked the official receiver should not provide an indemnity in respect of the receiver’s actions and remuneration.
25.55 Charge-holder takes no action to realise secured assets
The charge-holder may inform the official receiver that no action will be taken to realise their security. The official receiver would have to consider each case separately, taking into account the value of the asset, the amount secured on the asset and the costs of realisation. The official receiver may consider it appropriate to make an application to the Secretary of State for the appointment of a liquidator or trustee (see chapter 45). In this instance the official receiver should inform the charge-holder in advance of the application. The official receiver may also consider disclaiming their interest in the asset concerned (see chapter 42).
25.56 Assets subject to agreement with finance company
The company or bankrupt may be in possession of assets belonging to a third party that are subject to a formal agreement. Such agreements include rental agreements, conditional sale agreements, hire purchase agreements, etc. A summary of the different types of agreement in relation to motor vehicles can be found in chapter 27. These agreements can apply to assets other than motor vehicles. The rights of the company or bankrupt to use the asset and, possibly, to acquire ownership on the fulfilment of any specified conditions, become exercisable by a liquidator or pass to a trustee in bankruptcy unless excluded by an express term of the agreement.
25.57 Dealing with assets subject to a rental agreement
In the majority of cases the official receiver will not adopt a rental agreement and the owner of the property will be invited to collect it as soon as possible. In a small number of cases the official receiver may need to negotiate a temporary extension to the agreement in order to protect the realisable value of other assets, for example, flowers.
25.58 Dealing with assets subject to hire purchase, etc.
In agreements, such as hire purchase, conditional sale, etc., whereby ownership of the asset passes to the bankrupt or company after the fulfilment of a number of conditions, there may be sufficient equity in the property to provide a benefit for the estate after meeting the official receiver’s sale costs. Once the official receiver has confirmed the amount needed to settle the agreement and is confident that there will be a surplus on sale, the hiring owner should be informed that the official receiver as liquidator or trustee will be taking possession of the property and arranging for its sale. The official receiver should arrange adequate insurance on the property as necessary. Where there is doubt as to whether the property can be sold for a sum sufficient to pay the settlement figure under the agreement and the costs of sale, the hiring owner should be given notice of the order and asked to hold the surplus, if any, arising from any future sale to the order of the official receiver. Where there is insufficient equity the official receiver as trustee or liquidator, should inform the hiring owner that they do not wish to adopt the agreement.
25.59 General
A company or bankrupt may leave assets with a third party for a number of reasons, safe-keeping, storage, repair etc. The official receiver should contact the third party at an early stage and ask for the asset to be surrendered to their control.
25.60 Liens
A lien is a right to retain possession of another’s property pending the discharge of a debt. A lien may arise where a service has been performed but the bill has not been paid, for example retention of a motor cycle until the repair invoice is paid. A creditor with a right to a lien should be treated as a secured creditor in the insolvency unless the lien is over the books, records and papers of the company or bankrupt (see following paragraphs). Where a creditor claims a lien, reference should be made to chapter 12. The official receiver should always check that a creditor has a right to claim a lien over the property held when considering the validity of the lien.
25.61 Recovering assets from a third party
Where a third party does not deliver to the official receiver assets belonging to the company or bankrupt on request the official receiver has various powers available to enforce cooperation. For example the official receiver may apply to the court for a private examination of the third party, at which an order that the assets are delivered to the official receiver may be made [Sections 236 and 366]. Chapter 21 provides guidance on when a private examination would be appropriate. In some cases the official receiver may be able to recover the costs of the private examination.
25.62 Additional enforcement powers - Companies
Where the official receiver is liquidator or provisional liquidator an application to court may be made to require any person to pay, deliver, convey, surrender or transfer the property, books, papers or records of the company to the official receiver [Section 234(2)].
25.63 Additional enforcement powers - Bankruptcies
A banker, agent or other person holding assets on account of or for the bankrupt is required to pay or deliver up to the trustee all property in their possession which belongs to the bankrupt’s estate, subject to any legal right to retain the property. If the person defaults in this obligation the official receiver as trustee should inform them that they may be in contempt of court and subject to such penalties as the court may impose if they continue being un-cooperative without reasonable excuse [Section 312 (3),(4)]. The court also has the power, in certain circumstances, to issue a warrant for the seizure of property. Such a warrant allows the person executing the warrant to break open any premises necessary for its execution. The official receiver may make an application to court for a warrant that allows a constable or officer of the court to search premises for any concealed assets or books, papers or records of a bankrupt [Section 365].
25.64 Distress
The right of recovery known as distraint replaced by a more regulated and limited process called taking control of goods in April 2014. The term distress was updated within the general legislation in 2014 and is now known as ‘taking control of goods’. At an early stage, the official receiver should establish from the directors, bankrupt (or in the absence of these, any employees) whether a qualifying creditor has taken control of goods owned by the bankrupt or company. Chapter 12 provides more detail and guidance.
25.65 Execution
Execution is a creditor’s right to take control of goods to enforce a judgment. The official receiver should, at an early stage, establish from the directors, bankrupt (or in the absence of these, any employees) whether a valid execution has been levied against any of the company’s or bankrupt’s property. Chapter 12 provides more detail and guidance on execution.
25.66 Partnership Estate
There are occasions when bankruptcy orders are made against all the members of a partnership and no winding-up order is made against the partnership. The assets of the partnership are effectively held in trust in favour of the partnership creditors and are unavailable to the trustee in bankruptcy. In some of these cases there will be significant partnership assets to be dealt with.
25.67 Partnership Assets
Partnership assets such as motor vehicles, tools of the trade, etc. unlike in individual bankruptcy, are not exempt from the proceedings. The official receiver should take all assets into account when considering whether to make an application to consolidate the estates (see following paragraph).
25.68 Dealing with partnership assets
Where all the partners have been declared bankrupt, the partnership has not been wound-up and there are partnerships assets the official receiver should make an application to court for the consolidation of the estates [Section 303(2A)]. The application must request that the official receiver, or any subsequently appointed trustee of the consolidated proceedings, be able to deal with the assets of the former partnership [Section 303(2C)]. This will allow the official receiver as trustee to administer the partnership estate and wind up its affairs as if the individual members had presented a joint bankruptcy petition [The Insolvent Partnership 1994 article 11 and schedule 7]. For more information on consolidation see chapter 52.
25.69 Where there is a solvent partner(s)
In some instances a bankruptcy order will be made against a partner(s) leaving a solvent partner or partners who have a duty to dissolve the partnership, deal with the partnership assets and account to the official receiver for the share of the bankrupt(s). Chapter 52 provides full details of how to deal with cases which involve a solvent partner.
25.70 Assets outside England and Wales – Court orders
The official receiver may enforce court orders in the courts of other countries of the United Kingdom and a number of other countries [Section 426]. Further details can be found in chapter 62
25.71 Problems dealing with assets outside the United Kingdom
The official receiver may encounter problems in dealing with assets abroad, as their appointment may not be recognised there. There may also be local creditors with a claim on an asset under local laws. Company officers and a bankrupt have a duty to co-operate with the official receiver in the realisation of overseas assets. If a company officer or bankrupt fails to co-operate, the official receiver should remind them of the relevant enforcement procedures outlined in chapter 19.
25.72 List X
A List X site is a commercial site (i.e. not publicly owned) in the United Kingdom which is approved to hold government information, currently marked CONFIDENTIAL, SECRET and TOP SECRET. There are number of businesses in the United Kingdom carrying out work on behalf of government departments on List X sites. Should a winding-up or bankruptcy order be made against one of them it is essential, in the interests of national security, that all assets, books, papers and records with the appropriate protective marking under the HMG Security Policy Framework are protected and not moved without the relevant official clearance. If such a site is encountered the official receiver should identify the relevant items and immediately contact the security advice centre of the The Defence Equipment and Support Principal Security Advisor (DE&S PSyA) team. The DE&S PsyA team is responsible for providing relevant defence contractors with up to date security and business continuity policy and guidance.
The contact details are
Email: [email protected]
Telephone: 030 679 34378
Further information is available in chapter 59 of the archived guidance.
25.73 Maximising realisations and cancelling insurance
The official receiver should aim to maximise the amount of money realised to ensure that, as far as possible, the debit balance is cleared and funds become available for distribution to creditors. This may involve the disposal of a valuable asset for the best possible price. It may also involve the sale of a larger number of less valuable assets. Where the sale does not increase the debit balance the official receiver should ensure, wherever possible, that all available assets are realised. Once the assets have been sold, or otherwise disposed of, the official receiver should cancel any insurance – see chapter 14.
25.74 Realisation of assets – General
The official receiver should sell any assets that are likely to perish or diminish in value, for example seasonal goods such as Christmas stock, even where a trustee or liquidator other than themselves is likely to be appointed. An asset should also be sold where its net value would materially reduce due to related storage charges. Where agents are used they should be asked to account to the official receiver for the net sale proceeds.
25.75 Employment of agents
The official receiver should usually use bonded agents/auctioneers to sell the assets of a bankrupt or company, (see chapter 41). The official receiver should employ agents to collect and store assets pending their sale where they consider it practical and commercially worthwhile to do so. The official receiver’s usual agents may provide a verbal indication of the value of the assets free of charge. Any instructions given to agents verbally should be followed up in writing to prevent a misunderstanding arising and the agent should account to the official receiver for the net sale proceeds.
25.83 Assets of a specialist nature
Some assets may be of a specialist nature. In this instance, the official receiver may require a more formal valuation and/or professional advice on the best way of realisation. The official receiver may decide that their usual agents cannot provide sufficient information and that they need more specialist advice from another agent. It is likely in these circumstances that a charge will be made.