Ch 37: Release of Official Receiver as Liquidator or Trustee (January 2003)

January 2003

 

December 2014 - for cases closed on or after 1 December 2014 please refer to technical notice T34-14 before reading this chapter.

 

Note: The notes references in this chapter have been updated to reflect the changes made to the Insolvency Rules as a result of the Insolvency (Amendment) Rules 2010 which came into force on 6 April 2010. 

 

37.1 Introduction

The official receiver may apply for his/her release as liquidator/trustee when the administration of a company, partnership or bankruptcy estate is for all practical purposes complete. Sections 174(3) and 299(2) provide that the official receiver applies to the Secretary of State for his/her release and that release takes effect from the date determined by the Secretary of State. The power of the Secretary of State with regard to release has been delegated to Estate Account Services (EAS), Birmingham. When the official receiver is released he/she is discharged as of that date from all liability in respect of what he/she has done or anything he/she has failed to do in the administration of the estate. He/she is also discharged from all liability in respect of his/her conduct as liquidator or trustee. Creditors, contributories and successor liquidators/trustees do still have recourse to the court under sections 212 or 304 (remedy against delinquent liquidator or trustee) but such an application may only be made with the permission of the court once the official receiver has obtained his/her release.

Notes: [s174 or 299] [s212 or 304]

 

37.2 Provisional liquidator

Where the official receiver has acted as provisional liquidator of a company and the period of office ceases he/she should apply to the court which appointed him/her for release either at the time of cessation or shortly afterwards. Release as provisional liquidator should still be applied for even if the official receiver has become liquidator on the making of a winding-up order against the company as the release will stand to protect him/her in respect of any action which he/she took, or did not take, whilst provisional liquidator.

Notes: [s174(5)]

 

37.3 Release where OR replaced as liquidator or trustee by IP

Where the official receiver is replaced as liquidator/trustee on the appointment of an insolvency practitioner either at a meeting of creditors/contributories or following appointment by the Secretary of State the official receiver obtains his/her release at the time he/she notifies the court that he/she has been replaced. In a case where the insolvency practitioner is appointed by the court the court will determine the time of the official receiver’s release.

Notes: [s174(2) or s299(1)]

 

37.4 Early dissolution

Where the official receiver decides to apply for early dissolution of a company and issues a notice under section 202 to creditors, contributories and any administrative receiver (see Chapter 56, Part 2) of the company informing them of his/her decision, he/she is under no legal obligation to send creditors notice of his/her intention to apply for release. Section 202(4) relieves him/her from any such duty, which is in any event unlikely to arise, since creditors will not at that stage have had an opportunity to prove their debts. The official receiver should then apply to EAS, Operations and Customer Support, Releases, for release in the usual way (see paragraph 37.11). The early dissolution procedure should not be used where there is an immediate or foreseeable need to later defer the dissolution (see paragraph 37.8). For further information regarding early dissolution see Chapter 38, part 3.

Notes: [s202, form NED]

 

37.5 Notice of intention to apply for release

Where the official receiver has acted as substantive liquidator/trustee of the estate and his/her release is not granted by the operation of sections 174(2) and 299(1) (see paragraph 37.3), he/she must send notice of his/her intention to apply to the Secretary of State for release to all of the creditors of which he/she is aware and in the case of bankruptcy to the bankrupt. In the case of liquidation, contributories should not receive this notice. The official receiver may apply to the court to be relieved of the duty to send notice to all creditors of which he/she is aware. In considering the application, the court shall have regard to the cost of carrying out the duty, to the amount of the assets available and to the extent of the interest of creditors or contributories, or any particular class of them. The notice should include a summary of his/her receipts and payments as liquidator/trustee consistent with the information provided in the report to creditors. Full explanations must be given in respect of any assets which have not been realised, assets subject to protracted realisation and assets which did not achieve their estimated realisable values. In bankruptcy cases reference must be made to the position on the bankrupt’s discharge. In company cases reference should be made to any proposed application for deferral of the company’s dissolution.

The recipients of the notice have 21 days in which to object to the Secretary of State (EAS) regarding the granting of the official receiver’s release after which time the release may be granted. If for any reason there is a delay in the posting of the notices the OR Release Team (part of EAS), should be informed urgently by telephone so that the official receiver’s release is not approved until after the full 21 day notice period has expired. The telephone call should be followed up by a minute sent by e-mail on the same day. See paragraph 37.12 regarding objections to release.

Notes: [r4.124 or 6.136] [r4.125A or 6.137A] [form NORAD]

 

37.5A Electronic delivery of notices and the use of Websites

(December 2010)

With effect from 6 April 2010 the official receiver is permitted to send notices by electronic means provided that the recipient has consented and has provided an electronic address for delivery.

The official receiver may also satisfy his/her requirement to notify creditors and contributories by the notice being available for viewing or downloading on a website. The official receiver is required to notify creditors and contributories of the address of the website together with any password required to access or download the document. The notice must also contain a statement informing the recipient of their entitlement to request a hard copy of the notice and specify a telephone number, e-mail address and postal address to make such a request.

Accordingly, the official receiver could utilise electronic means or a website for giving notice of his/her intention to apply for release.

Notes: [s246B] [r12A.10 – 12A.13]

 

37.6 Notice to mutual societies

(Amended December 2010)

Where release is being sought in respect of a friendly society, building society or industrial and provident society, notice should be sent to Mutual Societies Registration, Financial Services Authority, 25 The North Colonnade, Canary Wharf, London, E14 5HS.  

 

37.7 Checks to be carried out when preparing notices for release

(Amended December 2010)

Prior to the official receiver applying for release a thorough review of the file should take place to ensure that all administrative matters have been dealt with and that all ISCIS screens have been updated with the correct information. If there are funds in the estate the official receiver should distribute them as soon as possible so as to get money into the hands of creditors. The checks that should be made as a minimum are as follows; 

  1. check that all relevant assets have been realised or otherwise accounted for;
  2. all protracted realisation items are listed;
  3. ensure all insurance, with the exception of that required for any long term assets, has been cancelled;  
  4. ensure that any agents have accounted for their asset realisations and that agents’ accounts have been paid;
  5. check that any items held in the cashier’s safe for safekeeping have been realised or returned to third parties, as appropriate;
  6. ensure that, where appropriate, remaining assets have been correctly recorded and that all relevant papers have been extracted and sent to the Regional Trustee Liquidator Unit (RTLU) for their realisation;
  7. check that all fees and disbursements have been charged correctly and any payments made in the due order of priority
  8. ensure that all correspondence has been answered;
  9. ensure that in company cases an approach has been made to any administrative receiver in office (see Chapter 56, Part2) to determine whether a deferral of dissolution is necessary ( an approach should also be made to any Law of Property Act receiver in office, see paragraph 37.10);
  10. check for any continuing prosecution or disqualification proceedings and, if so, seek to defer the dissolution of the company (see paragraph 37.9);
  11. consider the preservation or destruction of any accounting records;
  12. consider deferring the dissolution of a company where there is an occupational pension scheme in existence (see paragraph 37.8).

 

37.8 Deferral of dissolution, general

(Amended December 2010)

When the official receiver is released as liquidator it is usual following release for the company to be dissolved by the Registrar of Companies. Where the following situations exist it is imperative that an application is made at the time of applying for release for the dissolution of the company to be deferred by the Secretary of State: 

  1. where the company is subject to prosecution/disqualification proceedings, application should be made for dissolution to be deferred for 6 years;
  2. where an administrative receiver (see Chapter 56, Part 2) or Law of Property Act receiver is in office, 2 years deferral should be applied for;
  3. where the winding up of an occupational pension scheme remains to be concluded, an estimate will need to be taken of the time needed and the appropriate period of deferral (in whole years) applied for.

Other situations may also exist where it is imperative that the dissolution of the company is deferred e.g. where an insurance claim is in progress which requires the company to remain on the register but does not stop the liquidator’s release. In such situations the official receiver should apply for an appropriate period of deferral (in whole years).

For further information, see Chapter 38, paragraphs 38.48 – 38.52.

Notes: [s205(1)(b), s205(3), form DSNDIR]

 

37.9 Deferral of dissolution - prosecution or disqualification proceedings outstanding

The official receiver may apply for his/her release as liquidator where prosecution or disqualification proceedings are outstanding, but he/she must ensure that:

  1. the company records relevant to the proceedings are not disposed of, and
  2. the dissolution of the company is deferred for six years from the date of the official receiver’s release (see Chapter 38, paragraph 38.50)

Notes: [s205(3), form DSNDIR]

 

37.10 Deferral of dissolution - receiver in office

(Amended December 2010)

Where there is an administrative or Law of Property Act receiver in office the official receiver should, before applying for release, write to the receiver informing him/her of the official receiver’s intention to apply for release. Further, the official receiver should state that unless he/she hears to the contrary from the receiver, he/she will ask for a direction that the dissolution of the company be deferred for two years from the date of the official receiver’s release as liquidator. The official receiver should allow 28 days for a response from the receiver and should send a copy of his/her letter and a copy of any reply from the receiver to EAS, Operations and Customer Support, Releases (who act on behalf of the Secretary of State) with his/her application for release.

When the official receiver is informed at the time of release that the Secretary of State has directed that the dissolution be deferred he/she should notify the receiver of this. He/she should also inform the receiver that any subsequent application to extend the period of the deferral should be made by him/her to the Secretary of State, EAS, Operations and Customer Support, Birmingham before that period ends.

For further information regarding deferral of dissolution see Chapter 38, part 5.

Notes: [s205(3)] [form DSNDIR, RELADR]

 

37.11 Application for release

The official receiver should on sending out the notices of intention to apply for release apply to EAS (acting on behalf of the Secretary of State) for release by sending the following:

  1. one copy of the official receiver’s notice to creditors of his/her intention to apply for release (form NORAD),
  2. an account summary of the official receiver’s receipts and payments as trustee or liquidator (form ACCSUM),
  3. where appropriate, form DSNDIR and copy RELADR, application for deferred dissolution,
  4. in exceptional cases only, a copy of the application for release checklist.

EAS will vet all applications before approving the official receiver’s release and any deferral of dissolution.

Notes: [forms NORAD, DSNDIR, RELADR and ACCSUM]

 

37.12 Objections to release

(Amended December 2010)

The legislation does not provide for a period during which creditors may object to the official receiver’s application for release. However, the official receiver’s release will not be approved until the period of 21 days from receipt of the notice of intention to apply for release has expired and creditors are informed in that notice that any objections should be reported in that period to The Secretary of State at the Department for Business, Innovation and Skills (BIS), The Insolvency Service, 3rd Floor, Canon House, 18 Priory Queensway, Birmingham, B4 6BS (EAS). If an objection to release is received by the official receiver, EAS should be informed urgently by telephone to ensure that the official receiver’s release is not approved until after the matter has been resolved. On the same day a minute should be sent by e-mail. Once approved there is no mechanism for the official receiver’s release to be revoked.

When an objection to release is received within 21 days of the notice to creditors, or prior to release being granted, the official receiver’s application for release will be removed from general processing to prevent the release being granted. The reason for the objection is then considered by EAS and if it is not a valid objection the person concerned is notified in writing and given a further 21 days in which to respond. If the objection is considered to be valid a holding letter is sent to the objector and the official receiver is contacted for further information. The objection is then referred to Technical Section for adjudication. When the matter is finally resolved EAS are instructed by Technical Section to deal with the release and to send a copy of the release certificate to the objector.

Some creditors will tend to object in principle to the release of the official receiver as they consider that by the official receiver being released the director/bankrupt is in some way "getting off lightly". However, others may have concerns that the director/bankrupt is now enjoying a good lifestyle whilst they are suffering as a result of losses due to the insolvency. It is imperative that all creditor correspondence is followed up prior to applying for release to avoid delays caused by the receipt of objections to release from creditors who believe, for example, that the bankrupt/company has assets which were not disclosed to the official receiver.

Where an objection to release is lodged with the official receiver directly, in addition to notifying EAS there is nothing to stop the official receiver dealing directly with the objector to resolve the matter, copying the resulting correspondence to EAS/Technical Section, as appropriate.

If an objection to release is received by EAS after 21 days and the release has already been granted the objector is advised that the official receiver’s release cannot be revoked but EAS will liaise with the official receiver/Technical Section to try to address the matter raised. The objector will have the option to pursue the matter as a complaint whereupon the normal complaints procedure would be followed.

 

37.13 Release granted

(Amended December 2010)

Where release is granted this will automatically be entered on ISCIS following the writing off of any nil or debit balance (see paragraph 37.14). EAS will send a certificate of release to the court but a copy will not be forwarded to the official receiver. In company cases, EAS will prepare the notice that winding up is complete and forward this to Companies House together with any deferral of dissolution directions such as:

  1. the dissolution can proceed; or
  2. the official receiver wishes to apply for the early dissolution of the company; or
  3. dissolution has been deferred by the Secretary of State for a certain period.

A copy of the paperwork sent to Companies House regarding deferral of dissolution will be sent to the official receiver for noting on ISCIS and placing on the official receiver’s file.

Notes: [r4.124(3) or 6.136(3)][NORAD] [RELASS] [DSNDIR] [NOTCH]

 

37.14 Writing off nil or debit balances

Any nil or debit balance is written off by EAS on approval of the official receiver’s application for release, it should be noted that this is dependent on the request for write off having been entered on ISCIS by the official receiver.

 

37.15 Rescission/recall or stay of proceedings in winding up

(Amended December 2010)

Where the winding-up order is rescinded/recalled when the official receiver is liquidator, the official receiver must notify EAS of the rescission/recall on the "Cases for closure" spreadsheet (stored on Wisdom) which is submitted by each office on a monthly basis. EAS will then update ISCIS and the status of the case will be changed to "financially rescinded."

Where an order for a permanent stay of proceedings is made, the order should state that the liquidator will be released when the certificate of release issued by the Secretary of State is filed at court. The order should also include details of how the deposit is to be disposed of. If it is the intention of all parties that the stay be permanent the court may state in the order that the deposit be returned to the petitioning creditor’s solicitor. If the court declines to deal with the deposit in this way then the deposit should be transferred to reserved funds.

The official receiver should complete the information sheet "Permanent Stay notification to OR Banking" (stored on Wisdom) for the case and send it to EAS who will then update ISCIS and produce a certificate of release and forward it to the court, but to ensure that the company is not dissolved a copy will not be sent to Companies House

Notes: [s147(1), r7.47]

 

37.16 Annulment of bankruptcy order

Where the official receiver is trustee he/she should ask the court, when it makes an order of annulment, to order that the official receiver be granted his/her release as trustee "on the date that the official receiver submits a copy of his/her final account to the Secretary of State for BIS and files a copy of the final account with the court."

Following the making of an order of annulment of the bankruptcy order, the official receiver should submit a copy of his/her final account, completed on the "Final account" standard form (stored on Wisdom), to Corporate Governance Section acting for the Secretary of State. The figures for the final account should be taken from ISCIS. The official receiver must also file a copy of his/her final account with the court in order to comply with rule 6.214(4).

Details of the case annulled should be entered onto the monthly "Cases for closure" spreadsheet (see paragraph 37.15.) EAS will then update ISCIS and the status of the case will be changed to "financially annulled."

Notes: [s299(4) and r6.214(4)]

 

37.17 Official receiver acting in ex-officio capacity

Where the official receiver deals with assets in an ex-officio capacity following vacation of office on completion of an administration by a practitioner acting as liquidator or trustee, no application for release need be made. Where funds received enabled a payment to be made by way of refund of a deposit, payment of law costs, etc, the official receiver should distribute the monies or transfer small credit balances to indivisible balances account as appropriate and update ISCIS with the nil balance. Details of the case should be entered onto the ‘Cases for closure’ monthly spreadsheet (see paragraph 37.15.) EAS will then update ISCIS.

In the event that the official receiver becomes liquidator or trustee as a result of the removal, death or resignation of a practitioner acting as liquidator or trustee, he/she should apply for release in the usual way once the administration of the estate is complete.

Notes: [s136(3) or 300(2)]

 

37.18 Deputyship cases

An official receiver, acting as deputy official receiver, should apply for release on behalf of the official receiver who is the liquidator or trustee. All paperwork in this respect should bear the address of the deputy official receiver but the name of the official receiver who is the liquidator or trustee.

 

37.19 Partnerships

(Amended December 2010)

Release should be applied for in respect of every estate account opened regarding a winding-up order or bankruptcy order made in relation to a partnership. When dealing with a joint bankruptcy partnership (Article 11) a separate application should be made in each estate including the partnership estate. However, notices to creditors can be combined where release in more than one insolvency is being dealt with at the same time.