1. What is the function of an agent?
Generally, an agent is employed by the official receiver to realise or advise on the commercial value of an asset. Agents are mostly auctioneers, although the official receiver may also employ other types of agents to act on his/her behalf such as accountants, shorthand writers and interpreters. For guidance when using other agents see Technical Manual Chapter 32, Parts 2, 3 and 4.
One of the official receiver’s primary duties upon the making of a bankruptcy/ winding-up order is to identify, secure and collect any assets. As receiver and manager, the official receiver may only dispose of assets that are likely to diminish in value, e.g. perishable goods. Where the official receiver is trustee or liquidator of the estate, it is his/her duty to realise the assets for the benefit of the creditors.
Where action is considered necessary to protect the assets, examiners are encouraged to employ an agent without delay to advise on the collection, protection and possible realisation. Precise instructions should be given to the agent regarding full details of the assets involved, location and the exact terms of the agent’s employment i.e. whether the agent is to remove and sell or provide the official receiver with a valuation and then await further instruction. All verbal instructions must be confirmed in writing. Confirmation may be in electronic form.
The employment of agents should be noted on LOIS (CA08 & CA15 to record the asset) and in the record of handover to an insolvency practitioner (form IPROH).
For further information on the initial valuation of a motor vehicle see Case Help Manual part: Motor Vehicles.
For further information on a drive-by valuation of a property see Management Notice M72/02 and OROS Bulletin 1/05.
If the assets to be disposed of are situated in an area of the country dealt with by another official receiver, enquiries should be made of that official receiver to obtain details of the local auctioneers used by him/her in the area in question.
Where assets are of a specialized or unusual nature (e.g. paintings, stamp collections, musical instruments, high value furs or precious metals and stones), then specialist auctioneers should be employed. The official receiver may consider employing his/her usual agents who may then instruct specialists as sub-agents to deal with specific items. This will also overcome the need to request a bond or insurance from specialists not employed on a regular basis.
The exception to the official receiver’s usual agents instructing sub-agents is where the official receiver is required to dispose of waste. As this can only be handled by a licensed agent, the official receiver can only use his/her usual agents if they are licensed to deal with the waste concerned. If the usual agents are not licensed to deal, they cannot sub-contract a specialist firm to dispose of the waste and the official receiver must instruct a specialist waste management firm directly.
For more information see Technical Manual Chapter 82 paragraph 82.14.
The official receiver must ensure that any agent he/she employs is adequately insured against the loss of any assets whilst in his/her care whether as a result of, for example, damage to assets from fire or as a result of the agent’s negligence. These assets could include as yet unaccounted for sale proceeds or the risk of the agent becoming insolvent before accounting occurred. The agent can obtain this type of insurance in the form of a fidelity bond with an approved guarantee society (generally one of the major insurance companies). If an agent is unwilling to provide a bond but offers alternative security, e.g. professional indemnity insurance, the official receiver may accept the alternative, provided the protection afforded is the same as that covered by a bond. The official receiver should review the protection offered, to ensure that the security reflects his/her needs when compared to the value of assets and funds held by the auctioneer on behalf of the official receiver.
For further information regarding the bonding of auctioneers and valuers see Technical Manual Chapter 32.3, paragraph 32.3.11.
Whilst auctioneers used regularly should produce a copy of their fidelity bond or alternative protection annually, if the official receiver is satisfied that the agent used is reputable and has been dealt with in good faith over a long period, and he/she is sufficiently well covered for any loss that may occur, then the official receiver is not required to insist on annual verification of the bond. Those who are not used on a regular basis should provide a copy of their bond or insurance prior to their employment.
The official receiver should be aware that some bonds and insurance policies held by agents contain an excess clause, which could mean for example, if the policy excess is £2,500, the first £2,500 of every claim will not be met by the insurers. He/she should establish whether an excess clause would apply to a claim made by him/her on behalf of multiple estates, or in respect of each estate. Official receivers should ensure that the maximum amount which can be claimed under a bond/policy is sufficient to provide the level of cover required for the estate(s) concerned. To remove or reduce an excess on a bond/policy is likely to require payment of an additional premium.
In some instances, official receivers have relied on the fact that their agents are bonded by virtue of their membership of a professional body. The majority of these schemes do not protect losses following straightforward financial failure of a member. Details of some of these professional organisations can be found in Technical Manual Chapter 32 paragraph 32.3.14.
The terms and rates of fees to be charged should be agreed in advance with the agent and the official receiver must ensure that the costs and charges made by the agent are reasonable. The estate should gain the maximum benefit as a result of their employment. Where the benefit to the estate is likely to be small the official receiver should try to agree a nominal fee.
Wherever assets are to be sold by auctioneers, the official receiver should inform them whether or not the bankrupt/company is registered for VAT so that the appropriate amount is charged upon the sale.
An agent is not required to account gross to the official receiver for realisations. They will normally deduct their fees and charges from the proceeds of the sale and send the remaining balance for credit to the estate. The auctioneers must provide an itemised inventory of the items collected and sold against their costs and charges. VAT must be recorded separately in the agent’s bill.
The bill must be checked carefully and once authorized forwarded to Estate Account Services (EAS) for processing. A copy of the bill showing the full details should be placed on the office file.
An estimate of the agent's costs should be agreed before instruction but if on receiving the agent’s account the official receiver finds his/her costs unreasonable then he/she may refer the bill back to the auctioneer for re-consideration. If the agent refuses to amend his/her costs, the official receiver may request to have the bill assessed by the court (form CDETAS). See Technical Manual Chapter 39 – Detailed Assessment.
The official receiver should notify any agent he/she has retained of the appointment of an insolvency practitioner as trustee/liquidator (form IPROH). It may be that the insolvency practitioner will wish to continue to employ the agent. However, even if this is the case the official receiver will remain responsible to ensure that the agent is paid up to the date of the handover in accordance with the agent’s terms of employment. Where payment is made after handover, the resultant debit balance should be transferred to the insolvency practitioner.
Where can I find out more?
Insolvency Rules 1986 as amended by the Insolvency (Amendment) Rules 2010:
Rule 7.34A Requirement to assess costs by the detailed procedure
Rule 12.2 Costs, expenses etc
Case Help Manual:
Management Notice M72/02 - Drive-by Valuations
OROS Bulletin 1/05
Forms to be used:
CDETAS - cost, detailed assessment
IPROH – IP Appointment OR’s Report on Handover
LOIS references are given in brackets, e.g. (DO73)
1. Receive instructions from examiner to realise assets.
2. Confirm examiner's instructions to agent in writing. This confirmation may be in electronic form. Include in the confirmation that any assets are to be realised for the benefit of the estate.
3. Retain a copy of the confirmation for the file. Note LOIS accordingly (CA08, CA15).
4. When invoice received from agent check costs and once authorized forward to EAS for processing.
5. Enter details of any realisations on LOIS (CA08, CA15).
6. File copy invoice on office file.
If insolvency practitioner appointed
7. Include details of the assets and agent’s instructions in the form IPROH – OR’s Report on Handover, together with copies of the agent’s instruction and any relevant documentation.
8. Inform the agent that an insolvency practitioner has been appointed trustee/ liquidator. Include details of the insolvency practitioner’s name, address and telephone number together with the date of his appointment and date of handover of the estate.