Where individual bankruptcy orders are made against all of the members of a partnership but no winding-up order is made against the partnership itself, the bankruptcy orders operate (in the absence of a partnership deed which provides otherwise) so as to dissolve the partnership but without bringing it under the control of the official receiver. Such a situation ties the official receiver’s hands, as he/she has no jurisdiction over any partnership assets and this can result in great difficulty in administering the case.
If it would be impractical for all of the members of a partnership to file for bankruptcy, where for example the whereabouts of one partner is unknown, the court can direct that the petition be presented by such members as it deems appropriate.
Article 14 of The Insolvent Partnerships Order 1994 (IPO 1994) allows the court to make an order as to the conduct of insolvency proceedings where a bankruptcy petition has been presented against two or more members of an insolvent partnership. The application may be made by the official receiver, an insolvency practitioner (IP), the trustee of the partnership or any other interested person.
Where appropriate, the official receiver can thus seek to redress the situation in these cases by applying to the court for an order that the bankruptcy orders be consolidated into one case and that he/she be at liberty to deal with the assets of the former partnership business.
The alternative is for the official receiver to present a winding-up petition against the partnership, which will not be appropriate in the majority of cases.
In practice, the only reason for the official receiver to make such an application to the court for consolidation of bankruptcies would be to deal with any partnership assets, which would otherwise fall outside the official receiver’s control. Where there is any surplus arising out of the partnership estate after paying its creditors, the official receiver can ensure that those funds are made available to the insolvent estates of the partners.
Where there are no partnership assets, the official receiver can administer the cases in the usual manner ensuring that the partnership liabilities are included with the other personal creditors of the insolvent partners.
The official receiver will need to prepare a formal application and report for the court, together with a draft order for sealing and dating by the court once the application has been considered. In local court cases (which are by far the most common), the application and report can be included in one document.
The application must be in writing and state the order applied for together with sufficient details of the grounds for the application. There is no court hearing for the application and the court will generally process the application quickly and the sealed and dated order should be returned within 7 to 10 days. If the order is not received back from the court within 14 days, it may be worth telephoning the court to ascertain the reason for the delay.
The report sets out the background and relevant facts to the case with details as to why the application is being made.
There are no pro-forma applications and reports for this procedure at present but each office will generally have an in house version available for reference.
Two copies of the report and application, together with the draft order should be sent to the court.
The application/report must contain the names of all parties, together with the court and court numbers for their bankruptcy cases.
Full details of each bankruptcy order including each bankruptcy description should be given, with the earliest listed first, including the date of the order, the identity of the petitioner and the petition debt, where appropriate. If the case has been transferred, the date of transfer should also be included.
The official receiver should state that the bankrupts traded in partnership, and include the trading style and address. In a creditor’s petition case, the official receiver can further state, if known, that the petitioner has no application pending to wind up the partnership.
Where there are details of partnership assets known, these should be included, although if the official receiver is aware that there are assets but does not have specific details, a more general statement referring to assets in jeopardy, or some similar statement, can be used.
The application must contain a statement that the official receiver is of the opinion that the administration of the affairs of the bankrupts would be better facilitated if the proceedings were consolidated by the court under number…. … of ……...
Furthermore, 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. Consolidation of cases in itself does not automatically give the official receiver the power to deal with partnership assets and so, this authority must be specifically requested.
The consolidation application should also ask for the bankruptcy description to be amended, and the amended description should be included in full. The amendment should obviously incorporate the trading style, trading address and type of business undertaken by the partnership with the bankruptcy descriptions, which should be listed in chronological order.
The order should be a relatively straightforward document and must contain the following pertinent phrases:
IT IS ORDERED that the proceedings in the matter of ………… and. ……….. (including the full descriptions) be consolidated under…………. (county) court number……. of ……..
IT IS FURTHER ORDERED that the official receiver or subsequently appointed trustee be at liberty to deal with the assets of the former partnership business known as ……………
AND IT IS FURTHER ORDERED that the description be amended as follows……………
Generally, the official receiver should use the earliest of the bankruptcy court numbers for the consolidated case. Where the original bankruptcy orders were made in different courts, the official receiver should still use the court and number attached to the first bankruptcy order made, unless that order was made in the High Court and is being transferred to a local court, in which case the cases should be consolidated under the ‘new’ local court number.
Where the orders were made on the same day, there should be a time that the order was made included on each order. This allows for a decision to be made as to which was the earliest made. If the orders were made in a local court and no time is included on the orders, the court should be telephoned to discover which order was made first.
This paragraph is awaiting amendment to take account of ISCIS. In the meantime please see the ISCIS protocol for Partnerships.
The relevant details will need to be changed on LOIS. This can be done in office in LOIS (CA07), which gives options for transferring case addressees and creditors as appropriate. Care should be taken when making the entries in LOIS (CAO7) so that creditors etc. are attached to the right cases.
A call must be made to CUST to notify them of the consolidation order. It is the responsibility of the official receiver’s local office to ensure that the transfer of information to the consolidated case is completed correctly, and that the case or cases to be ‘hidden’ are at a nil balance in LOLA.
The local office will only contact the Estate Account Services (EAS) Enquiries Team if advice is needed on how to transfer the LOLA postings to the consolidated case, or to ensure that the case or cases to be hidden are at a nil balance in LOLA.
The (EAS) Enquiries Team can be contacted as follows. By telephone, 0121 698 4268, or by e-mail, EAS.firstname.lastname@example.org.
As a matter of courtesy, the office cashier should also be notified of the consolidation (if not previously aware of it).
The bankruptcy files should be amalgamated into the one file titled with the bankrupts’ names and the partnership trading style and the appropriate court number.
Orders for consolidation may be gazetted and advertised locally (as the order includes an amendment of the original description), particularly if there are a large number of partnership creditors or where there is no meeting
Check with the examiner as to whether or not the consolidation order should be gazetted and advertised locally. A Word template gazette notice has been drafted – see Forms to be used section. If required, a newspaper advertisement can be prepared by editing the NFN1 template for amended descriptions. For more information, see (Case Help Manual part – Publication of Insolvency Information).
In the past, there have been occasions where an order has been sought to consolidate two or more bankruptcy orders against the same person where the orders have been made within a short space of time. This action should only ever be considered if the orders were made in short order and it is unlikely (or unknown) that the bankrupt has incurred further debts.
Whilst this type of consolidation is not wrong, it can cause confusion as to how the deposits in the two or more cases should be administered unless the official receiver is very precise in covering this aspect in the application. A better option is to apply for the later bankruptcy to be annulled on the grounds that the order ought not to have been made which would result in the return of the deposit to the petitioning creditor in that case.
a Bankruptcy proceedings can be consolidated under the Insolvent Partnerships Order 1994 regardless of whether they commenced under the Insolvency Act 1986, the Insolvent Partnerships Order 1986 or the Insolvent Partnerships Order 1994.
b Where insolvency orders have been made against a partnership and its members, the official receiver can seek directions under article 14 of the Insolvent Partnerships Order 1994, to have all of the proceedings conducted under article 8 of that legislation.
c It is suggested that in an Article 14 case, where bankruptcy proceedings are consolidated to enable a partnership estate to be dealt with, the CAR A Article 11 form can be used, with references to Article 11 being replaced by Article 14 (see CHM part: Partnerships “Forms to be used”).
Where can I find out more?
Insolvency Act 1986:
Section 282 – Court’s power to annul bankruptcy order
Section 303 (2B) – General control of trustee by the court
Insolvency Rules 1986 as amended by the Insolvency (Amendment) Rules 2010:
Rule 6.236 - Consolidation of petitions
Insolvent Partnerships Order 1994
Article 14 (2) - Supplemental powers of court
Technical Manual:Chapter 5 – Gazetting and Advertising
Case Help Manual:
Gaz 17 – Amendment of title – consolidations click HERE
1 Receive instructions from examiner to apply for consolidation of two or more bankruptcy cases.
2 Obtain the relevant case files and ascertain which of the orders was made first. If the bankruptcies were made in a local court on the same day, telephone the court if there is any uncertainty as to which of the orders was made first.
3 Once the earlier case has been established, this will decide which of the previous court numbers will be used for the consolidated case.
4 Draft the application and report (usually a combined document), and draft order to court.
5 In the APPLICATION, do not forget to include all of the things that the official receiver wants the court to include in the order:
a. that the proceedings be consolidated under the number ….. of …..
b. that the official receiver or any other appointed trustee be at liberty to deal with the partnership assets.
c. that the description be amended to ‘ …………. ’.
6 For the REPORT:
a. list the full details of each bankruptcy case included in the consolidation application, in date order. Include the identity of the petitioner and the amount of the petition debt, if not debtor’s petition cases.
b. where the case has been transferred, add the date of transfer.
c. state that the bankrupts traded in partnership, with details of the partnership, trading style and the trading address.
d. in a creditor’s petition case, state further, (if known), that the petitioner in the bankruptcies has no petition pending to wind up the partnership business.
e. list details of known partnership assets, where available. In the event that there is no precise information, use a more general phrase referring to the official receiver’s awareness of assets which may be in jeopardy, or include a similar statement.
f. include a statement that the official receiver is of the opinion that the administration of the bankrupts’ affairs would be better facilitated if the proceedings were to be consolidated by the court under the number ….. of……
g. it is imperative to state that the official receiver or any subsequently appointed trustee, needs to be able to deal with the assets of the former partnership business.
7 Draft the ORDER incorporating all of the points applied for in the application.
8 Have the draft application, report and order checked. Pass to an assistant official receiver for signature.
9 Send 2 copies of the application, report and order to the court.
10 If sealed order not returned within 14 days, telephone the court to find out the reason for the delay.
11 Once sealed order received, change relevant details in LOIS (CA07).
12 Telephone CUST to notify them of the consolidation order. Ensure that the transfer of information to the consolidated case is completed correctly, and that the case or cases to be ‘hidden’ have a ‘nil’ ledger balance.
Contact the EAS Enquiries Team only if difficulties are experienced. (Tel. 0121 698 4268 or e-mail EAS.email@example.com)
13 Ensure the local office cashier is informed of the consolidation, with new court number.
14 Create a new file for the papers, headed up with the name of the bankrupts, the partnership trading style and address (if appropriate), and the consolidated case court and number.
15 If the examiner has given instruction that the order be gazetted (and advertised), take necessary steps to do so. A Word template gazette notice has been drafted – see Forms to be used section. If required, a newspaper advertisement can be prepared by editing the NFN1 template for amended descriptions.
16 Proceed with case administration in the usual manner.