Initial Enquiries in Company and Creditor Petition Bankruptcy Cases (ISCIS)

Initial Enquiries in Company and Creditor Petition Bankruptcy Cases (ISCIS)

October 2010

Introduction

For guidance regarding debtor's petition cases see Case Help Manual (CHM) part: Initial Contact in debtor's petition cases. 

1. When should enquiries begin?

Once notification of a winding-up order or bankruptcy order has been received, enquiries into the affairs of the company or bankrupt must begin immediately. 

Where possible, they should be made within 24 hours of the office being notified of the order and certainly within 48 hours. 

2. What does the Official Receiver need to know?

Of major importance at the initial stage are enquiries that relate to whether there is any continued trading activity and the extent and nature of the assets. 

One of the official receiver's primary functions is to preserve the estate, which means that he or she must ensure that assets are adequately insured, if considered to be necessary.  Perishable goods should be disposed of, as should any other goods that are likely to fall in value. The official receiver must protect the estate from possible third party claims where the public could be at risk, e.g. from entering premises, when he or she should attempt to effect public liability insurance.

On creditor petition bankruptcy and company cases, the following initial enquiries should be undertaken by L2/L3 examiners:

  • the initial contact with the bankrupt or company director;
  • telephone enquiries of third parties (e.g. solicitors, accountants and banks etc); and;
  • “non-standard” searches (e.g. membership lists of professional organisations, business websites, media reports, Google etc).

and the case clerk will undertake the following:

  • the standard internet or intranet searches (including Experian, EMS and Companies House)
  • despatch standard letters and notices.

The standard initial enquiry forms for company and bankruptcy creditor petition cases are available under the ‘Docs’ tab in ISCIS, IEC – ‘Initial enquiries, company’ and IEBC – ‘Initial enquiries, bankruptcy (creditor’s petition)’. These forms cover the main questions that will need to be asked and act as a general guide to the matters to be covered and should be used in all cases. However, these are not exhaustive and additional questions may have to be asked which are only relevant to a particular case.

3. Insurance

If any of the assets in a case are either uninsured or under-insured  instructions will be given immediately by the examiner via the Notes tab on ISCIS to either effect the necessary insurance or increase existing cover. (See ISCIS Protocols- Case Instructions and Notes) Public liability insurance may also need to be taken out (see 2 above) For further information see CHM part: Official Receiver's Insurance.   

4. What information can be obtained before contact?

The case clerk may have obtained useful additional information before contact by checking details using the Experian search engines. These can be found on the ORBS intranet site and can provide possible contact numbers and addresses. For bankruptcy cases the Citizenview search should be used and for company cases the Ltd Company Gold Report should be used.

It should be noted however, that in company cases the Experian engine should be used in the first instance, since routine use of Companies House Direct, Registry Trust and Corporate192.com will incur unnecessary cost.

5. Who should be contacted?

In the first instance, the company director, partner or bankrupt will invariably be the best source of information and every effort should be made to contact them. 

Sometimes they will be at court for the hearing, and it may have been possible to speak with them on the telephone there. This is ideal as it means that they are aware of the proceedings and will usually have some or all of the information to hand.

6. Petitioning Creditors and their Solicitors

The petitioning creditors and/or their solicitors can also be a useful source of information. They will almost certainly have more information than the basic facts incorporated into the petition and order and even where contact has been made with the director, partner or bankrupt, they can be used as a supplementary source of information. 

The petitioners will have details of service of the petition, which will indicate whether the subject can be contacted at the address in the description (bankruptcy), whether the insolvent is aware of the proceedings, whether any trading activity is/was being carried on, when the proceedings began, what is/was the business, and who was the main contact and their details. They may also have details of other parties such as solicitors, accountants, banks etc.  

7. Government Departments as petitioning/supporting creditor (amended September 2012)

When HM Revenue and Customs (HMRC) is the petitioning creditor in a bankruptcy, a standard package of information will be provided to the Petitions and Transfers section (P&T), (part of Centralised Activities Directorate and based at Sunley House, OR Croydon) as a matter of routine within 4 calendar days of the bankruptcy order. The information will be supplied to official receivers by P&T.  If a copy of the petition is required before that time, a request must be made to P&T, who will make the request on the official receiver’s behalf.

Where HMRC is a supporting creditor, an information package will be supplied to the official receiver on his/her written request which should be made to HMRC Enforcement and Insolvency Service, DX 90957, Worthing 3. Such a request should not be made as a matter of routine in every case, but only in cases where it is necessary to do so, e.g. in order to locate the bankrupt.  

In cases where HMRC has petitioned for the winding-up order or has supported the petition for winding-up, enquiries for information should be sent to Enforcement Office, at the address detailed above. 

8. Other sources of information - company

In a company, accounts filed with Companies House may contain the identity of the firm of accountants that prepared them. They too can be a useful source of information, and should know whether the company is still trading.
Details of banks may appear on the charges register and they may also have some information. Although banks tend not to be very forthcoming on the telephone, they may be willing to assist over the telephone or, as a matter of urgency, they may co-operate on receipt of a letter from the official receiver referring to the telephone call and confirming the date of the order and the nature of the information sought.   

9. Why do we ask specific questions?

Once contact has been made, the initial questionnaire forms IEC and IEBC(ISCIS ‘Docs’ tab) will cover the main questions to be asked. These forms are to be used in all cases.

The information sought and why the official receiver needs these details is further explained as follows:

Personal/ Director detail

  • asked for to ensure that the correct person has been contacted and( in bankruptcy) to check whether the description given in the order is correct and up-to-date .This could be especially relevant if an Experian search has revealed alternative addresses.

Trading details

  • needed to establish whether the bankrupt or company is still trading and whether an inspection is warranted. Also needed to determine whether any immediate action is required either to collect, protect or realise assets, to appoint an insolvency practitioner or to deal with any onerous property. 

Employees

  • if the bankrupt’s business or the company still has employees at the date of the bankruptcy/winding-up order then an inspection may be warranted as the employees may have to be dismissed. 

Personal/Business assets

  • the list contained in the initial enquiry form is not exhaustive. Where appropriate the nature of any business should be considered and what assets there may be. It is also important to find out if the assets are owned by anyone else or whether they are subject to retention of title. This may mean that they are not part of the estate and the official receiver should not attempt to sell them.

Accounting Records

  • arrangements should be made for the accounting records to be delivered to the official receiver or collected from the bankrupt/director as soon as possible. The bankrupt/director should be reminded of the importance of delivering up the accounting/financial records, if appropriate.

Bank or Building Society accounts

  • the official receiver is obliged to notify banks of the order and in a bankruptcy, will need to either realise any credit balance, arrange for the bankrupt to have access to all or part of the credit balance or to inform the bank that the official receiver has no objection to the bankrupt continuing to use the account. In a company the account should be frozen.

Motor Vehicles

  • motor vehicles could be an asset in the estate or they might be onerous property that the official receiver needs to deal with.

10. What if the business is still trading?

Where enquiries have established that a business/company is still trading the examiner must make immediate enquiries to enable him/her to consider what action needs to be taken.

11. The director/partner/bankrupt is unco-operative

In most cases the director/partner/bankrupt will have been aware of the proceedings leading up to the making of the insolvency order. Occasionally  the person on the other end of the phone may initially be unco-operative. If this is the case, explain politely and calmly that the order has now been made and that they have a statutory duty to co-operate with the official receiver and provide the information requested. 

12. What if the director/partner/bankrupt states that the order was a "mistake" and will be annulled/rescinded?

Occasionally, the director/partner/bankrupt's initial reaction to news of the order will be one of disbelief and they will insist that they are going to apply for an annulment or rescission of the order. In practice, such applications are not made in the majority of cases.

It is a matter for the bankrupt/partner/director to seek proper legal advice and to make the relevant application to court as quickly as possible - do not become involved other than to emphasize the need for urgency. Point out that they must still co-operate with the official receiver by providing the detailed information necessary for him/her to carry out his/her statutory duties. 

13. The director/partner/bankrupt is asking for advice

The official receiver is not in a position to give independent advice and accordingly, advice should NOT be given. Instead the director/partner/bankrupt should be referred to The Service's range of leaflets and Frequently Asked Questions on the internet (www.insolvency.gov.uk) or sent copies. The official receiver should advise the caller to read through the literature and contact as a matter of urgency, if appropriate, The Citizens Advice Bureau, an IP or solicitor who may be able to assist. 

14. Making an appointment for interview

When contact has been made the examiner will explain that the telephone call is only the initial contact and that after a series of a few questions( forms IEC/IEBC) the director/partner/bankrupt will be given an appointment date for interview in the office. The director/partner/bankrupt will be informed that he/she will be sent a letter confirming the appointment time, together with other information and leaflets and a Preliminary Information Questionnaire (PIQ) which should be completed before attending at the office.

It must be pointed out that it is extremely important that they keep the appointment but that  they should telephone the official receiver's office without delay, if there are special circumstances which would prevent them from keeping their appointment. The appointment for interview will then need to be re-arranged.   

15.  Delivering up books and papers

Both forms IEC and IEBC request details of the accounting records, their whereabouts and whether there are any computerized records.

It will be for the examiner to decide whether or not the records should be recovered. If a decision is taken not to collect the records, the examiner should record the decision together with the reason for it on the appropriate ISCIS screens, some of which will be automatically generated by workflows. The official receiver has a duty to investigate the affairs of a failed company and where he/she thinks necessary the affairs of each bankrupt. The examination of the records of the insolvent may be an important part of the official receivers' investigation and they should be recovered in every company case and all bankruptcy cases where the official receiver has not made a decision that investigation of the bankrupt's affairs is unnecessary. 

For further information see TM Chapter 10.3.

If the books and papers are to be delivered up, the letter NTB1 or NTCO gives details of what is required. In the case of a bankruptcy, this will include any accounts where the individual traded or was self-employed, together with bank cards, cheque books, building society passbooks and or credit cards, insurance policies, share certificates, premium bonds, finance agreements, lease/rental agreements for trading premises, etc. In the case of a partnership or company, this will include copies of accounts, both draft and filed, company bank cards, cheque books, company credit cards, company seal, statutory company books, lease/rental agreements for trading premises, finance agreements etc. 

If they are unsure whether to bring something in or not, it is better to err on the side of caution and bring it to avoid another trip to the office. Any specific queries will be dealt with by the examiner.

It must be stressed that cheque books, credit cards etc must no longer be used.

16. What happens if no telephone contact can be made?

If the director/partner/bankrupt cannot be contacted immediately, further attempts at different times of the day should be tried.

If, despite exhaustive enquiries, contact with the director/partner/bankrupt has still not been possible within the recommended time, then an initial appointment should be made and the case monitored to pursue, according to local office practice.

Where can I find out more ?

Insolvency Act 1986 

Sections 130-132

Section 235

Sections 288-289

Section 291

Insolvency Rules 1986 

Rules 4.20

Rule 12.19

The Insolvency (Amendment) Rules 2010

Rule 4.21

Rules 6.33 and 6.34

Technical Manual 

Chapter 3 - Initial Procedure when winding-up order made

Chapter 4 - Initial Procedure when bankruptcy order made

Chapter 10 - Custody, storage, preservation and destruction of records

Chapter 31.3 - Dealing with freehold & leasehold properties

Chapter 49 - Insurance

Case Help Manual

Initial Contact in Debtor's Petition Cases

Insurance

New Case Petitions

OROS Bulletin - February 2010

ISCIS Protocols

Case Instruction and Notes

Vetting and Interviews

Forms to be used

IEC - Initial  enquiries Company

IEBC - Initial enquiries Bankruptcy (Creditor's petition)

 

Initial Enquiries in Company and Creditor Petition Bankrtuptcy Cases Flowchart 


Procedure 

ISCIS tabs that must be used to record/view information are given in brackets e.g. (‘Docs’ tab).  

Director/partner/bankrupt present at court


1 Receive/take down details of order from court. 


2 L2/L3 examiners  will complete the appropriate initial enquiry  form IEC/IEBC in as much detail as possible. 

Director/partner/bankrupt not at court

3 The examiner will use any/all of the various sources of information to establish a contact phone number then telephone and complete form IEC/IEBC.

4 If necessary, they will contact petitioning creditors or their solicitors and obtain as much additional information as they have on the case. 

5 If not done already, the examiner will then contact bankrupt/partner/director and complete initial enquiry form.

6 The case clerk will undertake the standard internet or intranet searches (Experian, EMS and Companies House)

Where business/company is still trading

7 Examiner to make all necessary enquiries to enable him/her to consider what action needs to be taken.

In all cases

8. Ensure that an appointment for interview has been made either over the phone or in writing, according to local office practice and recorded under Vetting and Interviews on ISCIS. See ISCIS Vetting and Interviews Protocol.

Where no contact made with director/partner/bankrupt

9.Send out appointment letter and relevant enclosures to last recorded address as soon as possible. 

10. In all cases arrange for initial notices to be sent as indicated on the workflow.