Long-Term Assets (Formerly- Protracted Realisations)

September 2007                                                    

1. What are long-term assets?

When the official receiver as trustee realises any asset, the intention is to produce a net gain to the estate after the payment of any costs associated with the sale. Long-term assets are those assets that are deemed to be realisable and which are likely to result in a net benefit to the estate but  cannot be realised at the same time as the rest of the assets.

This will not prevent the case being closed or the official receiver obtaining his/her release as trustee as long as the delay in realisation is valid, e.g. where a bankrupt has a personal pension that is worth realising but he/she is not yet old enough to collect the pension.

Long-term assets are the responsibility of the Services’ Regional Trustee/Liquidator Units (RTLUs) who deal with some current asset realisations, and those which can only be realised at a future point in time.

 

2.  What could be described as long-term assets?

  1. freehold and leasehold properties where the bankrupt’s interest cannot be realised immediately
  2. life policies, annuities, and other pensions that are not excluded by the provisions of The Welfare Reform and Pensions Act 1999, endowments and other insurance products that are not imminently realisable
  3. company pension schemes
  4. long-term litigation issues and recovery actions
  5. royalties or other periodic payments where the interest is not saleable
  6. interests under a will or settlement which have not yet fallen due
  7. rights of action which have been assigned where the official receiver is entitled to a share in any proceeds subsequently recovered
  8. book debts, such as retentions, that are deferred for a significant periodof time under the terms of a contract
  9. some shareholdings

 

3. The role of an RTLU

Each region has its own RTLU under the command of a designated official receiver. Day to day operation of an RTLU is delegated to a senior office manager who is supported by a B1 office manager who leads a team of administrative staff.

RTLUs were created as specialist units to deal with asset related matters in cases from offices within their region, subject to the following criteria:

  1. there is likely to be a distribution to creditors
  2. the assets are not likely to attract an insolvency practitioner but will be time consuming for the local office to deal with
  3. realising or otherwise dealing with an estate’s interest in long-term assets regardless of value and complexity, where the case will not initially attract the appointment of an insolvency practitioner

 

4. What needs to be done to pass a long-term asset to an RTLU?

(Amended February 2014)

Before any case can be transferred to an RTLU, the originating office is required to prepare it to a prescribed standard. This includes inputting the asset details onto LOIS (CA15) and ensuring LOIS (CA08) is up to date with actions already carried out. An RTLU Transfer Form checklist must be completed from LOIS (DO73).

There are three types of Transfer Form, an RTLUDB debtor’s petition, an RTLUCB creditor’s petition and an RTLUCY for a company.

A separate file should be set up to hold the documents relevant to the asset and should include if available most of the following items, depending on whether it is a bankruptcy arising from a debtors or a creditor’s petition, or it is a company case: 

  1. full details of the long-term asset, including all associated correspondence and papers relating to it, including details of the official receiver’s insurance, if any, any other policy documents and documents of title
  2. copy of the report to creditors and meeting or no meeting notice
  3. copy of the bankruptcy order or winding-up order        
  4. all proofs of debt received
  5. copy of LOLA ledger (GLR41)
  6. print-out of LOIS (CA08 & PU400)
  7. form TNIDIS, Tax and NI Disclosure, LOIS (DO73)
  8. screen prints of LOIS (CA15, PU700 & PU701)
  9. statement of affairs
  10. petition
  11. bill of costs
  12. details of any disputed claims (including related correspondence)
  13. full list of known creditors or confirmation that LOIS (CA31) is full and complete
  14. copy of the official receiver’s closing notice, if appropriate

If all of this information is not included the RTLU are likely to return the file to the local office for the omissions to be rectified.

Where an asset in a bankruptcy case is to be forwarded to an RTLU for realisation and the case remains open, the local office should give notice to the bankrupt by sending form RTLULTB, LOIS (DO73).

If an asset in a bankruptcy case is to be forwarded to an RTLU for realisation after the official receiver has been released as trustee, the official receiver should give notice to the bankrupt by sending form TRLTB, LOIS (DO73) and to any other interested parties, such as mortgagees, by sending form NORAD, LOIS (DO73).

 

5. Types of long-term assets to be sent to RTLUs

1 -  Freehold and leasehold properties

Where a property currently has no surplus likely on sale (and an offer to buy out the interest for a nominal value has not been received), it should be sent to an RTLU as property prices may go up and a surplus may become available at a later date. Even in those cases where the mortgagees have an order for possession, regardless of whether it is suspended, the case should still be forwarded to an RTLU.

Where there is an interest in a property which is currently unrealisable, the official receiver’s main objective must be to protect that interest against unauthorised disposal.

In the case of a solely owned property that is registered, it is important to ensure that a bankruptcy restriction is lodged with HM Land Registry. (see the Case Help Manual part  Freehold Property - Solely owned: Registration of a Bankruptcy Restriction).

Where a solely owned unregistered property is involved, the official receiver can no longer obtain any form of caution or restriction against first registration. (See Technical Notice: T45-05).

For jointly owned properties, the official receiver must lodge a ‘J’ restriction against dealings at the Land Registry and request that a joint proprietorship ‘A’ restriction also be lodged.

The ‘A’ restriction will, in the event of a joint owners’ death, prevent a survivor from giving valid receipt for capital monies arising. (The application to lodge a ‘J’ and ‘A’ restriction on the same property can be made on the same Land Registry form RX1).

(For further information see Case Help Manual parts Freehold Property – Jointly Owned: Registering a Form J Restriction, and Leases with value).

When making up the file for despatch to an RTLU, ensure that correspondence to and from all of the charge-holders is included. In particular check that forms MP3, notice to mortgagee to account, have been returned duly endorsed.

Where appropriate, the acknowledgement of the ‘J’ and ‘A’ restrictions from the Land Registry should also be included.

 

2 -  Pensions

Following the introduction of the Welfare Reform and Pensions Act 1999, few pensions will now vest in the Official Receiver as trustee.

Where a bankrupt has a pension policy or occupational pension scheme which is available to the official receiver as trustee to realise, they will need to go to an RTLU until the bankrupt attains the earliest pensionable age specified under the policy or scheme (usually 50 for personal pension plans). If possible, the official receiver should amend a nominated retirement date to the earliest available under the pension policy.

In the case of a company, it may be that the scheme has not yet been wound up by either the insurance company administering the scheme or the independent trustee dealing with the scheme. A surplus on such a scheme is very rare and it would be for the independent trustee to notify the official receiver of any surplus at such time as it became available.

 

3 -  Reversionary interests

These assets, usually property, form part of an estate, most commonly under the terms of a will, where the beneficiary of the asset can only take possession after some particular time lapse or event. This means that if an individual is left a property under a will but someone else is left the right to occupy that property until he or she dies, the individual has a reversionary interest in the property until the date of the occupier’s death.

When such an individual is made bankrupt, any reversionary interest will vest in the trustee who can then dispose of it, subject to any other interest already in existence.

This means that in the example above, the trustee could sell the property once the life tenant dies even if this event occurs after discharge. In the meantime, the official receiver should contact the executors or administrators of the estate and notify them of the bankruptcy order and his/her resulting interest. It may also be appropriate to lodge a restriction against the property with the Land Registry. Check with the examiner or an assistant official receiver for instruction on this point.

 

4 -  Life policies

Most uncharged life policies can be realised in a straightforward manner, but where the policy cannot be sold or surrendered immediately, e.g. the policy is an endowment charged to a mortgagee, the local office may be able to place the policy with its RTLU.

The official receiver will be entitled to receive the proceeds of the policy both before and after discharge. In the case of a joint policy where the bankrupt has made no contributions to paying premiums after the making of the order, the joint policy holder may be able to claim more than half of the policy proceeds i.e. in proportion to the amount of premium payments made. Check with the examiner or an assistant official receiver if you are at all uncertain.

 

5 -  Cash at bank/building society

Realisation of cash deposits at a bank or building society can normally be carried out fairly quickly and should be undertaken wherever possible.

However, where there are long-term investments, such as an account which must be maintained at a specified balance for a fixed period, the official receiver as trustee may use his discretion to maintain the funds on the account and maximise returns, rather than realising the balance immediately.

This can be risky and should only be done with the official receiver’s consent but where the decision has been made to keep the investment in place, the details should go to an RTLU with the potential realisation date flagged up.

Notes:

a. In the case of companies, the general rule is that no assets of worth should remain unrealised at the completion of the liquidation, as the company will be dissolved after the liquidator’s release (unless an application for deferral of dissolution is made). When a company is dissolved, all property and rights held in trust for the company immediately prior to dissolution are deemed to be bona vacantia and belong to the Crown, the Duchy of Lancaster or the Duchy of Cornwall and are therefore lost to the creditors. This should not affect a possible surplus from an administrative receivership as application for the dissolution to be deferred for 2 years is routinely made by the official receiver when applying for release.

(For further information see Case Help Manual part: - Deferral of dissolution).

b. If an asset other than that shown on the RTLU Transfer Form checklist is referred to in any supporting documentation, a brief note as to how    that  asset has been dealt with, if at all, should be included so as to  avoid unnecessary further enquiries by the RTLU.

c. If the official receiver discovers that a closed case has a long-term   asset that has not been passed to an RTLU, steps should be taken to establish the extent of the asset and to protect it accordingly (such as by obtaining ‘J’ and ‘A’ restrictions), usually before passing it to the RTLU.

d. When a case is ready to be transferred to an RTLU a local office staff member will transfer it on LOIS (CA41). The RTLU will be shown as the  ‘owning office’ on LOIS (CA08) but will only have responsibility for the administration of the case. The local office will retain responsibility for any investigation matters.

 

Where can I find out more?

Technical Manual

Chapter 31.5 – Monetary Assets

Chapter 31.6 - Stock, Work in Progress and Plant and Machinery

Chapter 38 – Dissolved Companies

Chapter 50 - Dealings with the Land Registry

Chapter 61 – Pension Schemes

Case Help Manual

Book Debts

Deferral Of Dissolution

Family Home 

Freehold Property: Jointly Owned - Registering a Form J Restriction

Freehold Property: Solely Owned - Registration of a Bankruptcy Restriction

Insurance (Life Policies)

Leases with Value

Pensions

Shares

Timeshares

Notices:

T20/05 – Civil Partnership Act 2004

T45-05 – Registration Of Land – Withdrawal Of Facility To register Cautions Against First Registration

LOIS Workbooks

Assets & Liabilities – screens 15,31 & 8

The Bankrupt’s Home – Also referred to as The Family Home – screens 700/701

Transfer of cases to RTLUs – screen 41

OROS Protocol Document

Protocol governing the relationship between Official Receivers (ORs) and Regional Trustee Liquidator Units (RTLUs)

The Insolvency Service website at www.insolvency.gov.uk ‘Publications’

What will happen to my home?

What will happen to my pension?

What will happen to my bank account?

HM Land Registry website at www.landreg.gov.uk ‘Forms & publications’ ‘Forms’

HM Land Registry form RX1 – ‘Application to enter a restriction’

(This form is essential when applying to the Land Registry to lodge ‘J’ and ‘A’ restrictions)

Forms to be used:

RTLUDB – RTLU transfer form, (debtor’s petition)

RTLUCB – RTLU transfer form, (creditor’s petition)

RTLUCY – RTLU transfer form, (company)

LRRABO – Land Registry register BO  (or amended order)

LRCBI – Land Registry confirm bankruptcy inhibition/restriction

LRCLET – Land Registry Form ‘J’ Restriction Letter (Accompanies the RX1)

RTLULTB – Letter to bankrupt   (case remains open)

TRLTB – Trustee release, letter to bankrupt

NORAD – Notices, release and dividend

 

Long-Term Assets Flowchart 

 

Procedure

1. An asset is identified as a long-term asset.

2. Ensure that the long-term asset has been entered on LOIS (CA08/&CA15).

3. Update LOIS (CA08&CA15), with any action taken regarding the securing or realisation of the long-term asset.

4. If it becomes apparent that a long-term asset believed at one time to be realisable, is now known to have no value, obtain confirmation from the examiner or an assistant official receiver that the asset can be written off or disclaimed and update LOIS (CA08&CA15) accordingly.

5. Before transferring a case to an RTLU it must be prepared to a prescribed standard. Listed copies of documentation and any relevant correspondence from the case file must be packaged for forwarding along with required screen prints and printouts from LOIS.

6. The package must be fronted by an appropriate RTLU Transfer Form checklist from LOIS (DO73). The transfer forms are an RTLUDB for a debtor’s petition case, an RTLUCB for a creditor’s petition case and an RTLUCY for a company case.

7. Where an open bankruptcy case is to be transferred to an RTLU the local office should notify the bankrupt using form RTLULTB, LOIS (DO73). However, if the official receiver has been released as trustee form TRLTB, LOIS (DO73) should be sent.

8. Send form NORAD, LOIS (DO73) to any third parties with an interest in the asset, e.g. mortgagees, notifying them that it is being sent to the RTLU.

9. In the case of a solely owned property, ensure that a bankruptcy restriction has been registered with HM Land Registry. If not, check whether the Land Registry has been notified of the bankruptcy order.

10. Where the Chief Land Registrar was sent details of the bankruptcy order, form LRRABO LOIS (DO73), and has acknowledged receipt quoting a WO(B) number, forward form LRCBI, LOIS (DO73) immediately to the appropriate Land Registry office requesting registration of a bankruptcy restriction. If not, forward a second form LRRABO to the Chief Land Registrar immediately.

11. In the case of a jointly owned property, prepare a ‘J’ and ‘A’ restrictions  application on Land Registry form RX1 available online (www.landreg.gov.uk) accompanied by form LRCLET, LOIS (DO73).

Form RX1 must be signed by the official receiver or, in his/her absence, by an assistant official receiver.

12. When signed, pass the application papers and enclosures to the cashier who will forward the application and enclosures to the Estate Accounting Directorate (EAD) in Birmingham. EAD will forward payment to the appropriate Land Registry office.

13. Whilst acknowledgement from the Land Registry confirming that the  restrictions have been lodged should soon arrive, it need not delay transfer to the RTLU. Where this has not been received, and the local office consider it to be necessary, send 2 copies of an amended form LRCLET, LOIS (DO73) to the Land Registry requesting confirmation.

14. When the asset file is ready it should be passed to the nominated local office staff member for checking.

15. When the local office is ready to pass the long-term asset to the RTLU the nominated staff member of the local office should formally transfer the case, LOIS (CA41). This is done, usually each month, on a date previously agreed between local offices and RTLUs. The asset file is then forwarded to the RTLU.

16. If correspondence is received in the local office relating to a long-term asset being dealt with by an RTLU, forward it to the RTLU immediately for action or information.