December 2007
For ease of reference the businesses dealt with in this part of Chapter 59 are listed alphabetically
Accountants (paragraph 59.33 - 59.39)
Barristers (paragraph 59.40 - 59.42)
Bonded warehouses (paragraph 59.44d)
Bookmakers and Betting Shops (paragraph 59.43 - 59.44)
Charities (paragraphs 59.45 -59.51)
Commonhold Associations (paragraph 59.52)
Common Ownership Enterprises (paragraphs 59.53)
Community Interest Companies (paragraphs 59.54 to 59.56)
Companies limited by guarantee (paragraph 59.57)
Dentists (paragraph 59.58 - 59.67)
Doctors (paragraph 59.68 - 59.74)
Farms (paragraphs 59.74a to 59.75g)
Football Clubs (paragraph 59.75)
Housing Associations (paragraph 59.76)
List X Sites (paragraph 59.76A to 59.76P)
Nursing homes and residential care (paragraph 59.77)
Post offices (paragraph 59.78 - 59.79)
Public houses (paragraph 59.81 - 59.85)
Retailers of alcohol (paragraphs 59.81 to 59.85)
Solicitors (paragraphs 59.87 -59.94)
Scrap metal dealers (paragraph 59.95 - 59.99)
Veterinary surgeons (paragraph 59.100.)
The majority of accountants are members of recognised professional bodies which regulate their members conduct and provide training, ethical codes, deal with complaints and disciplinary procedures. Details of these regulatory bodies can be found at Annex A. The membership of one of these bodies may be compulsory for certain areas of work, for example auditing and insolvency practice but an accountant who has been made the subject of a bankruptcy order can continue to practice in most areas if he/she is not a member of an accountancy body.
The accountancy bodies expect their members to inform them of a bankruptcy order being made against them but it is good practice for the official receiver to send notification to the accountants' regulatory body, in particular where the bankrupt has not surrendered to the proceedings.
A member of the Association of Chartered Certified Accountants (ACCA) must, within one month, notify the Admissions and Licensing Committee of the ACCA of any bankruptcy event against him/her. A bankruptcy event is a bankruptcy order, BRO or BRU. The Admissions and Licensing Committee will decide whether or not to withdraw the bankrupt's membership. If the bankrupt fails to notify the ACCA of the bankruptcy event, his/her membership of the ACCA will automatically cease on the expiry of one month from the date of the bankruptcy event [note 1].
A member of the Institute of Chartered Accountants in England and Wales (ICAEW) will automatically cease to be a member on the making of a bankruptcy order against him/her [note 2].
Members of the Chartered Institute of Management Accountants (CIMA) and the Chartered Institute of Public Finance and Accountancy (CIPFA) do not usually work in areas where bankruptcy will stop them working but the regulatory body would expect to be informed and may investigate the circumstances of the bankruptcy and suspend or exclude from membership any individual made bankrupt if thought necessary.
Where the bankruptcy order has caused an accountant's membership to cease the bankrupt may at anytime apply for their membership to be renewed and it is at the discretion of the accountancy body to readmit them. Where the official receiver is approached for information on the conduct of the bankrupt by a regulatory body see paragraphs 47.6 and 47.39.
59.34 Dealing with a trading accountant
An accountant may be in partnership with another or others, be an employee of an accountancy firm, or be a sole trader. The official receiver will need to establish what part of the business, if any, forms part of the insolvent estate.
Where a bankruptcy order is made against an accountant who is in partnership with one or more individuals and no insolvency orders have been made against the partnership or all other individuals of the partnership the official receiver should follow the advice contained in paragraphs 53.61-53.69.
Where the bankrupt is a practising accountant employed within an accountancy firm the official receiver should inform the firm within which he/she is employed of the bankruptcy order.
It is possible that that the bankrupt holds accounting records belonging to a client(s). These records remain the property of the client and should, where possible, be returned to the client as soon as possible with the minimum of cost to the estate (see paragraphs 8.80 to 8.86 on dealing with third party property).
The insolvent business may hold a lien over the clients accounting records as security for payment of any outstanding debts (see paragraphs 9.108 - 9.122). These records should be retained and the book debt contractor (see paragraphs 31.1.4 to 31.1.33) should be informed of any liens and the whereabouts of the records when instructed.
The accountant is likely to have individual client files. These files will contain the accountant’s working papers and may contain information supplied to the accountant by the client.
59.37 Client files - work completed and final bill paid
Where the accountant has completed his/her work as instructed by the client and the final bill in respect of work undertaken has been settled the official receiver should review the file with the aim of returning it to the client. Any working papers belonging to the accountant should first be removed and stored with the accounting records.
59.38 Client files – work in progress.
59.39 Money held on client account
In connection with work being undertaken by an accountant a client may choose to place money in the care of the accountant if he/she holds the relevant authorisation. Where money is held in a client account the regulatory system aims to protect this money by seeking as far as possible to protect it from the claims of creditors in the event of an accountant’s insolvency and to prevent the accountant from using the client money to finance the business. This protection is provided by rules and regulations governing the handling of client money [note 3]. These requirements create a statutory trust under which an accountancy business must keep all client money separate from its own (unless agreed with the client) and which ring fences the client money from the claims of general creditors should the accountancy business fail.
Default Regulations [note 4] set out how client money should be handled and establish a procedure which should be followed by the liquidator/trustee in distributing the client money of a firm that has become insolvent. Even if all money is sufficient to pay all clients their entitlement, there may be a deficit due to the costs involved in distributing the funds. The official receiver or any liquidator/trustee appointed in his/her place would need to establish from the records the legal basis on which to distribute the funds.
It is extremely unlikely that the official receiver will need to deal with client money and consideration should be given to the appointment of an insolvency practitioner to act as liquidator/trustee in place of the official receiver in such circumstances.
The profession of barrister in England and Wales is a separate profession from that of a solicitor (see paragraph 59.87-94). Although there is some overlap in respective roles, it is not possible to be both a barrister and a solicitor at the same time. A barrister is often only involved in a case in order to appear before, and be heard in, the court on behalf of the client. Barristers are usually instructed by the client's solicitors.
In July 2004 the Public Access Scheme was introduced as part of the drive to open up the legal system to the public. It is part of a wider scheme to make it easier and cheaper for the general public to access legal advice. A Public Access barrister holds an additional qualification and can be instructed by members of the public directly.
The Bar Council is the professional body for barristers. It has established the Bar Standards Board to deal with the regulation of barristers (see Annex A). Although primarily regulated by the Bar Council a barrister must be a member of one of the four inns of court, Gray’s Inn, Lincoln’s Inn, Inner Temple and Middle Temple, who are responsible for training, further education and the admission of the barrister to the profession.
Barristers are usually individual self-employed practitioners who work in groups of offices known as chambers. That two barristers belong to the same set of chambers does not mean they have any other connection, they simply share office facilities. The chambers employ barristers’ clerks and it is normally the clerk who negotiates the barrister’s fees in advance of the case being taken. The person who instructs the barrister is responsible for the payment of any agreed fees.
The Bar Directory is a list of practicing barristers. Sweet and Maxwell has developed a searchable on-line version of the Bar Directory which can be accessed from the Bar Council website www.barcouncil.org.uk. It is based upon sections of the printed Bar Directory and includes information on Chambers, practising barristers in self-employed practice and barristers in employed practice.
59.41 Bankruptcy order made against a barrister
If a bankruptcy order is made against a person who is a barrister, the Bar Standards Board expect that the barrister would personally inform them of the making of the order although the official receiver should as a matter of course also send notification of the bankruptcy order (see Annex A for address and also paragraph 4.46). A bankruptcy order does not prevent a barrister continuing to practise, unless in the view of the Bar Standards Board there was any evidence of improper conduct, such as dishonesty.
59.42 Client files
(May 2008)
A bookmaker is a person (corporate or individual) who carries on the business of receiving or negotiating bets. On 1 September 2007, the Gambling Act 2005 came in to force, which changed the way the gambling industry is regulated in Great Britain and how licences are issued.
The Gambling Commission, established as a result of section 20 of the Gambling Act 2005, now regulates all commercial gambling in Great Britain, apart from spread betting and the National Lottery, including betting (for example, on horseracing, football or other sporting events, as offered by bookmakers). Betting is defined as making or accepting a bet on the outcome of a race, competition or other event or process, the likelihood of anything occurring or not occurring, or, whether anything is or is not true [Note 5].
59.43A Bookmakers – operating licences and personal licences
(May 2008)
In order to act as a bookmaker an operating licence is required, with individuals being issued with personal licences in certain circumstances. An operating licence authorises the licensee to operate a specified gambling activity and will specify the types of gambling authorised [Note 6]. It is, in most cases, an offence to provide facilities for gambling unless a valid operating licence is held. Although an operating licence may not be required in certain circumstances i.e. lotteries, clubs and miners’ welfare institutes [Note 7].
A personal licence is usually held as a condition of the operating licence and authorises an individual to perform the functions and/or share responsibility for ensuring compliance with terms or conditions of the operating licence [Note 8]. Small-scale operators do usually not require a personal licence [Note 9] [Note 10].
Further information is available from the Gambling Commission website at www.gamblingcommission.gov.uk. The Gambling Commission issue and regulate these licences and should be notified of the making of an insolvency order, at: The Gambling Commission, Victoria Square House, Victoria Square, Birmingham B2 4BP. An operating licence and where applicable, a personal licence, will lapse in the event of insolvency [Note 11].
59.43B Bookmakers – premises licence
(May 2008)
Where the bookmakers operate from premises, a premises licence must be held [Note 12]. A premises licence is a licence which authorises premises to be used for a specific gambling activity, such as a betting premises licence. A betting premises licence may be a betting premises (track) licence or a betting premises (other) licence [Note 13] [Note 14]. It is, in most cases, an offence to use premises for gambling unless a valid premises licence is held [Note 15].
The Gambling Act 2005 provides that the responsibility for licensing premises lies with the local council in whose area the premises are wholly or partly situated [Note 16] [Note 17]. Betting premises licences will lapse in the event of insolvency and the official receiver should obtain the appropriate licences held, from the insolvent [Note 18]. The local council should be notified of the making of the insolvency order, details of the appropriate local council can be obtained through the following link: http://www.direct.gov.uk/en/Dl1/Directories/Localcouncils/index.htm.
Where the official receiver recovers a betting premises licence, he/she should check the date of issue noted on the licence. An annual fee is charged in advance and it may be possible to recover such sums or a proportion thereof for the benefit of the insolvent estate, enquiries in this regard should be directed to the local council responsible for issuing the licence [Note 14] [Note 19].
59.44 Bookmakers – betting shop
(May 2008)
A betting shop is a premises licensed for the purpose of bookmaking. It is illegal for persons to meet and to carry on any bookmaking activity at any premises without a licence. A bookmaker based within a betting shop will require an operating licence, where applicable a personal licence and a betting premises (other) licence.
59.44A Bookmakers – operating at racetracks (May 2008)
Bookmakers can operate as on-course bookmakers, internet bookmakers, telephone bookmakers or operate a betting shop. Where the bookmaker and the person placing the bets do not meet i.e. telephone and internet betting systems only an operating licence and where applicable, a personal licence are required.
On-course bookmakers operate at racetracks, which are licensed on their own behalf, however areas of the track may not be covered by the racetracks licence [Note 20]. On-course bets are bets taken at a meeting attended by both the person making the bets and the bookmaker accepting the bets or from a bookmaker who is not at the meeting who makes hedged bets with a bookmaker who is present at the meeting.
An on-course bookmaker will require an operating licence, where applicable, a personal licence and where present at the racetrack, a betting premises (track) licence [Note 14]. Only one premises licence can have effect with regard to a specific area of the racetrack, however, a bookmaker can apply for a subsidiary licence which, if issued, transfers the licence for that specific area of the track to the bookmaker [Note 21]. The official receiver should verify the licence position when dealing with an on-course bookmaker and inform the relevant racetrack office(s).
On-course bookmakers must keep a field book, which is bound and has serially numbered pages. An entry must be made in the book for each bet, immediately after the bet is made. If an on-course bookmaker accepts bets which are not on-course bets he/she must also keep a betting duty account. [Note 22]
59.44B Bookmakers – gaming duty
(May 2008)
Betting duty is payable on the gross profit from bookmakers, excluding on-course betting, and a bookmaker must register with HM Revenue and Customs for the purpose of paying this duty [Note 23]. On-course bookmakers should be registered with HM Revenue and Customs even though on-course betting is not liable for betting duty. A bookmaker will receive a unique reference number and HM Revenue and Customs should be informed when a winding-up order or bankruptcy order is made against a bookmaker. Further details of general betting duty can be found on HM Revenue and Customs website at www.hmrc.gov.uk.
Notice of the making of the winding-up order or bankruptcy order should be sent to HM Revenue & Customs, Greenock Accounting Centre (GAC), Custom House, Custom House Quay, Greenock PA15 1EQ.
59.44C Bookmakers – book debts
(May 2008)
Bookmakers usually operate on a cash basis, with only a small number of customers having accounts. Prior to the Gambling Act 2005 coming in to force on 1 September 2007 gambling debts were not enforceable in law (see paragraph 40.57). Since the implementation of the provisions of section 334 of the Gambling Act 2005 gambling contracts are now to be treated in a similar manner to other contracts in law. This provision does not apply retrospectively, therefore, any gambling contract made, or any right arising from an agreement made before this section came into force will not be enforceable. (See paragraph 40.94) [Note 24]
Where an account customer owes money to the bookmaker at the insolvency order date, in relation to gambling contracts made on or after 1 September 2007, the official receiver’s agents may be instructed for collection, as these sums constitute book debts enforceable by law. Conversely, where the bookmaker owes sums in respect of uncollected winnings to people who have placed bets before the insolvency order date, these are provable debts and rank equally with other unsecured creditors.
59.44D Bonded warehouses – excise/tax and customs warehouses (inserted March 2012)
A bonded warehouse is a warehouse that has been approved by HMRC to handle goods on which excise duty would normally be payable (alcohol, tobacco and energy products), but which excise is suspended as the goods are not intended to enter the UK market.
Generally, this will be where the goods are intended for onwards transmission to another country – where the relevant duty will be levied. Other examples would be goods to be used in the manufacture of pharmaceuticals or foodstuffs, or goods to be used as ship or aircraft stores. If the goods enter the UK market, the relevant rate of duty must be paid on the goods.
The regulation of such facilities is tight and, as may be thought, the requirements to keep records of the movement of goods are stringent and liable to frequent inspection.
Where the official receiver is dealing with an insolvent that operated a bonded warehouse, and there are realisable assets in the estate in relation to the warehouse, it is likely to be appropriate to seek the appointment of an insolvency practitioner to act as liquidator or trustee.
A charity means any institution, corporate or not, which is established for charitable purposes and is subject to the control of the High Court in the exercise of the court's jurisdiction with respect to charities [note 25]. A charity may be in the form of a trust, an unincorporated association, an industrial and provident society (see paragraphs 59.19 to 59.24), a friendly society (see Chapter 58 - Unregistered companies Part 2) or a company limited by guarantee (see paragraph 59.57).
A charity is regulated by the Charity Commission whose function is the promotion of the effective use of charitable resources, and the monitoring and supervision of charities (see Annex A). A charity must be registered with the Charity Commissioners unless it is exempt from registration or excepted. Exempt charities are generally those that are supervised by other bodies e.g. industrial and provident societies and registered friendly societies are exempt [note 26]. The main categories of excepted charities are certain voluntary schools, Boy Scout and Girl Guide Charities and certain charities for the advancement of religion and also charities with an annual income below £1,000 [note 27].
The Charity Commissioners maintain the central register of charities. The register is required to contain the name of every registered charity and such other particulars about a charity as the Commissioners think fit [note 28]. The entry for a particular charity should contain its name, objects, area of benefit (i.e. the geographical area it covers, which could be a local region, all the U.K, or world-wide), bank account details, current correspondent (the person to contact) and approximate annual income. Charities whose gross annual income or expenditure exceeds £10,000 are required to provide an annual report (see paragraph 59.48). The register is open to public inspection both in person and on the Charity Commission website, and any person is entitled to be furnished with copies of entries on the register, although a fee may be charged.
The Charity Commissioners also have powers to obtain information [note 29], carry out investigations [note 30], appoint and remove trustees (including the directors of charitable companies) [note 31] and petition for the winding up of a charitable company [note 32].
The persons having general control and management of the administration of a charity are known as the trustees of the charity. The definition of trustee is wide enough to cover the directors of a charitable company [note 33].
A person is disqualified from being a charity trustee [note 34] if, among other things -
a) he/she has been convicted of any offence involving dishonesty or deception:
b) he/she has been adjudged bankrupt or sequestration of his/her estate has been awarded and (in either case) he/she has not been discharged or
c) he/she is subject to a disqualification order under the Company Directors Disqualification Act 1986, an order made under section 429(2)(b) of the Insolvency Act 1986 or he/she is the subject of a BRO, BRU or an interim order.
59.48 Requirement to keep records and make returns
The Charities Act 1993 requires charity trustees to ensure that accounting records are kept [note 35]. Although the requirements of the Act do not apply to charitable companies, they are required to keep accounting records by the Companies Act 1985. Trustees of exempt charities do not have to comply with the obligations imposed on non exempt charities but they are still required to keep proper books of account by their relevant regulatory body.
A charity must prepare annual accounts [note 36] and a charity whose gross income or total expenditure exceeds £100,000 in the present or two preceding financial years must have its accounts audited [note 37]. If the gross income or expenditure exceeds £25,000 but does not exceed £100,000, the accounts may be audited or examined by an independent examiner [note 37]. Charities which are companies registered under the Companies Act 1985 must comply with the provisions of that Act regarding the preparation of annual accounts. Exempt charities, if not required to by any other Act to prepare periodical statements of account, shall prepare consecutive statements of account [note 38].
The trustees of a charity must prepare in respect of each financial year an annual report containing [note 39] -
a) such a report by the trustees on the activities of the charity during that year, and
b) such other information relating to the charity or to its trustees or officers, as may be prescribed by regulations.
Where, in any financial year of a charity, its gross income or expenditure exceeds £10,000, the annual report prepared must be sent to the Charity Commissioners within 10 months of the charity's year-end although the Commissioners may agree a longer period. If the charity's gross income or expenditure does not exceed £10,000, the annual report prepared is only sent to the Charity Commissioners if requested by the Commissioners. All annual reports sent to the Charity Commissioners must have attached accounts prepared for the financial year in question [note 40].
Charities which are companies limited by guarantee are also subject to the supervision of the Registrar of Companies. Charitable companies, therefore, have to file annual returns with both the Charity Commissioners and the Registrar of Companies. Charities registered as friendly societies are exempt charities but they are subject to the control of the FSA (see paragraph 59.15). Annual returns, including accounts, must be submitted to either the FSA or the Commission. Charities registered as industrial and provident societies (also exempt charities) are subject to the control of the FSA to whom an annual return must be made (see paragraph 59.20).
A charitable company may be wound up voluntarily or by the court. A charity will be wound up using the provisions of the type of institution it is. For the procedures relating to the winding up of an industrial and provident society, see paragraphs 59.21, for a friendly society, see paragraph 59.16 and for companies limited by guarantee see paragraph 59.57). The winding up of a charity will in practice be very similar to the winding up of any other company and official receivers should therefore proceed with the liquidation in much the same way as normal.
A winding up petition may be presented in the usual way but additionally the Attorney General is given power to present a petition if a charitable company has failed to file annual returns for a considerable period, is inactive or difficulties have arisen over dealings with property [note 41]. The Charity Commissioners (with the agreement of the Attorney General) also have the power to present a winding up petition but only if they have instituted a formal enquiry under the Charities Act 1993, section 8. Before presenting a petition, the Commissioners must be satisfied either that there is or has been misconduct or mismanagement in the administration of the charity or that it is necessary or desirable to act for the purpose of protecting the property of the charity [note 42].
59.50 Distribution of funds in the winding up of a charity
The winding up of a charity will in practice be very similar to the winding up of any other company and official receivers should therefore proceed with a liquidation of a charity in much the same way as normal. The principal difference will be in the distribution of any surplus funds. The memorandum of association of most charitable companies usually provides that on winding up any surplus property should not be distributed amongst the members but should be transferred to another charity. If no recipient charity for the surplus assets has been specified by the members the court will order a cy - pres scheme [note 43]. Cy - pres is a legal doctrine of the Court of equity, it enables the court to amend the donation of a charitable gift which cannot be given to its intended recipient to another similar recipient.
Gifts to a charitable company by testators whether death occurred before or after the winding up order are gifts to the company beneficially and available to the creditors of the company unless the terms of the bequest provided otherwise [note 44].
The Charities Act 1993 contains various offences, including failing to display the charity's name [note 45], supplying false information to the Charity Commissioners [note 46] and failing to co-operate with the Commissioner [note 31]. The Charities Act 1993 provides that no proceedings relating to offences under that act shall be instituted except by or with the consent of the Director of Public Prosecutions. If the official receiver considers that any such offences have been committed, a statement of facts should be submitted to the criminal allegations team in the usual way.
Commonhold associations are companies (limited by guarantee, see paragraph 59.57) set up to allow freehold ownership of individual units in multiple occupancy premises such as blocks of flats, shopping precincts and office blocks [note 47]. For example, in a block of flats, the flats would be individually owned on a freehold basis and the freehold of the common areas such as the staircases, lifts, car park and gardens would be owned by the commonhold association. The flat owners are known as the "unit holders" and the common areas as the "common parts". The unit holders are the members of the company. As a company a commonhold association may be wound up subject to modifications as set out in the Commonhold and Leasehold Reform Act 2002, sections 43 to 56. As unit holders have a vested interest in making sure that their commonhold association does not enter an insolvency procedure these types of insolvencies are not likely to be dealt with regularly by the official receiver.
On the making of a winding up order (excluding any winding up order made on the grounds of public interest [note 48]) the court may make a "succession order" if it thinks it appropriate [note 49]. A succession order would provide for another ("successor") commonhold association to take over and be registered as proprietor of the common parts [note 50]. That would mean that those common parts would not be assets in the liquidation. Few assets may therefore remain in the liquidation apart from any money in the reserve fund [note 51] and (subject to the memorandum and articles and any succession order) the right to levy charges against the former unit holders for sums which should have been charged to them (e.g. for repairs, local authority charges etc). The court may also make an order that the liquidator make the records (or copies thereof) and information available to the successor commonhold association [note 52].
Where the official receiver is liquidator he/she should, as soon as possible, notify the Land Registry (and provide the Registrar with copies of the relevant report or orders) [note 53] of: -
The flats will remain the property of the unit holders and will not feature on the company's statement of affairs unless the commonhold association itself should own one (or more) in its own right.
If no succession order is made the common parts would remain as assets in the liquidation and should be disposed of if a willing buyer can be found.
59.53 Common Ownership Enterprises
A common ownership enterprise is a body, either a company limited by guarantee (see paragraph 59.57), a co-operative society or an industrial and provident society (see paragraphs 59.19 to 59.24), to which the FSA has given a certificate to the effect that it is an common ownership enterprise [note 54]. Only persons who are employed by the body, or any of its subsidiaries, are permitted to be members of the body. The body must be controlled by a majority of the people working for it. The assets must be applied only for the purposes of the objects of the body.
On the winding up of a common ownership enterprise any assets remaining after the liabilities are satisfied are not distributed among its members but must be transferred to another common ownership body or a central fund maintained for the benefit of common ownership enterprises as the members may determine.
59.54 Community Interest Companies
Since 1 June 2005 Community Interest Companies (CIC) can be established under the provisions of the Companies (Audit, Investigations and Community Enterprise) Act 2004 and the Community Interest Company Regulations 2005, and are designed for use by not-for-profit social enterprises. Subject to the specific requirements of the 2004 Act and Regulations, the whole of existing company law and practice is applicable to CICs. A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than giving returns to shareholders. Social enterprises are active in a wide range of markets such as social housing, waste recycling, fair trade, local transport, the provision of childcare and care services to the elderly etc.
To ensure that CICs use their assets and profits for the community interest, CICs have some special features and their own independent Regulator [note 55] (based at Companies House, Cardiff) www.cicregulator.gov.uk (see also Annex A).
To register as a CIC a company must adopt a suitable constitution (established in its Memorandum and Articles of Association) and satisfy (in the opinion of the Regulator) a community interest test, confirming that it will pursue purposes beneficial to the community and will not serve an unduly restricted group of beneficiaries [note 56].
A company may incorporate as a CIC and existing companies, including charities, can convert to CIC status provided they meet the necessary requirements. A CIC can be a private company limited by shares, private company limited by guarantee (see paragraph 59.57) or public limited company [note 57].
A CIC must have a name ending with one of the following designations:
CICs are restricted from distributing profits and assets to their members. The purpose of this “asset lock” is to ensure that the assets and profits of a CIC are either permanently retained within the CIC and used solely for the community purposes for which it was formed, or transferred to another asset-locked organisation e.g. another CIC or a charity. In order to raise investment, CICs limited by shares will have the option of issuing shares that pay a dividend to investors but the dividend payable on these shares will be subject to a cap [note 59].
A CIC must produce an annual “community interest report” to be delivered with its accounts to Companies House and placed on the public record [note 60].
The Regulator is responsible for ensuring that CICs comply with their legal requirements and he/she has various powers, for example to investigate (or appoint someone else to investigate) the affairs of a CIC and he/she may by order remove (or suspend for up to one year pending a decision whether to remove) a director of a CIC. A person who has been removed may not subsequently be appointed a director of the company.
The Regulator may also by order appoint a manager in respect of the property and affairs of a CIC and the order will specify the manager’s functions and powers. Where a manager is appointed, the powers of the company’s directors may be restricted [note 61].
In addition to the Regulator, there is an officer known as the Official Property Holder, who is one of the Regulator’s staff [note 62]. The Official Property Holder’s role is to hold property where the Regulator has made an order vesting that property in the Official Property Holder, so as to safeguard it for the community interest. The Official Property Holder will hold property as a trustee and will hold the property vested in him/her on trust for its rightful owner. The Official Property Holder may release or deal with property that he/she holds so as to give effect to the rights of third parties in that property, or to comply with a request made by the office-holder, including a liquidator, where a CIC is insolvent. Otherwise the Official Property Holder may only release or deal with the property in accordance with the directions of the Regulator.
To complete the set up there is an Appeals Officer who has the power to determine appeals against decisions and orders of the Regulator [note 64].
59.55 The difference between a CIC and a charity
An enterprise cannot be both a CIC and a charity (see paragraph 59.45). A charity may convert to a CIC as long as it meets CIC requirements and has the permission of the Charities Commission. CICs and charities are different types of legal entity. Charities must be established exclusively for charitable purposes whereas CICs can be established for any lawful purpose, as long as their activities are carried out for the benefit of the community. CICs will be more lightly regulated than charities but do not have the same advantages (e.g. tax benefits) of charitable status.
A charity may establish a CIC as a subsidiary, in which case the CIC would be permitted to pass assets to the charity, e.g. a CIC could run a “charity shop” and pass the profits to the charity which owns it.
59.56 Winding up a CIC
A CIC may be subject to all the standard insolvency procedures with some minor amendments. The winding up of a CIC will in practice be very similar to the winding up of any other company and official receivers should therefore proceed with a liquidation in much the same way as normal.
The main differences to note are that: -
In the unlikely situation that residual assets remain after any distribution to members, then these must be distributed as follows [note 71]: -
The Regulator is required to give notice of any direction to the CIC and the liquidator [note 72].
59.57 Companies limited by guarantee
Companies limited by guarantee are mostly formed for charitable, social or non trading purposes. A company limited by guarantee is one whose memorandum contains an undertaking by its members to contribute a specified amount toward the payment of the company's debts and liabilities and the expenses of its winding up if it is wound up while he/she is a member or within one year after he/she ceases to be a member [note 73]. The specified amount may vary for different members and may be calculated by reference to facts which can only be ascertained when the company is wound up. The rest of the company's memorandum is similar to that of a company limited by shares and it states that the liability of its members is limited.
The guarantee given by members of a company limited by guarantee is different from the liability of shareholders for unpaid share capital in that it is not an asset of the company, but a contingent liability of the members to contribute the amount guaranteed if the company is wound up. In the first instance it is the persons who are members at the commencement of the winding up who are responsible for honouring the guarantee [note 74]. Persons who have been members within a year before the commencement of the winding up may also be compelled to contribute if the present members are unable to do so, or if the company's debts exceed the contributions which the present members are required to make [note 75]. Past members are liable to contribute only toward payment of the company's debts incurred before they ceased to be a member [note 76]. No member can be required to make a contribution exceeding the amount undertaken to be contributed by him/her [note 77]. If contributions are required from members, the official receiver should follow the procedure detailed in paragraphs Chapter 58 - Unregistered companies, paragraphs 58.16 to 58.20 relating to making calls on contributories.
All dentists, must be registered with the General Dental Council (see Annex A) Dentists may also be a member of the British Dental Association, the trade association of dentistry. A dentist will only be suspended from practice following the making of a bankruptcy order if the bankruptcy reveals evidence of some related professional misconduct.
Most dentists are self-employed (see paragraphs 59.59 –59.61). Dentists may also be a salaried employee of a dental practice or hospital. Dentists often work in partnerships and the terms of any partnership agreement should be ascertained. Unless the partnership is also subject to a winding up order or bankruptcy orders are made against all the partners the official receiver cannot deal with the partnership business (see Chapter 53, Partnerships, Part 3).
The majority of dentists do a mix of NHS and private dental work and may consequently have several different terms of employment, and sources of income.
Where a dentist is carrying out a mix of work the official receiver should follow the guidance provided in paragraphs 59.58 –59.67
59.59 National Health Service (NHS) – Self employed Dentists
A self employed NHS dentist enters into a contract with the local Primary Care Trust (PCT) in England or Local Health Board (LHB) in Wales to deliver dental services (see paragraph 59.60). The contract is negotiated locally between the dentist and the PCT/LHB. The NHS dentist receives an annual fee from the PCT/LHB and charges standard fees to patients according to treatment received. The annual fee and the work to be done will be part of the negotiation between the dentist and the PCT/LHB.
Self employed NHS dentists fund their own practice, equipment and staff and personal income is the residual from the contract after expenses have been met.
The NHS Business Services Authority (NHSBSA) was set up in 2006 to pay and monitor providers of NHS dental services under the terms of their contract. NHS dentists are required to send to the NHSBSA Dental Practice Division a claim for each course of treatment provided. The claim includes an indication of the amount of money collected from the patient for the course of treatment and an indication of the number of units of activity appropriate to the course of treatment [note 78]. The NHSBSA is responsible for paying NHS dentists monthly and the amount paid is usually their monthly fee allocation based on the annual contract value, less any patient charges collected and reported in claims submitted.
If a bankruptcy order is made against a NHS dentist the Chief Executive of the PCT/LHB should be informed (see also paragraph 4.69). An undischarged bankrupt or person subject to a BRO or BRU may not enter into a contract for general dental care with a PCT [note 79] and where a bankruptcy order is made or the dentist is subject of a BRO or BRU the PCT/LHB may terminate any ongoing contract but this decision is not automatic and the PCT/LHB will consider circumstances on a case by case basis. [note 80].
59.60 Primary Care Trusts and Local Health Boards
PCT’s were set up under the Health Care Act 1999 and they are free standing, legally established National Health bodies that are accountable to their Health Authorities. PCT’s are responsible for securing provision of a full range of medical, dental, pharmaceutical and optical service for local populations in England. All NHS doctors and dentists in England are employed either directly or by contract to a PCT.
LHBs are similar to PCT’s and are free standing statutory bodies accountable to the Minister for Health and Social Services and the Welsh Assembly Government. LHBs receive a substantial share of the NHS budget for Wales, and as such are involved in planning and allocating heath services tailored to their own local population, and then negotiating with hospital trusts, General Practitioner (GP) practices, dentists and other organisations to provide these services. All NHS doctors and dentists in Wales are employed either directly or by contract to a LHB.
59.61 NHS Dentists and money due from/owed by NHSBSA Dental Practice Division
Where a bankruptcy order is made against a self employed NHS dentist the official receiver should write to the NHSBSA Dental Practice Division (see Annex A) to establish whether any money is owed to them by the dentist or if any money is due to the insolvent estate. The NHSBSA Dental Practice Division may owe money to the bankrupt if he/she has been underpaid, if money has been withheld on the instruction of the PCT/LHB or if money is held pending probate in the case of a deceased dentist or where there is a dispute within a practice or the bankrupt has been suspended as a dentist.
Alternatively the bankrupt may owe money to the NHSBSA where he/she has under delivered on the performance as detailed in the terms of contract and the payment has been made or there has been a retrospective amendment to the terms of the contract. There is a significant time delay between payments being made to dentists and activity reports being made available and significant debts can accrue. Additionally the value of patient charges in a month may exceed the dentist’s monthly allocation resulting in money due from the bankrupt.
59.62 Dentists in private practice
In a private dental practice the dentist’s terms of employment will be agreed between the patient and the dentist with no involvement of the PCT/LHB. The private dental industry is an open market with customers choosing which dentist to employ.
To spread the cost of dental treatment many private patients have dental plans with companies that collect monthly payments from the patient on behalf of the dentist who will carry out the contracted work. These contracts are not transferable to another dentist when the dentist ceases to practice and the contract will end and may give rise to either a book debt or creditors claim depending on the terms of the contract and what payments have been made to the dentist. Any dental plan provider should be informed of the bankruptcy of the dentist as a matter of urgency.
The business and accounting records of a private dental practice should be recovered in the usual way (See chapter 10). The accounting records of the dentist should be examined to establish amounts due by patients and the book debt contractor should be instructed to deal with the collection of any outstanding fees (see paragraphs 31.1.4 to 31.1.33). For information on how to deal with patient dental records (see paragraph 59.65).
59.63 Dealing with a patient in the middle of the course
Where a patient is in the middle of a course of treatment with a dentist it may be possible for the bankrupt to arrange for the treatment to be carried out by another dentist. Alternatively the patient should be referred to the PCT/LHB in the case of NHS treatment or where the treatment has been undertaken privately should be advised to seek another private dentist.
59.64 Dealing with the patients (NHS and private)
Where a dentist ceases to practice it is the responsibility of the patient to find another dentist. For patients seeking NHS dental treatment most PCT's/LHBs will give assistance in enabling them to register with an NHS dentist and the official receiver should refer the patient to the PCT/LHB. Where the official receiver has sold the database of a private dentist’s client details it is likely that the individuals concerned will have been transferred to another private dentist.
59.65 Dealing with dental records (applicable to both NHS and private dentists)
Records of dental treatment, are records of dealings between the dentist and patient; no other third party such as the PCT are involved. The British Dental Association advise that the dental records are a record of the dentists work and therefore remain his/her property. Where the dentist’s is ceasing or has ceased to practice the official receiver should collect the dental records as part of the records of the insolvent. Dental records are not required to be passed to the patient’s new dentist as the new dentist will make his/her own record of treatment but where requested by the patient the official receiver can release the records to a new dentist. Records that are not requested by the patient will remain with the insolvent’s business records. Where the dentist has provided treatment that includes an element of NHS treatment the record of that treatment should be kept for two years [note 81]. There is no legal requirement to keep private dental records for any specific period.
59.66 Matters for particular consideration when dealing with dentists
There may be a number of matters requiring the official receiver's consideration should a bankruptcy order be made against a dentist who has recently ceased to practice. These may include: -
a) Drugs - there may be quantities of drugs including controlled drugs and prescription only medicines on the premises. For information about the disposal of drugs including controlled drugs and prescription only medicines see paragraphs 31.6.20 to 31.6.28.
b) Equipment (e.g. the dentists' chair, instruments and x-ray machines) may be considered by the dentist to be the tools of his/her trade and therefore may be claimed as exempt property (see Chapter 30, Part 1). Where equipment is claimed as exempt property to enable the dentist to continue to trade the official receiver should consider obtaining an income payments agreement or income payments order (IPA/IPO) (see Chapter 31.7). It may be possible for a dentist to claim expensive equipment as exempt property e.g. high value x-ray equipment. The official receiver may allow the exemption where a higher return to the estate is likely by obtaining a higher than usual monthly payment by the bankrupt under an IPA/IPO.
c) There may be X-ray equipment which contains a radioactive source. For the disposal of radioactive waste, the advice of the Health & Safety Executive (see Annex A) should be sought.
d) There may be clinical waste which requires disposal. In most cases, the practice will already have collection arrangements, which could be utilised by the official receiver. Alternatively, a contractor registered with the Environment Agency (see Annex A) to dispose of such waste may be used. (see paragraphs 82.10 to 82.21).
e) In the case of a dentist trading privately the database of client’s details may be an asset in the insolvency (see paragraphs 31.10.123 –31.10.128)
The Department of Health operates a helpline which may be able to provide further information if required (see Annex A).
59.67 Sale of database of a dentist’s private patient details
If a private dentist ceases to trade the official receiver may be in possession of a database of details relating to the patients treated privately by the dentist. This database is potentially an asset, which could be sold for the benefit of the insolvent estate.
Normally personal information in a database should not be sold if the individuals have not been told originally that their information could be passed on to other organisations. However, where a business is insolvent, bankrupt, being closed down or sold, the DPA will not prevent the sale of a database containing the details of individual customers, providing certain requirements are met [note 82]. These requirements are detailed in paragraphs 31.10.123 –31.10.128.
The Information Commissioner has published a good practice note on the buying and selling of databases which can be accessed at http://www.ico.gov.uk/upload/documents/library/data_protection/practical_application/buying_and_selling_customer_databases_v2.pdf
All doctors in practice in the UK (including private doctors) are required to be registered with the General Medical Council (see Annex A). There are separate registers for General Practitioners and consultants. A list of all registered medical practitioners is maintained on the General Medical Council website at www.gmc-uk.org and can be accessed via a searchable online database on that site. A bankruptcy order made against a doctor does not preclude him/her from continuing to trade as a doctor. A doctor will only be suspended from practice by the General Medical Council where the bankruptcy reveals evidence of some related professional misconduct.
A doctor in an NHS practice is employed by the local PCT/LHB (see paragraph 59.60). If a bankruptcy order is made, the Chief Executive of the local PCT/LHB should be informed as soon as possible (see also paragraph 4.70) as an individual becoming the subject of a bankruptcy order provides the PCT/LHB with the power to terminate a contract of employment with an individual. Such termination is not automatic and the PCT/LHB will consider the circumstances on a case-by-case basis.
Where a NHS doctor trades as a GP in a partnership with others and ceases to trade it is the normal practice that the remaining partners in the practice take over responsibility for his/her patient's care. In the event that the GP is practising alone the PCT will normally decide whether to 'disperse' the list of patients elsewhere in the PCT's area or whether to advertise for another GP or practise to take on the patients.
All patient records of a NHS doctor belong to the Secretary of State for Health and should a NHS doctor who is in sole practice cease to trade following the making of a bankruptcy order all patient records will be transferred to the local PCT Family Health Care department. The PCT will forward the patients' records to the patient’s new doctor.
In private practice a doctor’s terms of employment will be agreed between the patient and doctor with no involvement of the PCT/LHB. The private medical industry is an open market with customers choosing which doctor to employ.
The primary purpose of making and maintaining health records is the provision of health care to the patient. Private doctors are considered to own the records they make of patient treatment and any records that can identify a patient are confidential between the doctor and the patient and should not be perused by the official receiver. This confidentiality can only be waived with the consent of the patient or where the disclosure of the information is in the overwhelming public interest.
Private doctors are recommended by the British Medical Association (see Annex A) to retain the record of medical for the periods recommended by the Department of Health for NHS doctors although there is no legislative requirement to keep those records. The Department of Health give detailed advice about the storage and retention of NHS records [note 85] which must be retained for a minimum of 10 years.
Patients have the right to access their medical records [note 84] and the records may be required for litigation purposes at any time in the future.
Where a private doctor ceases to practice the patient’s medical records should be forwarded to the doctor who is taking over the care of the patient or where there is no succeeding doctor returned to the patient. The storage of such medical records by the official receiver for the recommended periods would be an onerous task and should be avoided where possible.
The accounting records of the doctor should be examined to establish amounts due by patients and the book debt contractor should be instructed to deal with the collection of any outstanding fees (see chapter 31.1 paragraphs 31.1.4 to 31.1.33). ) The official receiver may encounter difficulties where the bankrupt’s accounting records are incomplete and the amounts due for work undertaken by the doctor are not known. Due to patient confidentiality the official receiver should not peruse any records in relation to a patient, without the patient’s consent, other than to establish whether it contains a time costs sheet to assist in the calculation of outstanding fees. When the bill for outstanding fees has been settled the file can then be returned to the patient or sent on to another doctor at the patient’s request.
59.74 Matters for particular consideration when dealing with doctors
(Amended March 2013)
There may be a number of matters requiring the official receiver's consideration should a bankruptcy order be made against a doctor who has recently ceased to practice. These may include: -
a) Drugs - there may be quantities of drugs including controlled drugs and prescription only medicines on the premises. For information about the disposal of drugs including controlled drugs and prescription only medicines see paragraphs 31.6.20 to 31.6.28.
b) Medical equipment may be considered by the doctor to be the tools of his/her trade and therefore exempt property see Chapter 30 Part 2. Where equipment is claimed as exempt property to enable the doctor to continue to trade the official receiver should consider obtaining an income payments agreement or income payments order (IPA/IPO) (see Chapter 31.7). It may be possible for a doctor to claim expensive equipment as exempt property e.g. high value x-ray equipment. The official receiver should consider allowing the exemption as higher return to the estate may be possible by obtaining a higher monthly payment by the bankrupt under an IPA/IPO.
c) There may be X-ray equipment which contains a radioactive source. For the disposal of radioactive waste, the advice of the Health & Safety Executive should be sought (see Annex A)
d) There may be clinical waste which requires disposal. In most cases, the practice will already have collection arrangements, which could be utilised by the official receiver. Alternatively, a contractor registered with the Environment Agency (see Annex A) to dispose of such waste may be used (see Chapter 82 Environmental legislation, Part 2, paragraphs 82.10 to 82.21).
e) In the case of a dentist trading privately the database of client’s details may be an asset in the insolvency (see paragraph 56.67 and paragraphs 31.10.123 –31.10.128).
The Department of Health operates a helpline (see Annex A) which may be able to provide further information if required.
59.74a Farmers – general (inserted April 2012)
In essence, a farming business may be dealt with by the official receiver, as liquidator or trustee as any other type of business. There are, though, matters requiring particular attention, as follows:
Livestock – care (see paragraph 8.81)
Livestock – realisation or disposal (see paragraphs 31.6.40 to 31.6.44)
Milk – realisation (see paragraphs 31.6.45 to 31.6.47)
Crops – realisation (see paragraphs 31.6.48 to 31.6.49)
Seeds – realisation (see paragraphs 31.6.50 to 31.6.51)
Agricultural charges (see paragraphs 59.74b to 59.74f)
Agricultural tenancy compensation (see paragraph 59.74g)
59.74b Agricultural charges (inserted April 2012)
Under the Agricultural Credits Act 1928 a charge may be created in favour of a bank over farming stock and other agricultural assets owned by a farmer [note 84a]. This is completely separate to the farm itself (i.e., property/land) which may be subject to the usual property charge (see paragraphs 9.101 to 9.107). This Act defines a farmer as any person (not being an incorporated company) who owns or is tenant of an agricultural holding and cultivates the holding for profit [note 84b]. The term farmer can be extended to the plural to include partnerships [note 84c] but companies are specifically excluded from entering into this arrangement.
The charge is registered against the name of the farmer personally and not against any property he/she may own. It may be a fixed or floating charge or both, but a floating charge would crystallise (become a fixed charge) on the making of a bankruptcy order [note 84d]. The intention of the Act is that farmers are free to deal with assets subject to an agricultural charge as they would in the normal course of business. Subject to the terms of the charge, a farmer is usually free to deal with assets subject to a charge (including sale thereof) as long as the proceeds are paid to the bank holding the charge.
(Amended October 2013)
A charge created under the Agricultural Credits Act 1928 must be registered at HM Land Registry Agricultural Credits Department within seven clear days of the creation of the instrument to which the charge relates [note 84e]. HM Land Registry maintains a register of charges [note 84f] and this is available for public inspection [note 84g] on submission of the relevant form www.landregistry.gov.uk/.../ac6.pdf with a fee (currently 50p per name searched). Completed forms may be returned by post only:
Agricultural Credits
Plymouth Office
Seaton Court
William Prance Road
Plymouth
PL6 5WS
DX: 8249
PLYMOUTH 3
Enquiries relating to the form, or the system of agricultural charges generally, may be directed to the above address, or by telephone to 0300 006 6667.
59.74d Failure to register an agricultural charge (inserted April 2012)
A failure to register an agricultural charge does not automatically remove the benefit of the charge to the lender but it will not establish priority over any subsequent charges [note 84h].
59.74e Order of priority of charges (inserted April 2012)
Where an agricultural charge creating a floating charge has been made, an agricultural charge creating a fixed charge on the same property is void whilst the floating charge remains in force [note 84i].
In circumstances where an agricultural charge is created to secure a current account or other advances, and further sums are advanced against this charge they will take priority over a later charge so long as it was not registered at the time the original charge was created, or when the last search of the register was carried out by the bank [note 84j].
The rights of the bank under the agricultural charge in respect of crops on the land shall take priority over the rights of the (separate) mortgagee of the land [note 84k], and the agricultural charge also has priority over a right to distrain for taxes, rent or rates [note 84l].
59.74f Effect of bankruptcy order on an agricultural charge (inserted April 2012)
Where an agricultural charge is created within three months of the presentation of a bankruptcy petition and operates to secure any sum owing to the bank immediately prior to the giving of the charge, the bank concerned can only claim under their charge for the increase in their debt in the period from the creation of the charge to the making of the bankruptcy order (with the remainder being an unsecured debt in the proceedings). If the chargeholder can prove that the farmer was solvent at the date of the creation of the charge then all the debt would be secured under the charge [note 84m].
59.74g Agricultural tenancy compensation (inserted April 2012)
A farmer may be entitled to compensation for early termination of a farming tenancy by a landlord or in relation to the cost borne by the farmer of agreed improvements to the farm during the period of the tenancy. The amount and nature of compensation payable is dependent on the legislation under which the tenancy was granted and [note 84n] may be offset against outstanding rent. The compensation may form an asset in the insolvent estate and the official receiver should take steps realise the compensation in the normal way.
The majority of professional football clubs are operated as limited companies and may be wound up. The principal assets of a football club would appear to be the ground and its players. The ground is often owned by a third party and either leased or rented to the club, or is subject to a mortgage. In the event of insolvency, the value of players is forfeit to the Football League and they can move on a free transfer to other clubs.
A registered social landlord is a housing association or similar non-profit making body that is registered with The Homes and Communities Agency (HCA) (http://www.homesandcommunities.co.uk/). The HCA is the government agency that funds new affordable housing and regulates housing associations in England. A housing association will be concerned with the supply of low cost rented accommodation and is likely to receive a high level of investment of public funds in the form of housing stock and grants.
59.75b Insolvency of a registered social landlord – requirement to give notice
The legislation provides that certain insolvency events, including the presentation of a winding-up petition, should be notified to the HCA (see paragraph 59.75a). Such notice is the responsibility of the petitioner [note 85a].
59.75c Contact with the Homes and Communities Agency
Whilst the official receiver, as liquidator, has no responsibility to serve a notice on the HCA (see paragraph 59.75b), he/she should ensure that they are aware of the proceedings when a winding-up order is made. He/she should also check the status of any moratorium (see paragraph 59.75d) and make enquiries as to the intentions of any manager appointed by the HCA (see paragraph 59.76). Where he/she is asked by a manager to approve proposals in relation to the housing association, the advice of Technical Section should be sought.
59.75d Moratorium on the disposal of land
The legislation provides that certain insolvency events, including the presentation of the winding-up petition, trigger a moratorium on the disposal of the land by the provider (including the liquidator of the provider) without the consent of the HCA [note 85b] [note 85c], but does not affect the liquidator’s ability to disclaim property of the housing association, which disclaimer should be served on the HCA.
Certain disposals are excluded from the provision requiring the permission of the HCA, such as assured tenancies and agricultural tenancies [note 85d], and it is possible for properties to be disposed of to the person who is living in the property [note 85e].
59.75e Period of the moratorium
The moratorium (see paragraph 59.75d) will end (unless cancelled or extended) 28 working days from the date the HCA received notice of the insolvency event [note 85f] [note 85g].
The HCA may extend the moratorium, with the agreement of the secured creditors [note 85h], but must inform the liquidator of such extension [note 85i].
59.76 Appointment of interim manager and manager
During the period of the moratorium (see paragraph 59.75d), the HCA may appoint an interim manager [note 85j] whose role it is to develop proposals, in liaison with the creditors and liquidator [note 85k] [note 85l], to ensure that the housing association’s property stock remains available for social housing [note 85m]. This may result in the appointment of a manager to deal with the housing association [note 85n] [note 85o], and the HCA may provide financial assistance to the housing association during this period [note 85p]. The manager is under the control of the court [note 85q].
59.76A List X sites
(November 2008)
A List X site is a commercial site (i.e. not Government) on UK soil which is approved to hold UK Government protectively marked information marked CONFIDENTIAL and above. The term is equivalent to Facility Security Clearance used in other countries. There are number of businesses in the UK carrying out contracted work on behalf of government departments, including the Ministry of Defence, the Home Office, Department of Health and Pensions and HM Revenue and Customs, on List X sites. Some of these sites contain high-grade encryption equipment and codes.
Should a winding up order be made against a company or a bankruptcy order be made against an individual trading on a List X site it is essential, in the interests of national security, that all protectively marked assets, books, papers and records are protected and not moved without the relevant security clearance (see paragraph 59.76B below).
59.76B Control of List X sites
List X sites have their status granted and monitored by the Defence Equipment and Support Department of the Ministry of Defence (DES) following Cabinet Office guidance.
The recovery of government protectively marked material from a List X site is usually undertaken by DES in conjunction with any other relevant parties.
59.76C Businesses trading from List X sites
It is possible that a business trading from a List X site has other general trade contracts and not just the government contract(s) that has resulted in the List X site status.
A business trading from a List X site may have one or more other List X trading addresses. Similarly a business that has a List X site may have other trading addresses which are not classified as List X as the List X status is site specific (i.e. the site where the contract is being carried out) and not business specific.
59.76D Who to contact when official receiver is notified of a List X site
Should the official receiver become aware that an insolvent is trading, or has traded from a List X site, immediate contact should be with DES by phone to the helpdesk on one of the following numbers informing them of the official receiver’s interest in a List X site:
Advice Centre – 0117 9134378
If contact cannot be made on this number, then the following 2 back up numbers may be used:
Helen Coffin – 0117 9133835
Danielle Smyth – 0117 9133836
For information to be requested during the course of the telephone call see paragraph 59.76E.
For assistance in dealing with computers or hard drives that contain classified information, please ensure that the Advice Centre is made aware of all available information. Available information may be limited at the initial stages, and contact with DES should not be held up to obtain this information.
59.76E Information to be requested
The Advice Centre should be requested to carry out a search to check whether a trading address is registered as a List X site. The official receiver may be asked to provide confirmation of the insolvency prior to the information being provided, and if so, a fax of the insolvency orders and a covering letter should be sent. The appropriate fax number should be obtained on the initial phone call.
The Advice Centre should be requested to provide the following information, which should be easily accessed via the database held:
(a) The nature of the business carried on at the List X site.
(b) Details of the government agency the contract is with.
(c) What type of work the contract relates to.
(d) What classification the information held is (e.g. secret, confidential).
(e) An approximate idea of the number and types of material/documents held (see paragraph 59.76L).
(f) The name and contact details of the security controller and board level contact (see paragraph 59.76F).
(g) The form that the document register takes (electronic or paper) (see paragraph 59.76G).
(h) At a later date, if there is cause to investigate the case, and the contract was with the MoD, the contract should be obtained to ascertain whether there were any breaches of the terms, which may also be reported to the court.
59.76F List X site – nominated individuals
Any business that trades from a List X site, must have nominated people to carry out the following 2 roles:
a) “Security Controller” – The Security Controller is responsible for the security of the information held on the site and should be able to provide the official receiver with all the relevant information regarding information held on the site. The Security Controller is also responsible for maintaining a document register on every List X site (see paragraph 59.76G).
b) “Board Level Contact” – The nominated Board Level Contact is a member of the Board of Directors (when dealing with a limited company) and has overall responsibility for security matters. In a bankruptcy case, this is likely to be the bankrupt.
If the insolvent operated a small business, it is possible that the same person undertook both these two roles.
A document register should be maintained on every List X site which is a record of every document containing classified information, the movement of those documents, and whether or not they have subsequently been destroyed. The document register should always be up-to-date and can be held either electronically or as a hard copy. The official receiver should protect this document until it can be collected by DES (see paragraph 59.76H).
59.76H Procedure for dealing with List X sites
When an insolvency order is made against a business that traded from a List X site, the priority for DES is securing and collecting any material classified as confidential or above. This may result in computer equipment and stock being lost to the estate in the interests of national security. For example, stock may consist of components manufactured for a defence contract, which would need to be collected by DES. The official receiver does not have security clearance from the Ministry of Defence and so should not access any records that are marked as “confidential”, “secret” or “top secret”.
Following initial contact with the DES (see paragraph 59.76D), arrangements will be made for either DES or the local police Special Branch to attend the List X site. The official receiver should allow DES to secure and remove all items relating to the contract. The official receiver will need to work closely with DES to ensure that the interests of national security are protected, and that all items are secured to their satisfaction until collection can be arranged if it cannot be carried out immediately.
In all cases, an inventory of all material and equipment recovered, together with written confirmation of National Security interests will be provided by DES to the official receiver.
59.76J What if security protocols have not been followed?
If it appears to the official receiver that security protocols have not been followed and the security of material classified as “confidential” or above cannot be guaranteed, immediate contact should be made with DES to ensure they are aware of this (see paragraph 59.76D). DES reviews every case individually, and how this is dealt with should be discussed and agreed with DES. The official receiver does not have sufficient security clearance to handle material classified as “confidential” or above, and if material were taken into custody, would acquire responsibility for the security of that information. DES will advise on the best course of action to ensure the safety of material whilst awaiting collection. A situation should not arise where the official receiver incurs costs to secure the material in the interests of national security. If such costs were to be incurred (after agreement with DES), they would be covered by the administration fee and sent to finance section for payment.
59.76K Accounting records stored on computer
Although computers are realisable assets DES should be allowed to remove all computers or hard drives that are known to contain any confidential information relating to the contract, or that have been networked to a computer containing such information. As far as possible sensitive personal data stored on such systems is concerned, the Data Protection Act 1998 exempts such data from the data protection principles if required for the purpose of safeguarding national security.
Whilst businesses are required to store confidential information relating to the contract separately to its financial information, in practice this may not have occurred. This may result in the removal of the insolvent’s computerised accounting records into the custody of DES. Should this happen the official receiver will need to liase with DES to work out the best way to access the accounting records as anyone accessing the material may need to have the appropriate security clearance. It may be necessary to liaise with CUST on how best to deal with this. See Chapter 66 for more information on dealing with computerised accounting records, in particular paragraph 66.7 for the service provided by, and contact details for CUST.
59.76L Types of material that may be encountered on a List X site
59.76M Photocopiers and printers
It should be noted that there is a possibility that confidential information could be held on the internal memory of any photocopier or printer used on the List X site. The official receiver should allow DES to carry out an investigation of the memory on this equipment to establish what, if any, information is stored, and allow such items to be taken into their custody to analyse the information. Such action is a priority to any steps the official receiver should take in his/her capacity as liquidator/trustee to realise the equipment for the benefit of the insolvent estate.
59.76N Back up computer systems
Businesses trading on a List X site are required to back up all information relating to the relevant contract. If there is a back up of a computer system held at another site, the official receiver should liaise with DES as to how best to deal with the recovery of this system.
59.76P General information security issues
Some businesses may hold protectively marked information marked CONFIDENTIAL and above, but not be on List X. Examples of such things may include, personnel data, plans of sites subject to national security, information of a commercially sensitive nature. (See this notice for guidance on different security markings likely to be encountered, and the level of security needed http://intranet/CWS/Resources/Security/Protectivemarking.htm). Official receivers are reminded that it is likely accounting records will often contain some personal information, and responsibility for identifying and protecting this information will initially lie with the collecting officer.
59.77 Nursing and residential care homes (amended October 2013)
If an insolvency order is made against a nursing home wherever possible, the official receiver should seek the early appointment of an insolvency practitioner to act as liquidator or trustee, or where a charge exists over the company's assets that was created pre 15 September 2003 to consider approaching the charge holder to appoint an administrative receiver (see Chapter 56, Alternative Corporate Proceedings, Part 2).
If the official receiver decides to close down a home, he/she should contact the local social services and/or health authority with a view to those agencies finding alternative accommodation for the residents before this occurs, wherever possible. Wherever possible this should be completed promptly but care should be taken not to cause unnecessary disturbance or upheaval to the residents who may be elderly or confused. No guarantees should be given as to whether the home meets the necessary fire, health and safety and medical regulations, as if the home does not meet such regulations the local health authority must ensure its closure.
The official receiver should in any case contact the local health authority and the Care Quality Commission where the home is in England (http://www.cqc.org.uk/) or the Care and Social Services Inspectorate Wales (CSSIW) (http://wales.gov.uk/cssiwsubsite/newcssiw/aboutus/contactus/location/;jsessionid=BB53A9A396FB13B0012DD88B0F826DD2?lang=en) where the home is in Wales.
59.77a Pawnbrokers – general (inserted September 2012)
Pawnbrokering is, in essence, the act of lending money against an item, which is then surrendered to the lender and subsequently sold if the borrower does not repay the loan and interest within the agreed period.
The activity is tightly regulated by legislation [note 97] [note 98] [note 99].
The lender is known as the pawnee; the borrower is the pawnor and the item given up in return for the loan is the pawn, or pledge. A pawn receipt is given for the item surrendered [note 100]. Repaying the loan and getting the item back is known as redeeming the pledge.
Guidance on dealing with a insolvent’s items held by a pawnbroker is contained within paragraphs 31.0.47a to 31.0.47f)
59.77b Dealing with a pawnbroker – general (inserted September 2012)
It is likely to be appropriate to seek the appointment of an insolvency practitioner as liquidator or trustee where an insolvency order is made against a pawnbroker. If that is not possible, the guidance in paragraphs 59.77c to 59.77l, below, should be followed.
59.77c Dealing with a pawnbroker – storage of items in pawn (inserted September 2012)
Where the official receiver encounters items in pawn it is generally better to leave the items in-situ, so far as is possible. This will avoid the cost of removal and storage. Additionally it will be of assistance when customers wish to redeem the pledges. The benefit of leaving the items in-situ should be weighed against any rental liability for the premises, and, of course, the premises and items should be insured (see Chapter 49).
59.77d Dealing with a pawnbroker – official receiver’s ability to sell items (inserted September 2012)
Generally, a pledge is redeemable at any time within six months after it was taken [note 101]. This is subject to the credit agreement coming to and end before that date [note 102]. On the basis that the credit agreement will be ended by the insolvency order, the redemption period will end and the items may be sold, subject to notice (see paragraph 59.77e).
59.77e Dealing with a pawnbroker – customers to be given opportunity to redeem pledges (inserted September 2012)
Unless the loan amount was less than £50 (in which case see paragraph 59.77i), the official receiver may sell an items after giving the owner no less than 14 days notice of the intention to sell the item (see paragraph 59.77f). If there is no response to the notice, the item should be sold, using agents as appropriate, and a notice of the sale issued to the owner (see paragraph 59.77g).
59.77f Contents of notice of intention to sell pawned item (inserted September 2012)
The legislation provides that a notice of an intention to sell an item under pawn should contain the following information [note 103] [note 104]:
59.77g Notice to owner of sale of item and the proceeds and expenses (inserted September 2012)
The official receiver is required to give notice of the outcome of the sale of the item to the owner. Such notice (see paragraph 59.77h) must be given within 20 days of the sale [note 105] [note 106] [note 107].
59.77h Contents of notice of sale of pawned item (inserted September 2012)
The legislation provides that the notice of the outcome of the sale of a pawned item must contain the following information [note 108].
59.77i Sale of items where loan was less than £50 (inserted September 2012)
Where the loan (or running account) was/is less than £50, the seller is not required to give notice of the intention to sell the article. (see paragraph 59.77g) [note 109].
59.77j Dealing with the sale proceeds (inserted September 2012)
Where the sale proceeds of a pawned article are greater than the amount of the loan outstanding and the costs of sale, the proceeds should be paid into a suspense account. Any surplus proceeds (after repayment of the loan and payment of costs of sale) are due to the pawnor of the article. The surplus should be paid to the pawnor by cheque from the suspense account. Fees are only chargeable on the loan and the costs of sale and should not be charged on the surpluses paid to the pawnors.
Once any surplus has been paid the balance should be transferred to the estate account.
59.77k Dealing with any shortfall following sale (inserted September 2012)
If, following the sale of a pawned item (see paragraph 59.77d), there is any shortfall in relation to the amount due under the agreement the official receiver should instruct The Service’s book debt collection agents as appropriate (see Chapter 31.1) [note 110].
59.77l Identifying the owners of pawned property (inserted September 2012)
Pawnbrokers must keep such books or other records as are sufficient to show and explainreadily at any time all dealings with pawns taken by them [note 111]. Assuming adequate records have been maintained, the official receiver will be provided with a list of both the items in pawn and their owners, and the amount of credit secured by the pledge.
If the records have not been kept then the official receiver should seek the guidance of Technical Section
The official receiver is most likely to become involved if a bankruptcy order is made against a sub post master/mistress (see paragraph 59.79) or where a post office shares premises with a business that goes into liquidation/bankruptcy (see paragraph 59.80).
59.79 Bankruptcy of a subpostmaster/mistress
(Amended December 2009)
Subpostmasters/mistresses are not employees of Post Office Limited but operate as agents under contract to provide a service.
Bankruptcy, in itself does not prevent a subpostmaster/mistress from continuing to provide that service, although he/she has to provide premises, and if the shop premises in which the sub post office is located is to be closed down he/she would be unable to continue using those premises. If the subpostmaster/mistress lives at the premises, he/she must be able to have access to his/her living accommodation, but wherever possible the business premises must be secured.
If a bankruptcy order is made against a subpostmaster/mistress, Post Office Limited Audit Team should be contacted. Where possible the sub postmaster/mistress should be asked for the name and telephone number of their contact within the Post Office as this will save time tracing the relevant manager but if this is not possible the Post Office Audit Team should be contacted by Fax on 01622 777046 giving the name and address of the bankrupt and the business address. The Post Office operates a Help Line (Tel: 08457 223344) which may be able to assist in obtaining a contact at Audit Team. The Audit Team will send a representative to the sub post office to identify Post Office property and remove Post Office cash and other property. The Post Office's primary aim is likely to be the continuance of the Post Office service. In the meantime the business should be closed down and the assets secured and protected.
Where a bankruptcy order is made against the individual who is running the Post Office business there is a convention that everything "behind the grille" is the property of the Post Office, the rest being the insolvent's property. This is not necessarily correct, as a subpostmaster/mistress may also be operating another business within the same premises and keep high value items, such as cigarettes, behind the grille where they are more secure, and Post Office stationery etc., which is of little value, may be stored elsewhere.
It is possible that the Post Office property at the premises is not insured, as many insurance companies are unwilling to provide cover, as sub post offices can be vulnerable to robbery. If the official receiver requires insurance, the official receiver should make the insurers aware that the premises contain a post office (see Chapter 49: Insurance, Part 3).
59.80 Post office sharing insolvent's premises
Where the post office share premises with an insolvent business but is not part of the insolvent business the official receiver should consider the terms of the post office's agreement to occupy the premises. If the post office has a right to occupy the premises and conduct a business this business should not be impeded. The official receiver should consider how to permit the post office to operate whilst protecting any assets belonging to the insolvent business and insuring against any public liability claim.
59.81 Public houses and other establishments that supply alcohol and late night refreshments/food (amended October 2013)
All establishments that supply, for consumption on or off the premises, alcohol at any time, or hot food after 11pm and before 5am must be licensed to do so by a local authority [note 85] [note 85a]. It is an offence to provide these services without a valid premises licence [note 85b]. The holder of the premises licence can be an individual, company or partnership [note 86].
Additionally the premises must have a ‘designated premises supervisor’, a natural person (an individual, not a company or partnership) who must hold a personal licence [note 87]. The premises licence holder and the designated premises supervisor can be the same person [note 87a] - for example, a publican in a free house (see paragraph 59.82) but in tied houses (see paragraph 59.82) the premises licence holder is likely to be the brewery and the designated premises supervisor the manager or tenant.
Further information regarding licensing can be found by following this link:
http://www.homeoffice.gov.uk/drugs/alcohol/alcohol-licences/
59.82 Management of public houses
Public houses in Britain are generally designated as either a free house, where there is no obligation on the pub to buy beer from a particular brewery or a tied house where the pub must buy the majority of its stock from a particular brewery.
A tied house maybe rented from the brewery under a tenancy agreement or the brewery may appoint a salaried manager to run the pub it owns, this form of tie is sometimes called a managed house. A tied pub may also be owned by the publican with the purchase of the pub made by loans from a brewery from which the publican is required to purchase beer in return.
A free house is a pub that is free of the control of any one particular brewery. But "free" in this context does not necessarily mean "independent". Many free houses are not independent family businesses but are owned by large pub companies. There are very few truly free houses, either because a private pub owner has had to come to a financial arrangement with a brewer or other company in order to fund the purchase of the pub, or simply because the pub is owned by one of the large pub chains.
Where an insolvency order is made against the proprietor of a public house the official receiver will need to establish the basis on which the public house trades and the extent of the involvement of a brewery.
59.83 Bankruptcy of a designated premises supervisor (holder of a personal licence) (amended October 2013)
Where a bankrupt is operating as a designated premises supervisor as the holder of a personal licence (see paragraph 59.81), the official receiver need not take any action in respect of the licence or the premises at which the bankrupt is the supervisor. This is because the licence is personal to the bankrupt and does not vest in the trustee of his/her estate. Where the bankrupt holder of a personal licence is also the holder of the premises licence (see paragraph 59.81), the advice in paragraphs 59.83a to 59.84a should be followed.
59.83a Insolvency of the premises licence holder – effect (amended October 2013)
If the holder of a premises licence (see paragraph 59.81) becomes insolvent the licence lapses [note 88] and the business is no longer licensed to provide the licensed services, unless the official receiver, as liquidator or trustee, issues an ‘interim authority notice’ (see paragraph 59.84a).
59.84 Insolvency of the premises licence holder – notification to licensing authority of insolvency (added October 2013)
The official receiver should inform [note 88a] the relevant local authority (see paragraph 59.81) as soon as possible of the insolvency of a premises licence holder. Details of the dedicated email address and telephone number for licensing applications can be located on the web site of the relevant local authority.
59.84a Insolvency of the premises licence holder – continuation of trade (added October 2013)
Where the premises licence holder has become insolvent, the official receiver will need to consider whether the business should be continued (see Chapter 62, Carrying on a business, paragraph 62.7). Within 28 days of an insolvency order a liquidator or trustee is able to issue to the licensing local authority (see paragraph 59.81) an ‘interim authority notice’ in respect of a lapsed premises licence until the licensed premises can be transferred to a third party [note 89]. This involves the liquidator or trustee in taking on the responsibility for the premises licence on a temporary basis and enables trading to continue until the licence is transferred to a third party.
The official receiver may therefore wish to consider the desirability of an urgent application for a Secretary of State insolvency practitioner appointment where it is considered appropriate for the licensed activities to continue (see Chapter 17, Appointment of liquidators and trustees, Part 5).
If the public house is to be closed, the official receiver will need to establish ownership of the fixtures and fittings as charges may exist over the assets. Similarly, stocks (including alcohol) may have been supplied on a sale or return basis. Some agents may sell opened bottles of spirits, but partly used casks of beer are considered to be of no value. If there is food at the premises the official receiver should consider the Food Safety Act 1990 provisions as a person who sells or offers for human consumption food which fails to comply with food safety requirements is guilty of an offence, Guidance on dealing with food is given in paragraphs 31.6.38 and 31.6.39. Gaming machines and juke boxes are likely to be supplied by a third party and arrangements should be made for their prompt collection; the insolvent may be entitled to a share of the takings of such machines so the rental agreements should be examined. Any keys to the cash boxes of such machines should be recovered. There is always a safe in a public house, which should be located, and the contents dealt with. If the landlord lives at the premises, wherever possible, steps should be taken to secure the business premises while still allowing access to the living accommodation.
A winding-up order may be made against an independent school. Information about the independent schools sector can be obtained from the Independent Schools Council (telephone: 0207 766 7070, website: http://www.isc.co.uk/), though this organisation is unable to provide any direct or practical assistance to official receivers should there be a need to close down a school.
Where the official receiver is required to inspect or close down a school he/she should be aware that there are strict rules governing working with children. The official receiver should not be denied access to the school on the grounds that they have not had the relevant Criminal Records Bureau checks, that is that they had not been verified as being fit to work with children by the Criminal Records Bureau, as staff will not be required to work directly or alone with the children. To avoid any difficulties the official receiver should ensure that a member of the school staff accompanies them at all times when in the school premises during school hours. The Children's Safeguards Policy Team, in the Department for Children, Schools and Families (telephone number 01325 391151) should be contacted if any queries are raised about access to the school on child protection grounds.
It is likely that school staff can be persuaded to remain with the children in the company of the official receiver’s staff until such time as the children can be returned to the custody of parents or guardians. That way, in addition to avoiding the need for official receiver’s staff to have sole custody of the children, the return of children can be overseen by school staff to ensure that children are safely reunited with the correct adult. Consideration should be given by the official receiver for an early return of the children to the care of the parents or guardians by arranging for school staff to telephone parents or guardians and ask them to attend at the school premises to collect their children as soon as possible. This may not be practical depending on the number of children in the school and as it may not be possible to contact all parents/guardians during the course of the day and, therefore, it may be necessary for the school to continue until the end of the school day.
In the unlikely event that school staff choose not to remain at the premises then the official receiver should immediately contact the child protection team of the local authority (at county or unitary authority level) and arrange for them to attend at the school premises as soon a possible, as the children would be in a position of increased risk to their welfare. In this respect, it would be prudent for the official receiver to make a call to the relevant child protection team in advance of attending at the school premises to put them on notice that their assistance may be required and give them the opportunity to accompany the official receiver’s staff at the premises in any case.
The responsibility for arranging alternative schooling/education for the children rests with the parents/guardians of the children and, therefore, this is something that need not concern the official receiver directly. The official receiver should consider issuing a letter to all parents and guardians (perhaps when they collect their child) outlining the effect of the winding-up order on the future of the school and pointing them in the direction of the education department of the local authority who can provide advice on the availability of school places in the local area.
Outstanding fees should be dealt with as an asset in the insolvency (where fees are in arrears), or as a debt where fees have been paid in advance.
59.87 Solicitors (amended May 2010)
All practising solicitors in England and Wales must be members of the Law Society which is the representative body for solicitors formed to set standards and ensure good practice. (see Annex A). On the making of a bankruptcy order against a solicitor the official receiver should also notify the Law Society and the Solicitors Regulation Authority (see Annex A) (see also paragraph 4.61). If a bankruptcy order is made against a person who is a solicitor, their practising certificate is immediately suspended [note 90]
59.88 The Solicitor’s Regulation Authority
The regulation of solicitors and their practice is dealt with by the Solicitors Regulation Authority, which was set up in January 2007 to replace the Law Society Regulation Board. It is important that the Resolutions Team of the Solicitors Regulation Authority is informed, in writing, of any bankruptcy promptly as it may wish to intervene in the solicitor’s practice (see 59.89) A solicitor may apply to the Solicitors Regulation Authority to have the suspension of his/her practising licence terminated and may apply in advance of a bankruptcy hearing if the making of a bankruptcy order seems probable. Conditions (such as operating as a partner or in employment approved by the Solicitors Regulation Authority) are usually imposed if a bankrupt solicitor's practising certificate is reinstated. Similar conditions are likely to be imposed on an individual on his/her discharge from bankruptcy.
The Solicitors Regulation Authority obviously has the experience and resources to best deal with a solicitor’s practice. In all cases the official receiver should press strongly for the appointment of an intervenor, and only deal with the practice himself/herself as a last resort. Where no intervention is made and the solicitor still has cases in progress the official receiver may consider an urgent appointment of a trustee with experience of legal practice be sought (see Chapter 17 Appointment of liquidators and trustees).
59.89 Intervention by the Solicitor’s Regulation Authority
The Solicitors Regulation Authority has the power to intervene in a solicitors practice on a number of grounds [note 91]. One of the grounds for intervention is the making of a bankruptcy order and the suspension of the solicitors practicing certificate. Intervention is primarily designed to secure client money and client files in the public interest for the protection of the clients of the particular firm in relation to which intervention takes place. It is not primarily concerned to determine the basis on which the solicitor affected by the intervention should thereafter be entitled to practice.
Intervention has the effect of vesting in the Solicitors Regulation Authority all practice money. The Solicitors Regulation Authority also takes possession of the practice papers, including all client files and documents, all accounting records and financial information, and all money in all client and office accounts. The Solicitors Regulation Authority will then appoint a local solicitor to act as its Intervention Agent.
The Intervention Agent's role is not to continue the practice beyond dealing with urgent matters; the Agent will wind down the practice passing client papers on in accordance with the client's instructions. The Agent will also carry out a reconciliation and verification of the accounts of the practice and will distribute any money held to those beneficially entitled to it.
Subject to any order for the payment of costs made on an application to court any costs incurred by the Solicitors Regulation Authority in connection with the intervention are to be paid by the solicitor and are recoverable as a debt owing to the Solicitors Regulation Authority [note 92]. If intervention had occurred prior to the date of the bankruptcy order then the costs of intervention are a bankruptcy debt. If intervention occurs after the date of the bankruptcy order then the costs of intervention are a post bankruptcy debt for which the bankrupt is personally liable, unless the court orders otherwise [note 92].
(Amended September 2012)
After intervention takes place in a solicitor’s practice, The Solicitors Regulation Authority is entitled to receive monies held by the practice at that time but it is not entitled to collect outstanding money which remains vested in the solicitor. In the event of a bankruptcy order being made against the solicitor, outstanding fees will therefore vest in the official receiver as trustee. If the official receiver collects the fees in respect of outstanding legal debts they vest in the bankruptcy estate but as soon as they are collected they then vest in the Solicitors Regulation Authority until the full costs of the intervention are met (where after the surplus belongs to the insolvent) [note 93] [Note 93A].
The official receiver could collect the outstanding practice debts but it may be that this is not to the advantage of the insolvent estate if the outstanding practice debts are less than the costs of the intervention. If there is no prospect of a surplus after the intervention costs have been paid then the bankruptcy estate has no financial interest in the collection of the practice debts. The Solicitors Regulation Authority will want the debts collected as the deficit in the intervention can then be minimised but has no power to collect the debts. In such circumstances the official receiver could consider:
Appointing the Intervention solicitors as practice debt collectors for the official receiver, as trustee, on the basis that all costs in doing so will be costs in the intervention and will not fall on the official receiver or the bankruptcy estate.
Entering into an assignment of the outstanding practice debts to the Law Society.
It is a fundamental duty of a solicitor to keep all clients affairs confidential. The duty of confidentiality extends to all confidential information about a client’s affairs irrespective of the source of information. The official receiver should not read a bankrupt solicitor’s files as this would breach the duty of confidentiality to the client. The official receiver should consider at all times that the solicitor’s client files are confidential and should be kept securely.
59.92 Client files containing work completed by the solicitor
Where a file contains work undertaken by the solicitor as instructed by the client that has been completed and the final bill has been settled in full by the client the official receiver should take steps to contact the client to arrange collection of the file.
59.93 Client files containing work in progress
59.94 Solicitor retained on a no win no fee basis.
Where a client has instructed the solicitor on a no win no fee basis the file should be returned to the client or sent on to another solicitor on the client’s request.
A person may only carry on business as a scrap metal dealer if registered with the local authority in the area where the scrap metal store operates (see paragraph 59.97) or if he/she has no such store in the area where he/she normally resides [note 94]
A person carries on business as a scrap metal dealer if he/she carries on a business which consists wholly or partly of buying and selling scrap metal, whether scrap metal sold is in the form in which it was brought or otherwise, other than a business in the course of which scrap metal is not bought except as materials or as surplus materials bought but not required for such manufacture.
Scrap metal includes any old metal, and any broken, worn out, defaced or partly manufactured articles made wholly or partly of metal and any metallic wastes, and also includes old, broken, worn out or defaced tool tips or dies made of any of the materials commonly known as hard metals or of cemented or sintered metallic carbides.
A scrap metal store is a place where scrap metal is received or kept in the course of business of a scrap metal dealer.
59.98 Scrap metal dealers records
A scrap metal dealer must keep a book at each place occupied by him/her as a scrap metal store in which should be entered details of all scrap metal received at that place, and all scrap metal processed or dispatched from that place [note 94].This record must include:
For scrap metal received:
For scrap dispatched:
This book must be retained for two years beginning on the day the last entry was made. A scrap metal dealer, if he/she has complied with the law, should therefore have a detailed record to provide to the official receiver of at least current stock. The official receiver should also ensure that any records collected from a scrap metal dealer are not destroyed until at least two years after the date of the insolvency order.
Itinerant collectors, who have no scrap metal store, must also keep transaction receipts for two years [note 95]
Scrap metal is a hazardous product and land that has been used for storing or processing scrap metal may be contaminated land. (see Chapter 82 Environmental LegislationAny area used for storing scrap cars is considered contaminated, as battery and engine fluids may be present. Only a licensed scrap metal dealer can deal with the scrap metal so specialist agents may be required for the disposal of any stock.
If the land poses an immediate risk to persons, property, ecological systems, or is causing the pollution of controlled waters, the person(s) causing the contamination are responsible for making the land safe. If that person cannot be found then the landowner is responsible. In these circumstances the official receiver should consider disclaiming the site. If the land is not causing any immediate risk then normally any future developer of the land will take responsibility for cleaning the land when it is redeveloped.
Advice on the treatment of the site can be obtained from the local authority and the Environment Agency (see Annex A).
Veterinary surgeons are regulated by the Royal College of Veterinary Surgeons (see Annex A) who maintain a register of all persons qualified to practice as vets in the United Kingdom [note 96]. A vet will only be suspended from practice where his/her insolvency reveals evidence of some related professional misconduct.
There may be a number of matters requiring the official receiver's consideration should a bankruptcy order be made against a vet who is still trading, or has recently ceased to trade. These may include: -
a) Drugs - vets often have stocks of drugs for the treatment of animals. For information about the disposal of drugs including controlled drugs and prescription only medicines see paragraphs 31.6.20 to 31.6.28.
Veterinary practices may also hold stocks of Prostaglandin preparations which are used as a muscle relaxant. These preparations are absorbed through the skin and can induce abortion. Therefore, it is advisable that pregnant staff members should not carry out inspections or otherwise attend the premises of a veterinary practice.
b) There may be X-ray equipment which contains a radioactive source. For the disposal of radioactive waste, the advice of the Health & Safety Executive (see Annex A) should be sought.
c) There may be clinical or animal waste which requires disposal. In most cases, the practice will already have collection arrangements, which could be utilised by the official receiver. Alternatively, a contractor registered with the Environment Agency (See Annex A) to dispose of such waste may be used (see paragraphs 82.10 to 82.21).
d) Animals on premises – should be returned to owners if in a fit state to be returned but outstanding bills should be settled first where possible. If not possible to receive immediate payment the animal should be returned to owner and the outstanding bill treated as a book debt.
If an animal is not in a condition to be returned to its owner the owner should be requested to seek the services of another vet. Where the animals owner cannot be located the advice of the RSPCA or the Royal College of Veterinary Surgeons should be sought.
e) If a veterinary surgeon ceases to trade the official receiver will be in possession of a database of details relating to the owners whose animals have been treated by the vet. This database is potentially an asset, which can be sold for the benefit of the insolvent estate (see paragraph 59.67 and paragraphs 31.10.123 –31.10.128).
[Back to Part 3 - Other unusual businesses]