Role in Investigation, Disqualification and prosecution

June 2000

1.30 Duty to investigate (companies)

The official receiver has a duty to investigate the affairs and causes of failure of a company, and the conduct of the directors or others concerned in the management of the company. The duty to investigate is imposed in the public interest, but is not owed to any particular person or category of persons, e.g. creditors. Section 132 does not prescribe the nature of the investigation to be carried out. (For further details see Chapter 15 - Aims and conduct of the official receiver’s investigations.).

The official receiver has wide-ranging statutory powers to obtain information, material, and explanations, including the power to examine people in court. (See also Chapter 13 Co-operation, Non co-operation and Enforcement of duty to co-operate, Chapter 14 Public Examinations, Chapter 23 Private Examinations and Chapter 47 Disclosure of information (including inspection and production of records)).

Notes: [s132]

 

1.31EA Duty to investigate (bankruptcies)

When a bankruptcy order is made, the official receiver has a duty to investigate the conduct and financial affairs of the bankrupt for the period leading up to his/her bankruptcy, in order to establish the causes of the bankrupt's failure. This may involve inquiries into the bankrupt's affairs over a number of years, but the official receiver will concentrate mainly on the period immediately before and after the bankrupt became insolvent.

The duty to investigate is imposed in the public interest but is not owed to any particular person or category of persons e.g. creditors. Section 289 does not prescribe the nature of the investigation to be carried out.

The official receiver has wide ranging statutory powers to obtain information, material and explanations including the power to examine people in court. (See also Chapter 13 Co-operation, non co-operation and enforcement of duty to co-operate, Chapter 14 Public examinations and Chapter 47 Disclosure of information (including inspection and production of records)).

Notes: [s289]

 

1.32 Powers of inquiry

The official receiver has wide powers of inquiry. Company officers, partners and bankrupts are obliged to attend any requisite meetings and supply information, and they may, if it proves necessary, be publicly examined in court. 

The official receiver also has the power to apply to the court for the private examination in court, of  

  • any officer of a liquidating company/partnership,
  • any person holding property of the company/partnership,
  • any debtor of the company/partnership, or
  • any person who may be capable of giving information concerning the company/partnership.

Notes: [s235 or 291] [s133 or 290] [s236]

At any time after the bankruptcy order has been made, the official receiver may apply to the court for the private examination in court, of 

  • the bankrupt or the bankrupt’s spouse or former spouse or civil partner or former civil partner,
  • any person known or believed to have any property of the bankrupt,
  • any debtor of the bankrupt, or
  • any person capable of giving information concerning the bankrupt or the bankrupt’s affairs.

Notes: [s366]

 

1.33 Use of powers of inquiry

 

The official receiver should rely initially on voluntary co-operation and goodwill during his/her investigation, and only invoke the court’s powers of inquiry when necessary. The official receiver should not threaten to apply to the court for a public or private examination where there is no intention to go through with that. (See Chapter 13 for further details.) If the official receiver, as liquidator or trustee, applies for an examination his/her costs are payable out of the estate unless the court orders otherwise. Where the official receiver applies in some other capacity, no costs order may be made against him/her.

Notes: [r9.6(3) and (5)]

 

1.34 Action when offences suspected

Where the official receiver’s enquiries indicate that criminal offences may have been committed, he/she should prepare and submit a statement of facts to Authorisations Team (AT).

The statement will be considered by AT, who will decide if the case should be referred to BIS’s Legal Services D2.

The official receiver may also have dealings with other agencies, e.g. the Serious Fraud Office or the local police on particular cases.

If the official receiver is unsure about preparing a report he/she should discuss the matter with AT before preparing and submitting a statement of facts.

 

1.35 Action after submission of statement of facts

The submission of a statement of facts changes the basis on which any further investigation is to proceed. Departmental lawyers and investigators, or some other agency, will be responsible for any criminal investigation and/or prosecution. The official receiver must ensure that he/she does not abuse his/her statutory powers in securing admissions or other evidence. The official receiver may continue to examine the records, correspond with creditors, and interview company officers and bankrupts for other purposes, such as asset realisation.

If the official receiver or a member of his staff is asked to make a witness statement, he/she should refer to Chapter 47 regarding disclosure of information. The official receiver should co-operate with any reasonable defence request to interview him/her or his staff.

 

1.36EA Disqualification

Where a company is wound up by the court in England and Wales, the official receiver is the office-holder for the purposes of section 7 of the Company Directors Disqualification Act 1986. Section 7 imposes a duty on the office holder to report matters of unfitness to the Secretary of State. In the first instance that is recorded on the CAR D form on the official receiver’s file, the entry of the relevant date on the Central Index, and the submission of the six monthly return to headquarters. Although the official receiver is under no statutory duty to submit a return where there is no misconduct, he should do so as best practice in all cases.

The report or the return should feature any person involved in the company’s management during the three years prior to the insolvency event. Where unfit conduct occurred prior to that period, the report should run from the date of the first instance of that conduct. The report should include all those who have acted as a director, or have otherwise acted in the management of the company, whether formally appointed or not. See Chapter 15, paragraph 15.52.

Where a report or return is likely to feature a person who was not a formally appointed director, the official receiver should seek guidance in the first instance from AT. Also, where the official receiver is unsure as to whether particular conduct is likely to be classified as unfit, or whether the conduct as a whole is sufficient, in the public interest, to justify the issue of proceedings, AT should be contacted to discuss the matter before carrying out extensive work.

Official receivers may also be asked to proceed with disqualification cases based on an insolvency practitioner’s report in a voluntary liquidation, administrative receivership or administration. In those circumstances no direction to proceed is issued, the official receiver generally taking the case into court himself/herself on behalf of the Secretary of State, who is the named applicant.

The Office of Fair Trading or other specified regulator may carry out an investigation and make an application for disqualification or accept a disqualification undertaking if they suspect that a breach of competition law has occurred (see Chapter 15 paragraph 15.77)

 

1.37 Right of audience [Practice Direction: Directors Disqualification Proceedings]

Official receivers and deputy official receivers have rights of audience in any proceedings to which the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 apply, whether the application is made by the Secretary of State or by the official receiver at his direction, and regardless of whether the application is made in the High Court or a County Court.

Notes: [r10]

 

1.38 [Practice Direction: Directors Disqualification Proceedings]

Evidence in disqualification proceedings is by affidavit, except where the official receiver is the applicant, in which case his/her evidence may be in the form of a report (with or without supporting affidavits/witness statements by others). A report is treated as prima facie evidence of its contents. The official receiver can only file a report where he/she is the applicant. Where the Secretary of State is the applicant, or in a case where the company has been dissolved or where the report is being made in an Insolvency Practitioner's case, the evidence must be by affidavit.

Particular care should be taken over any reports. They should be written in the official receiver’s own words, in plain and concise language easily understood by the defendant. They should state clearly the case which the defendant has to answer. The official receiver should not express opinions but should draw conclusions from the available material.

 

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