BANKRUPTCY PETITION HEARINGS AND TERMINATION OF APPOINTMENT
This part deals with the termination of an interim receiver’s appointment both before, and at, a bankruptcy petition hearing. It also covers the return of the business to the bankrupt where the bankruptcy petition is dismissed.
The appointment of an interim receiver may be terminated by the court on the application of the interim receiver, the official receiver, a creditor, or the debtor [note 1].
The appointment of an interim receiver ceases automatically if the bankruptcy petition is dismissed, or a bankruptcy order is made or if the court by order otherwise terminates the appointment [note 2].
The effect of the termination of the appointment is that the interim receiver, with effect from the time ordered by the court, is discharged from all liability both in respect of any acts or omissions or in relation to his/her conduct as interim receiver.
The official receiver, when acting as interim receiver, should consider whether he/she needs to attend the hearing of the petition or relevant application for the purpose of ensuring that the court is aware that any order made needs to provide for payment of the amount payable by or due to him/her in respect of his/her expenses and remuneration (see Part 4). If the official receiver does not attend the hearing, he/she should lodge a report setting out those details. If the interim receiver’s appointment terminates as a consequence of the dismissal of the bankruptcy petition or otherwise, the court may give such directions as it thinks just with respect to the accounts of the administration or any other matters it thinks appropriate [note 3]. Unless the court otherwise orders, the interim receiver may retain sufficient of the debtor’s property to settle the amount due to him/her [note 4].
The official receiver’s sole purpose in attending the hearing of the petition is to make representations about the amounts due in respect of his/her remuneration and costs whilst acting as interim receiver. The official receiver should not make any representations in respect of the petition itself [note 5]. Although this was decided in a provisional liquidation case, it is also likely to apply to a case where an interim receiver has been appointed. If, however, the judge or registrar asks the official receiver whether there are any matters which he/she considers should be brought to the court’s attention, reference may be made to the debtor’s financial position from information which has been received during the conduct of the case.
It may be useful if the official receiver inquires of the court before the hearing whether he/she will be expected to lodge an account of his/her administration, so that this may be included in any report he/she files [note 6].
If the court finds that a bankruptcy petition was presented containing material non-disclosure relating to the debtor’s affairs, then the court may recall the appointment of the interim receiver. In one case, a provisional liquidator was appointed over the company [note 7]. The company had attempted to give the petitioner banker’s drafts covering the amount of the debt prior to the petition hearing, but this had not been disclosed at the hearing for the appointment of provisional liquidators. The petition was dismissed and the court ruled that the provisional liquidator’s appointment would have been recalled whether or not the petition was dismissed. It is likely that this case would apply if a similar material non-disclosure was to arise in an application for the appointment of an interim receiver.
If the bankruptcy petition is dismissed and the official receiver’s interim receiver appointment is terminated, then a file note should be made of the hearing noting any order regarding costs and the reasons for the dismissal. The official receiver will need to arrange for the return of the debtor’s property to the debtor. The debtor’s bank will also need to be notified in relation to any frozen accounts so that the funds may be released to the debtor subject to any costs the official receiver is entitled to claim from the debtor’s property (see Part 4, paragraph 2A.118).
When the interim receiver’s appointment is terminated there are no legal requirements for the notification to any parties. Unless the termination is on the making of a bankruptcy order (which will be publicised anyway) or the court directs otherwise, the official receiver should send notice of the termination of his/her appointment to any parties already notified of the appointment, as soon as reasonably practicable.
The official receiver does not need to inform Finance Section or Estate Accounting Services when his/her appointment as interim receiver has ceased. The termination of the interim receiver appointment is entered onto ISCIS when a bankruptcy order is made or if the petition is dismissed, which automatically updates the financial systems.
When the official receiver at PIU has acted as interim receiver (see paragraph 2A.8), and a bankruptcy order is subsequently made, the official receiver at PIU will retain the case as a matter of course. Where a local official receiver has previously acted as interim receiver (see paragraph 2A.10), the local official receiver will retain that case on the subsequent making of a bankruptcy order. The bankruptcy should be proceeded with as normal, although the official receiver may have already interviewed the debtor, and gathered sufficient information to refrain from conducting a further interview. An investigation decision will however be needed, which will not have been taken in the interim receivership, which may necessitate a further interview.
When the official receiver is appointed receiver and manager on the making of a bankruptcy order where an insolvency practitioner was previously special manager, it is possible for a Secretary of State trustee appointment to be made in such a case, if there are sufficient assets to warrant such an appointment. Ultimately, it is the creditor’s decision as to whom should be appointed as trustee, but the special manager insolvency practitioner may be appointed if creditors wish.
When a bankruptcy order is made, any interim receivership will terminate and the official receiver will become receiver and manager of the bankruptcy estate [note 8]. The official receiver should, wherever possible, make immediate application to the court for an order [note 9] in relation to all outstanding matters in the interim receivership in respect of which a receiver and manager or trustee needs the sanction of either the court or, where appropriate, a creditor’s committee [note 10] [note 11] (see Chapter 29). This will normally involve legal proceedings or the carrying on of a business. Such an order sanctioning the continuation of matters in relation to which the permission of the court was obtained in the interim receivership should be sought even where the official receiver has been acting in the case, since the change in the nature of office makes further sanction necessary.
[Back to Part 4 – Deposits, indemnities and remuneration]