Chapter 36A Distributions (May 2010)

May 2010

Chapter 36A Distributions

Index and introduction

36A.1 Index

This chapter is divided into parts as follows:

Index and introduction (paragraphs 36A.1 to 36A.6)

Part 1  Distribution costs (paragraphs 36A.7 to 36A.18)

Part 2  Distribution procedure (paragraphs 36A. 19 to 36A.35)

Part 3  Problems in paying dividends (paragraphs 36A. 36 to 36A.47)

Part 4  Accounting for future debts, interest and unproved creditors (paragraphs 36A.48 to 36A.54)

Part 5  Final distribution and application of assets in company cases (paragraphs 36A.55 to 36A.102)

Part 6  Final distribution and application of assets in bankruptcy cases (paragraphs 36A.103 to 36A.119)

Part 7  Final distribution and application of assets in partnership cases (paragraphs 36A.120 to 36A.131)

Part 8  Return of capital to contributories or surplus to bankrupt after distribution (paragraphs 36A.132 to 36A.144)

Annex A Summary detailing how to account for assets realised and payments made

Annex B Example of a distribution from joint and separate estates under the The Insolvent Partnerships Order 1994 (IPO94)

Annex C Guidance showing expected hours to be spent on distributions, and rates according to The Insolvency Regulations 1994 (as amended) (IRegs94).


36A.2 General introduction

As explained in Chapter 36, the provisions of the Enterprise Act 2002 (EA2002) enabled The Insolvency Service to make a change to its financial policy at that time. The principle of this change is that creditors will pay for the full costs of the official receiver's administration via a single administration fee funded in part from the petition deposit, and a general Secretary of State's administration fee chargeable only in compulsory insolvencies.  Full details of the fees and expenses charged in both company winding up and bankruptcy proceedings,  and the primary and secondary legislation governing those fees and expenses, are included at Chapter 36.


36A.3 Distribution by means of a dividend

Whenever the liquidator or trustee has sufficient funds in hand for the purpose he/she shall, subject to the retention of such sums as may be necessary to meet the expenses of the winding up/bankruptcy, declare and distribute dividends among the creditors in respect of the debts for which they have proved [note 1] [note 2]. In bankruptcies the  trustee may need to seek the permission of the creditor’s committee to deal with the division of property amongst creditors, where, due to the specific nature or special circumstances of that property, it cannot easily or advantageously be sold.  See Part 4 of this chapter,  paragraph 36A.54  for further information on this.

36A.4 Time and rate fee charged for administration of dividend payments

The administration fee charged to the insolvent’s estate (see paragraph 36A.2) does not include the function of distributing funds to creditors. The change in financial policy introduced from 1 April 2004 provides that the official receiver may charge general remuneration based on a time and rate basis (as set out in the IRegs94 (as amended)) for the activity of distributing funds to creditors. This is applicable to all distributions made on or after 1 April 2004,  irrespective of whether the insolvency order was made pre or post 1 April 2004. This time and rate fee does not include the time spent on returning the petition deposit or paying the petitioning creditor's costs,  for which no separate charge is made.

36A.5  Distribution fee charged pre 1 April 2004

Previously the official receiver charged a distribution fee (i.e. a percentage of the funds distributed) as set out in the IRegs94 (as amended). The Insolvency Amendment (Regulations) 2004 revoked the distribution fee for all cases although this fee, validly charged pre 1 April 2004, should be retained and not rebated, for example.

36A.6 Abbreviations

Where commonly referred to throughout the chapter the following abbreviations have been used:

Legislative Abbreviations


The Companies Act 2006


The Enterprise Act 2002


The Insolvency Fees Order 1986 (as amended)


The Insolvency Proceedings (Fees) Order 2004 (as amended)


The Insolvency Act 1986 


The Insolvency Rules 1986 


The Insolvency (Amendment)Rules 2009/642


The Insolvency (Amendment)Rules 2010/686

IRegs 94

The Insolvency Regulations 1994 (as amended)


The Insolvent Partnerships Order 1994


The Judgments Act 1838


The Partnership Act 1890

Other Abbreviations


Company Voluntary Arrangement


Estate Accounts Services


Financial Services Authority


Financial Services Compensation Scheme


HM Revenue & Customs


Insolvency Service Account


National Dividends Unit


Redundancy Payments Service


Regional Trustee and Liquidator Unit(s)



[On to Part 1 Distribution costs]