Part 1 Identification of assets
September 2011
Following the making of a winding-up order or bankruptcy order the official receiver should identify and deal with the insolvent’s assets in an appropriate manner.
31.0.3 Companies – identifying the assets
On the making of the winding-up order the functions of the official receiver, as liquidator, include securing and realising the assets of the company [Note 1]. The official receiver should use the information obtained from his/her initial enquiries, Preliminary Information Questionnaire (PIQC), the company director(s), the company’s financial records and third parties e.g. creditors to identify its assets.
31.0.4 Liquidator’s function to realise the company’s assets
Whilst the company’s assets do not vest, the liquidator’s functions include securing the assets, realising them and distributing the proceeds to the creditors [Note 2]. The liquidator (including the official receiver where appropriate) should realise the company’s assets for the best possible price to maximise the distribution to creditors after the payment of the fees, costs and expenses of the liquidation. A failure to fulfil this duty may result in the court ordering the liquidator to pay compensation for the benefit of the estate [Note 3].
31.0.5 A company officer’s duty to co-operate with the official receiver
Company officers have a duty to co-operate with the official receiver and to provide such information regarding the company’s property (amongst other things) as may be reasonably required [Note 4]. The court has the power to order a company officer to deliver up any property, books, papers or records of the company to the official receiver, administrator, administrative receiver, liquidator or provisional liquidator [Note 5].
31.0.6 Bankruptcy – identifying the assets
On the making of the bankruptcy order the official receiver, as receiver and manager, is under a duty to protect the estate until a trustee is appointed [Note 6]. The official receiver should use the information available from the initial contact form (ICON), the statement of affairs (debtor’s petition), the bankrupt’s financial records, an inspection (if conducted), Preliminary Information Questionnaire (PIQB) (if completed), interviewing the bankrupt and information from third parties to identify those assets which comprise the estate and will be available to the trustee.
31.0.7 A bankrupt’s duty to co-operate with the official receiver
A bankrupt has a duty to deliver up possession of his/her estate to the official receiver together with all books, papers and other records in his/her possession [Note 7]. On the appointment of a trustee (which may be the official receiver) the bankrupt has a duty to co-operate with him/her [Note 8]. The bankrupt should also surrender possession of any property, books, papers or other records under his/her control [Note 9]. If the bankrupt does not cooperate see paragraph 31.0.9.
31.0.8 Trustee’s duty to realise the assets for the benefit of creditors
The bankrupt’s assets vest in the trustee in bankruptcy on his/her appointment or upon the official receiver becoming trustee e.g. following the sending out of the notice of no meeting [Note 10]. The trustee/official receiver as trustee is under a duty to realise the bankrupt’s assets for the best possible price to maximise the value of the estate for the benefit of the creditors after payment of the fees, costs and expenses of the proceedings. A failure to fulfil this duty may result in the court ordering the trustee to pay compensation for the benefit of the estate [Note 11].
If a company officer or bankrupt fails to co-operate with the official receiver, an application may be made to the court for an order to examine him/her in court or for property to be delivered up. Further details can be obtained from Chapter 13, in particular, Part 6 which deals with obtaining a court order.
31.0.10 Information held by third parties
A third party may have information about the company or bankrupt which may assist the official receiver in identifying potential assets. If a third party is believed to have information about the insolvent or the insolvent’s business, affairs, dealings or property, the official receiver should seek to obtain such information at an early stage. If the third party does not co-operate the official receiver may make an application to the court for a private examination of the person in question [Note 12], for further information see Chapter 23. The court upon the application of the official receiver may order delivery up of property of the company or bankrupt, payment of monies due or the re-examination of third parties [Note 13].
31.0.11 Information held by third parties - companies
In a liquidation in addition to company officers certain other persons associated with the company, for example, those in its employment, have a duty to give information to the official receiver. Failure to do so may result in a fine for non-compliance [Note 14]. In addition the official receiver may apply for the private examination of the third party [Note 15].
In a number of insolvencies(see paragraph 8.8 for more details) the official receiver should carry out an inspection of the premises of the company or bankrupt. An inspection allows the official receiver to clearly identify and secure any assets, for example land with portable buildings on it, as well as identifying any potential liabilities, such as industrial waste (see Chapter 82 for further information on dealing with controlled or hazardous waste). An inspection may result in the official receiver identifying assets that have not been previously disclosed. Where an inspection is undertaken an inventory should be taken (see paragraph 8.63). The official receiver should follow the advice in paragraphs 8.64 and 8.65 to identify third party property during the inspection. In certain cases, see paragraph 8.12, an agent may be employed to carry out the inspection and/or inventory.
In order to fulfil one of his/her functions the official receiver should seek to identify all the potential assets in a company liquidation or bankruptcy. The realisation of these assets may enable the liquidator or trustee to pay a dividend to the creditors after the payment of the fees, costs and other expenses of the liquidation or bankruptcy.
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