The Insolvency Service has a contract for the services of an agent to work on behalf of the official receiver to collect book debts due to companies or partnerships against which a winding-up order has been made, or due to individuals (including members of a partnership) subject to a bankruptcy order. The contract extends to the collection of monies due under income payments orders (IPOs) or income payments agreements (IPAs) antecedent and other collections (as detailed in Annex I of the Service Level Agreement – see paragraph 31.1.4A). Details on IPOs and IPAs is provided in Chapter 31.7 :Income Payments Orders and Income Payment Agreements.
31.1.4A Book debt contractors (Amended July 2012)
The current contract is with Moon Beever Solicitors, of Bedford House, 21a John Street, London, WC1N 2BF, and runs until 7 September 2013. A copy of the Service Level Agreement with Moon Beever can be found on the ORBS pages of the Intranet. Further guidance on the operation of the contract, including using Moon Beever online, is also available on the ORBS pages of the Intranet (Moon Beever Guidance).
Throughout this chapter Moon Beever will be referred to as the contractor.
The contractor undertakes to accept all instructions received from the official receiver for the collection of book debts and IPAs/IPOs regardless of the age of the debts or whether the book debts have been described as irrecoverable by the company director, bankrupt or partner.
The debt collection agreement is exclusive and means that the contractor is the only party that the official receiver can instruct to undertake book debt collections. Where instructed by the official receiver the contractor must undertake to collect, or attempt to collect, those debts on behalf of the official receiver. The official receiver should make no attempt to actively recover book debts other than through the contractor (but see paragraphs 31.1.19 and 31.1.20 for information on cheques in hand, found at the insolvent’s premises or otherwise recovered by the official receiver after the insolvency order).
In the event that a book debtor is represented by the contractor, the contractor will inform the official receiver forthwith and return the responsibility for the collection of that debt to the official receiver. The official receiver should pursue the debt.
Using the contractor means that the official receiver has no need to contact book debtors at the initial notices stage and thus no letters requesting payment should be sent to book debtors by the official receiver.
Book debt collectors may have been appointed by the insolvent prior to the date of the insolvency order. The official receiver has the discretion to retain the services of the book debt collection agent instructed by the insolvent if he/she feels it to be appropriate.
Otherwise, the official receiver should disengage himself/herself from any existing agreement at the earliest opportunity, and instruct the contractor. The official receiver should instruct the existing debt collectors to forward all payments already collected and any supporting documentation held in respect of book debts still to be realised to the official receiver (not to the contractor).
The official receiver can still instruct the contractor to collect the book debts even if the notices have not been issued in a case and he/she is not yet the trustee. If the official receiver feels that the book debts are at risk and should be protected for the estate, the contractor should be instructed to begin the collection process whilst the official receiver is receiver and manager.
Where an insolvency practitioner has been appointed by the court on the making of an insolvency order or has been appointed by the Secretary of State shortly after the order, the contractor should not be instructed by the official receiver as he/she is not the liquidator or trustee.
Book debts become more difficult to collect as time passes and it is important that the instruction to collect the books debts is given to the contractor as soon as possible after the existence of book debts are notified to the official receiver even where it is likely that an insolvency practitioner liquidator or trustee will be appointed at the first meeting of creditors.
The official receiver should use the relevant form [note 1] to instruct the contractor, who will acknowledge receipt of all instructions to the originating office by e-mail within 3 days of receipt. The acknowledgement will be sent to the offices' generic e-mail boxes. If no acknowledgement is received within 4 days, the matter should be pursued with the contractor who will review the situation and respond within 24 hours.
If an insolvency practitioner is subsequently appointed to act as liquidator or trustee the contractor should be informed so that contact can be made with the new office holder (see paragraph 31.1.32).
At the same time as instructing the contractor the official receiver should inform the directors, partners or bankrupt [note 2] of the contractors appointment in order that they can cooperate fully in the collection of debts. If they fail to cooperate with the contractor, the contractor will report this failure to the official receiver.
The contractor will notify book debtors of the official receiver's instruction within 3 working days of receiving such instructions and follow the method of collection agreed in the Service Level Agreement (see paragraph 31.1.4).
If on investigation the contractor considers any book debt irrecoverable notification will be sent to the official receiver within 7 working days and the official receiver may then write off the bad debt.
The contractor will need the following information in every case;
Where this information is not available to the official receiver or where the contractor needs further information, the contractor must be prepared to make further enquiries at their own expense.
Successful debt recovery is dependent on the official receiver supplying the contractor with as much information as possible as early as possible. The official receiver should ensure that when he/she receives any of the following information, after the initial instruction, it is passed to the contractor:
Further useful supporting evidence (from whatever source) about the debts,
Further information provided by the directors, partners or bankrupt.
Documentary evidence in support of the book debts will probably be in the accounting records of the insolvent. Any accounting records needed for the collection of the book debts should be made available to the contractor. A schedule of the records handed over should be prepared and the contractor asked to sign and return a copy of this schedule to the official receiver.
Where practical to do so the supporting documentation should be sent by post to the contractor with the instruction to collect the debts. Where the volume of accounting records is large or it is not practical to send by post or they have been placed in remote storage the official receiver should liaise with the contractor to arrange collection. Where possible a schedule of documents and papers should be forwarded to the contractor to avoid a wasted journey. The contractor is responsible for ensuring the safety of documentation which is passed over in this manner and will return it to the official receiver or remote storage at the end of the debt collection process. The remote storage facility may require a letter of authority before they release the records to the contractor and this should be supplied by the official receiver.
Where the accounting records are held electronically the official receiver should contact the contractor to ensure that they can access the information in that form.
In ongoing prosecution or disqualification cases the official receiver may wish to retain the original records. Photocopies of the relevant records should be made available to the contractor where practical or the contractor be granted access to the records while they remain in the official receiver's possession.
The accounting records remain the property of the liquidator or trustee. If the official receiver requires the return of the insolvent’s books and papers he/she should contact the contractor to request this.
Where book debtors are limited companies information about their status can be found at Companies House. Where the official receiver has had cause to check for information on a limited company book debtor via Companies House Direct, such information should be forwarded to the contractor to assist them in the debt collection.
No longer applicable
Every three calendar months following the commencement of the contract, the contractor will supply each official receiver with an exception report, copied to the contract manager detailing;
The contractor will additionally notify each official receiver once the book debt collection has been completed. The contractor also provides an online enquiry facility which allows access to cases for monitoring progress and to provide instructions online. This can be accessed via the website www.moonbeever.com. Each official receiver's office and RTLU has a login account and password to allow access.
If the official receiver recovers cheques from the business premises of the insolvent or if they are handed over at interview by the bankrupt/director, they should be banked as normal and the official receiver’s usual fees charged if the contractor has not yet been instructed. The official receiver must take steps to ensure that the instruction to the contractor does not then include the debt(s) which have already been paid. If the contractor has already been instructed, they should be notified of the remittance received by the official receiver . The contractor will not be entitled to the usual commission if the remittance to the official receiver does not result from any action on their part.
Occasionally, a book debtor may remit payment for a debt direct to the official receiver notwithstanding the fact that he/she has been requested to pay the contractor. Where the official receiver is satisfied that the remittance is as a result of the action of the contractor, e.g. a letter sent to the book debtor requesting payment, the contractor is entitled to his/her commission on that debt. The official receiver should inform the contractor of the remittance so that he/she does not continue to pursue the debt and bank the cheque. The contractor will deduct his/her commission on that debt from other receipts in the accounting to OR Banking (see paragraph 31.1.33).
Where an insolvency practitioner is appointed the official receiver should inform the contractor of his/her appointment [note 3]. The contractor will account for any monies in their hands at the date of the handover direct to the insolvency practitioner and forward a copy of the account to the official receiver.
It will be a matter for the insolvency practitioner after appointment to determine whether the contractor will continue to collect the book debt and on what terms.
Where a case is transferred internally within The Insolvency Service or to another court after initial instruction, the contractor should be informed of the transfer.
At the time of an insolvency order, the insolvent may have ongoing legal proceedings against book debtors. The contractor may still be able to assist the official receiver by arranging for the recovery of files from solicitors to be considered by its own legal advisors as to the merit of pursuing the matter. Whilst it is rare for any legal work to be worth continuing, especially in bankruptcy cases, there may be an approach to the official receiver to assign the rights of action. The contractor will consider the advice from their legal advisors on the collectability of the debt and suggest a course of action to the official receiver. If this course of action involves legal action, the contractor will need to be funded to pursue the debts. An estimate of the likely future expenditure will be provided by the contractor and the official receiver should then consider contacting the principal creditors to ask for funding prior to instructing the contractor to issue legal proceedings. (In practice it is likely that such cases will only be taken forward by insolvency practitioner trustees and liquidators) (see paragraph 31.1.30). If any legal files in respect of book debts have already been passed to the official receiver, these should be forwarded to the contractor with the initial instruction or as soon as possible thereafter.
The contractor may consider a compromise to be more productive than taking proceedings against a book debtor. Where a book debtor suggests a compromise i.e. admits to a level of debt but offers a payment less than that, the contractor will have discretion to accept this compromise where the debt is less than £3,000. Where the debt exceeds £3,000 the contractor will refer the matter to the official receiver within seven working days with their advice as to whether the offer is acceptable or not.
Where there is full admission of a debt by any book debtor who then offers to pay the full sum in instalments, the contractor may exercise their discretion as to whether to accept the proposals for settlement. All such matters should be reported to the official receiver within seven working days of their acceptance.
Where the book debtor is overseas the contractor may, in appropriate circumstances, pass details of the debt to a local agent for recovery. Inevitably this will lead to a greater commission being charged by the contractor and the contractor will liaise with The Insolvency Service contract manager in advance to agree the fee payable.
Where a book debtor cannot be found the contractor will decide whether to trace the book debtor. Any additional costs (see paragraph 31.1.34 for limits of these costs) incurred in tracing the book debtor will only be charged to the estate if the debtor is found and the debt recovered. These costs are in addition to the usual commission charged by the contractor.
The decision to discontinue the collection of a debt and return the debt to the official receiver uncollected rests with the contractor. This decision is not affected by the size of the debt.
The contractor will inform the official receiver that in his/her opinion the debt is irrecoverable within seven working days. The official receiver will review the situation but in practice it is unlikely that the official receiver will take further steps to recover a debt where the contractor considers it irrecoverable and the debt will be written off.
Where a book debtor becomes subject to any insolvency proceedings the contractor will contact the insolvency practitioner to register the official receiver's interest as a creditor and ascertain whether any dividend is likely to be paid. The contractor will lodge a claim in the proceedings on behalf of the official receiver and the collection of the debt can then be treated as concluded by the official receiver.
If a dividend becomes payable at a later date the contractor will be entitled to his/her commission on the dividend.
If the contractor believes that there is a good chance of recovering a book debt, but cannot progress the recovery without funding, e.g. to commence legal action, all relevant details should be supplied to the owning official receiver or RTLU. The official receiver will consider the request for sanction to institute legal proceedings within six weeks of receipt during which time creditors may be consulted
The official receiver will decide whether or not to ask the creditors of the estate if they are willing to fund the action. If the official receiver decides not to refer the matter to creditors, or if he/she does so and the creditors are not willing to fund the action, the matter will be concluded.
If the creditors are willing to fund the action, on receipt of the funds, the official receiver may instruct the contractor, in writing, to continue with the recovery. The contractor will act as solicitors on behalf of the official receiver and they will be entitled only to recover their legal fees not the fees they would be entitled to as collection agents (see paragraph 31.1.32).
Alternatively, the creditors may choose to appoint an insolvency practitioner as liquidator or trustee of the estate to deal with the matter. The official receiver should notify the contractor of the appointment. It will then be up to the insolvency practitioner to decide whether to continue with the recovery and whether he/she will continue to use the contractor to recover the book debts.
When the contractor has completed collection activity in respect of the book debts, the official receiver will be informed in writing. In the meantime, the official receiver can progress of collection via the contractor’s website www.moonbeever.com
The contractor has agreed a fees structure and no fee is payable where no realisation has been made. In addition where a book debt payment is recovered by the official receiver and the payment is not the result of any action taken by the contractor no fee is payable (see paragraphs 31.1.20 and 31.1.21).
Where the average value of each debt in a case is £9.99 or less, subject to the official receiver's agreement that the case is one that falls into this category, a flat rate fee of £1 plus VAT will be payable on each debt recovered. On other book debts the fee is fixed at 5% of the realised sum plus VAT.
Fees will include disbursements except where,
Where collections are made outside the UK the contractor will liaise with the contracts manager to agree a fee in advance of any collection action.
Where the contractor is instructed to take legal action on behalf of the official receiver their fees will be covered by a standard conditional fee agreement provided that,
A new agreement is required for each piece of litigation.
All money collected by the contractor on behalf of the official receiver must be placed into a global dedicated client account in the name of The Insolvency Service and remitted weekly by CHAPS to Estate Account Services (EAS) net of fees charged. Each remittance is accompanied by an electronic statement giving details of the case and a breakdown of money collected and fees charged. This statement will be copied to the Contract Manager.