February 2013
FAQs – Sundry Assets
These FAQs aim to assist official receivers in giving a brief overview of the subject, but for full information they must be read in conjunction with the more detailed guidance given in the main body of the Technical Manual chapter. Links to the chapter relevant to the FAQs are included below. Links to other Technical Manual chapters containing related information can be found on the Front Page for this chapter.
Household and personal effects
Can a bankrupt’s personal pet animal be realised as an asset?
The official receiver is able to arrange for a bankrupt’s pet animal to be sold but is unlikely do so unless it would benefit the estate. It is highly unlikely that selling a pet would benefit the estate, unless it has a good pedigree, see paragraph 31.10.18.
What is the first stage in selling a pet animal?
In the unlikely event that the official receiver decides a bankrupt’s pet does have a realisable value, as a first step enquiries should be made to establish whether the bankrupt wishes to introduce a third party to make an offer to buy the animal. See paragraph 31.10.18 for further information and the procedure to follow.
Can a bankrupt’s wedding ring be realised?
Yes, if the bankrupt no longer wishes to retain the ring or where its value is significantly higher than most simple gold bands. In most cases it is unlikely that it will be appropriate for the official receiver to claim a wedding ring as an asset in the bankruptcy. Where a ring is of a high enough value to be sold, the bankrupt should be given sufficient funds from the sale proceeds to purchase a simple gold band as a replacement. Further guidance on the subject can be found at paragraph 31.10.17.
Can the official receiver realise an engagement ring given by the bankrupt to his/her fiancé(e)?
Yes, although the ring must be of sufficient value to warrant the costs involved in any sale and the official receiver should not take engagement rings as a matter of course. In principle an engagement ring constitutes a gift conditional on the marriage or civil partnership taking place, so the ring does not pass as property to the recipient until the marriage has taken place. If the ring is of sufficient value to realise, it may be possible to effect a sale of the ring to a family member or other third party introduced by the bankrupt. Further guidance on the subject can be found at paragraph 31.10.16.
Can the official receiver realise an engagement ring received by the bankrupt?
Yes, however the ring must be of sufficient value to warrant its sale costs. Official receivers should not take engagement rings as a matter of course. The general principle is that an engagement ring constitutes a gift conditional on the marriage or civil partnership taking place – therefore the ring does not pass as property to the recipient (the bankrupt) until the marriage/civil partnership has taken place, so cannot be realised where they remain engaged only. The date of the marriage/civil partnership is key as follows:
It may be most cost effective to sell the ring to a family member or other third party introduced by the bankrupt. Further guidance on this subject can be found at paragraph 31.10.16.
What happens if the bankrupt’s fiancé(e) bought the engagement ring?
Before the marriage/civil partnership the engagement ring will belong to the fiancé(e)/proposed civil partner, where they can prove they provided the funds to purchase the ring, so it cannot be realised as an asset in the bankruptcy. After the marriage/civil partnership the ring then belongs to the recipient of the ring (i.e. Bride/Groom/Civil Partner). The ring can be realised where it is of sufficient value to warrant the costs of sale, but official receivers should not take engagement rings as a matter of course. It may be possible to effect a sale of the ring to a family member or other third party introduced by the bankrupt. Further guidance on the subject can be found at paragraph 31.10.16.
What do I need to do when I take possession of any jewellery/high value item(s)?
Where jewellery or any personal/high value item(s) are delivered into the official receiver’s possession, a written receipt must be issued to the person delivering up the item(s), detailing all item(s) collected. It is accepted that the collecting examiner/officer may be unable to verify the exact material or quality of the item received, so the description should be phrased in general terms e.g. “Yellow metal ring, said by X to be gold, set with three clear stones, said by X to be diamonds”. For further details see paragraph 31.10.15, see also the Estate Accounts advice on the Intranet regarding "Cash and valuables handling guidance".
Can the official receiver realise personal or household items claimed by the bankrupt as a domestic requirement?
Whilst generally furniture and provisions required to satisfy the bankrupt’s domestic needs would not be claimed in the bankruptcy, valuable items, such as antique furniture, might be claimed by the trustee as exempt property of excess value (see Chapter 30 Exempt Property). In considering whether a realisation of such items is viable, the cost of providing a reasonable replacement should be factored in. For further information see paragraphs 31.10 11 to 31.10.13.
Can the official receiver realise the bankrupt’s personal correspondence?
No. Although it would appear that personal correspondence falls within the definition of property this point was considered in the case of Haig v Aitken [2000] 3 WLR 1117 where it was ruled that personal correspondence, whatever the subject matter, does not form part of the bankrupt’s estate within the definitions of the Insolvency Act 1986. See paragraph 31.10.22 for further information.
What if the personal correspondence relates to affairs relevant to the administration of the bankruptcy estate?
Even if the personal correspondence is relevant to the insolvency proceedings the ruling in Haig v Aitken [2000] 3 WLR 1117 still applies, it does not form part of the bankrupt’s estate (see paragraph 31.10.22 for further information).
What happens if the official receiver is unable to sell an asset belonging to a company in liquidation or vesting in him/her as trustee?
Generally, where an asset is considered to be unsaleable it should be disclaimed as soon as possible. An alternative is to sell the item to the directors of a company in liquidation or a relative of the bankrupt for a nominal sum. For further details, guidance and other options see paragraph 31.10.43.
Aircraft and boats
Where can I check if a bankrupt is the owner of an aircraft?
The CAA (Civil Aviation Authority) maintains a register of aircraft registered in the United Kingdom, which is available for anyone to inspect (see paragraph 31.10.3)
Can I sell an aircraft registration mark (like a personalised car number plate)?
No, an aircraft registration mark can only be used once and cannot be applied to any other aircraft. See paragraphs 31.10.2. to 31.10.4.
Who needs to be informed where the official receiver decides to sell an aircraft?
The CAA must be informed of any change in the ownership of an aircraft, and notification of registration must be completed within 28 days of the change. The original Certificate of Registration must be returned to the CAA or the CAA should be notified using the Address Change Form available on their website, see paragraph 31.10.8.
Where can I check if an insolvent is the owner of a sea-going ship or boat?
The UK Ship Register (maintained by the MCA – Maritime and Coastguard Agency) may assist the official receiver in ascertaining the owner of a particular ship or boat. An application to search the register can be submitted to the relevant MCA office (see paragraph 31.10.28)
How do I sell a sea-going ship/boat or shares in a ship/boat?
To sell a ship or boat, or shares in a ship or boat, a bill of sale will need to be produced to the Registry of Shipping and Seamen in the prescribed format available on the Registry’s website (see paragraph 31.10.30 for details and a link to the form).
Where can I check if an insolvent is the owner of a vessel held on a UK inland waterway?
The Environment Agency operates a registration scheme for boats using inland waterways over which it has responsibility. This includes most of the UK’s navigable rivers and the Royal Military Canal through Sussex and Kent. See paragraph 31.10.34.
What about boats on canals in England, Wales and Scotland?
The Canal and River Trust (England and Wales) and Scottish Canals (British Waterways trading as) administer and maintain canals in England, Wales and Scotland. They are responsible for issuing licences, detailing boat owners and registering changes of ownership. See paragraph 31.10.35 for full details.
What do I do if the insolvent owns a boat in the Lake District or on the Norfolk Broads?
Where a boat on Lake Windermere is to be transferred, sold or otherwise disposed of, the official receiver (acting in place of the registered owner) has a legal obligation to notify the Lake Windermere registrar within 14 days of the change. See paragraphs 31.10.31 to 31.10.32.
Any boat kept within the Norfolk Broads Authority’s navigation area for more than 28 days must be registered with the Broads Authority. Any change of ownership must be notified to the Broads Authority by the buyer and seller. See paragraph 31.10.33.
Share capital
Should the official receiver pursue unpaid share capital?
Yes - where there is a substantial sum outstanding, this should be recovered, however this must be balanced against the contributories’ ability and/or costs involved in pursuing payment. The official receiver may take court action to recover unpaid share capital if necessary; see paragraph 31.10.36 and paragraphs 31.10.37 to 31.10.40 regarding settling the list of contributories in order to pursue unpaid calls.
Can the official receiver seek contributions from contributories in unregistered companies?
Yes - the procedure for seeking contributions in unregistered companies is very similar to that in registered companies, see paragraphs 31.10.36 to 31.10.41. Further detail is provided in Chapter 58 “Unregistered companies”, paragraphs 58.16 to 58.20.
Intellectual property and other intangible assets
What is intellectual property?
Intellectual property is the legal right associated with creations of the mind, e.g. artworks, inventions etc. Formal systems exist to protect the legal rights associated with these creations, e.g. copyright, design right, patent and trade mark. Literary, dramatic, musical and published works are covered, as are sound recordings, films, broadcasts and computer programs. All information relating to intellectual property and intangible assets is now available in Chapter 31.10 Annex 1.
Can the official receiver collect income relating to copyright, recording or performance rights owned by an insolvent prior to insolvency?
Yes, copyright is an asset, therefore existing copyright relating to any work created by an insolvent prior to the making of an insolvency order vests in the estate of the insolvent. See Chapter 31.10 Annex 1 paragraphs 15 to18.
How do I know if copyright still applies?
In the UK the length of time for which copyright protection is afforded is dependant on the nature of the work as follows:
For further information see Chapter 31.10 Annex 1 paragraph 6.
How do I check who owns a copyright on which royalties are due?
Various different societies and organisations exist to collect royalties on behalf of people and organisations holding copyrights, according to whether the company or individual created, performed, recorded or published the work. Full details of all the relevant organisations and who they represent can be found at Chapter 31.10 Annex 1 paragraphs 7 to 14.
Can a copyright be licensed or assigned?
Yes – as copyright is an asset it can be transferred to someone else, either in whole or in part (e.g. where film rights are sold for a novel). Any assignment must be in writing and signed by or on behalf of the assignor. Licensing allows a licensee to carry out specific acts in relation to the copyrighted work, (e.g. produce the DVD for a cinematically released film). See Chapter 31.10 Annex 1 paragraphs 16 to18.
Can the official receiver disclaim a copyright where the royalty income is low or nil?
Yes, the official receiver can consider disclaiming copyright where there is no royalty generated (e.g. the work is unpublished) or the future costs of administering collections under the copyright are likely to exceed any copyright value or income. See Chapter 31.10 Annex 1 paragraph 19.
What is a patent?
Generally patents are a deal or bargain between a state and an inventor – an intellectual property right granted by the government of a country as a territorial right for a limited period. The inventor agrees to make public his/her invention for it to be freely copied, after the expiry of an agreed period where he/she has a monopoly over its manufacture, use and sale. In the UK a patent is granted via the UK Intellectual Property Office (formerly the Patent Office) and lasts for 20 years, but must be renewed to keep it in force. See Chapter 31.10 Annex 1 paragraphs 52 to 63, particularly paragraph 56 regarding the duration of a patent.
Does a patent have a value?
A patent can be bought and sold like any other property, it can generate royalties or be subject to a secured loan by way of a mortgage, or the rights to it can be licensed. Where an insolvent owns a patent (which is in force) at the date of insolvency, it vests in the estate and can be realised as an asset, once ownership has been verified. Where a patent has lapsed the official receiver may need to consider restoring it in order to sell it, see Chapter 31.10 Annex 1 paragraphs 56 to 58.
Will an insolvent’s computer software be realisable as an intellectual asset?
Most computer software used by an insolvent is likely to be a standard package purchased “off the shelf” so will not be a realisable asset. Where an insolvent is using “bespoke” software (written specifically for the insolvent’s business) or software produced within the business (“in house”) the official receiver should examine any agreements/contracts with the software supplier or in house creator, to ascertain copyright ownership and any intellectual property rights created, also any restrictions on assignment. For further information see Chapter 31.10 Annex 1 paragraph 63.
Can a “design” have a monetary value?
Design relates to the outward appearance of a product, rather than to the product itself. Both registered and un-registered designs can be protected, and design rights are an asset that can vest and may have a value. They can also generate income from royalties, which can be collected by the official receiver. For full details see Chapter 31.10 Annex 1 paragraphs 20 to 34.
What about trade marks and service marks?
Trade or service marks (e.g. a logo or graphic such as the Bass red triangle) are usually registered (although this is not compulsory) and can vest in an insolvent’s estate. Where they are vested, they may be sold as an asset. The licence to a trademark can also be sold as an asset. The insolvent may be in receipt of royalties as a condition of the sale of a registered trade mark, although the trade mark will no longer vest. These royalties should be collected by the official receiver as income, including via an IPA or IPO where appropriate. Further information on trade and service marks can be found at Chapter 31.10 Annex 1 paragraphs 64 to 74.
Does a company, business or trading name have a value?
Yes, a company, business or trading name can have a value and can be sold, if there is sufficient interest. If the insolvent wishes to purchase the name, it should be independently valued by agents where a satisfactory valuation cannot be agreed. See Chapter 31.10 Annex 1 paragraph 41.
What does the official receiver have to be aware of when selling a name?
When transferring the registered or trading name of a company, the implications of the Insolvency Act 1986 section 216 must be considered, i.e. the name is prohibited from being used for a period of 5 years by a person who is, or has been, a director or shadow director of the company in liquidation in the 12 months preceding the date of liquidation. Also it is not possible for a limited company to have a name which is the same as a name already appearing in the registrar’s index of company names, therefore where a 3rd party wishes to purchase the registered name of the company in liquidation, it will be necessary to change the name of the company in liquidation at Companies House to allow the purchaser to buy the original name. See chapter 31.10 Annex 1 paragraphs 37 to 44.
What about domain names on the internet – can they be sold or transferred for a value?
Domain names are word sequences, which allow internet users to search and navigate to a specific website. Each domain name is assigned to a specific internet service provider and is registered, and some can be sold for significant amounts of money. Domain names are not owned by the user or registrant, but are licensed by the appropriate registrar for use whilst the licence is paid for. Where a domain name is registered to the insolvent, breaches no trademark and there are no outstanding fees, it can be dealt with as any other asset. See chapter 31.10 Annex 1 paragraph 45. For a full outline of the action to take where a domain name exists in connection with an insolvent, go to chapter 31.10 Annex 1 paragraphs 46 to 51.
Is goodwill an asset?
In insolvency cases where a former business has ceased, its goodwill is likely to be worthless. Goodwill is only likely to have any value where a business is being sold as a going concern. See chapter 31.10 Annex 1 paragraphs 35 to 36.
Can the official receiver sell a client, customer or patient database?
Client lists, customer or patient databases are potential assets which can be sold; the DPA (Data Protection Act 1998) does not prevent the sale of the database containing individuals’ details, as long as certain requirements are met. Specifically, any buyer needs to understand that the information can only be used for its original intended purpose and its usage must be within the reasonable expectations of the individual concerned. As part of the sale the official receiver should obtain an undertaking from the buyers that they will inform the affected individuals who it is that now holds their information. See chapter 31.10 Annex 1 paragraphs 76 to 77 for further information.
What Data Protection implications are there in selling a database?
The purchaser of a database may wish to forward marketing material to the individuals on the database. Whether they do this depends on the basis on which the personal information concerned was originally collected. The official receiver should draw the buyer’s attention to the restrictions imposed by the DPA on the use of marketing material and the length of time information can be retained (which should not be longer than is necessary for its original purpose) - see chapter 31.10 Annex 1 paragraphs 78 to 79.
What if a buyer cannot be found for the client/customer database?
Where a purchaser cannot be found for the database, or a sale is not able to be concluded, the information held should be deleted or destroyed as soon as it is no longer required, to comply with DPA provisions. See chapter 31.10 Annex 1 paragraphs 79 to 80.
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