February 2013PART 2 ASSETS FROM OTHER INSOLVENCY PROCEEDINGS
31.10.44 Assets from a creditors’ voluntary liquidation (CVL) or members’ voluntary liquidation (MVL)
Where a compulsory winding-up order is made against a company in a voluntary liquidation, the voluntary liquidator has a duty to deliver any remaining assets to the official receiver or liquidator if not the official receiver [note 1]. The voluntary liquidator should be advised of the making of the compulsory winding-up order using standard letter [note 2] and arrangements should be made for the handing over of the company’s assets, including any funds which have not been paid into the Insolvency Services Account (ISA). Payment of these funds may be net of expenses and remuneration [note 3], but see Chapter 56 paragraph 56.183 for circumstances where net funds should not be accepted.
The voluntary liquidator’s remuneration and expenses should be detailed in the report to creditors, as these may affect the amount of any distribution to creditors.
The official receiver, as liquidator, should deal with assets unrealised by the voluntary liquidator in the usual way.
31.10.45 Assets remaining after an administrative receivership
A receiver’s powers conferred under section 42 of the Insolvency Act 1986 and schedule 1 of the same act, including the right to realise assets covered by the charge and convey property in the company’s name, are unaffected by the making of a winding-up order.
Where a winding-up order is made against a company in an administrative receivership, the official receiver should make contact with the administrative receiver to advise him/her of the making of the order and to ask him to provide information regarding charged assets not yet realised and an estimate of anticipated realisations. A standard letter ADMREC [note 4] is available for this purpose. The standard letter also asks the administrative receiver to provide information relating to the charge in respect of which they were appointed. Reference to the information provided by the administrative receiver in this respect should allow the official receiver to make a calculation regarding any surplus available to the liquidation estate – and, if appropriate, report this to creditors.
It may be the case that there are assets belonging to the company which were not covered by the charge and, therefore, not being dealt with by the administrative receiver. Those assets should be protected and realised by the official receiver as liquidator in the usual way.
31.10.46 Assets from administration proceedings
The assets of a company in administration are charged in favour of:
The official receiver, as liquidator, should establish from the former administrator the value of any remaining assets and the level of the outstanding liabilities (administration creditors) charged against those remaining assets (form ADLTR) [note 6]. If it is the case that the level of outstanding liabilities exceeds the value of the assets then the liquidator has no interest in the assets and action to realise them should not be taken. In these circumstances, the official receiver, as liquidator, should inform administration creditors and the former administrator that he/she intends to take no action regarding the assets and that the former administrator should deal with them. An explanation of the situation should be included in the report to creditors so that pre-administration creditors are made aware of the position.
If the assets are of a greater value than the amounts outstanding to the administrator and the administration creditors the official receiver, as liquidator, should ask the former administrator to deliver up the assets and deal with them in the usual way.
31.10.47 Partnerships subject to administration orders
31.10.48 Assets from a failed company voluntary arrangement
Where a winding-up order is made against a company which is in a company voluntary arrangement (CVA) the effect of the order is to terminate the CVA. Following this, the status of CVA assets or monies is dependent on the terms of the arrangement. The assets held by the supervisor may be held on trust, or subject to a charge, in favour of creditors who are bound by the CVA. Further information on this and the action the official receiver should take is outlined in paragraphs 56.251 to 56.253 (see also paragraphs 20.5 to 20.15).
If the supervisor has unpaid costs when a voluntary arrangement fails they are paid as a first charge out of the assets of the company [note 8] but this charge will rank behind any charge created by the company as a fixed charge. If the unpaid costs are greater than the value of the assets, the official receiver as liquidator should take no steps to realise the charged assets.
The supervisor’s unpaid costs should be detailed in the report to creditors, as these may affect the amount of any distribution to creditors.
In the event that the assets are not held on trust or the way in which they are to be dealt with is not provided for in the terms of the CVA, and there is a surplus in the value of the assets over the expenses of the supervisor, the official receiver should take control of the assets and deal with them in the usual way.
31.10.49 Assets from a failed partnership voluntary arrangement
A partnership may be subject to a partnership voluntary arrangement [note 9][note 10] the rules for which are in line with the rules regarding CVAs. The information and guidance in paragraph 31.10.133 should be followed in this respect.
See also Chapter 20, Part 3
31.10.50 Assets from a failed individual voluntary arrangement
The effect of a bankruptcy order on an existing individual voluntary arrangement (IVA) is dependent on the terms of the IVA, in particular any trust clause [note 11]. The assets held by the supervisor may be held on trust, or subject to a charge, in favour of creditors who are bound by the IVA. Further information on this, and the action that the official receiver should take, are covered in paragraphs 57.33 to 57.35.
If the supervisor has unpaid costs when a voluntary arrangement fails and a bankruptcy order is subsequently made the unpaid expenses will be a first charge on the bankruptcy estate – even though the underlying asset from which they are paid may not have been included in the IVA [note 12][note 13]. If the unpaid costs are greater than the value of the assets the official receiver, as trustee, should take no steps to realise the charged assets. The supervisor’s unpaid costs should be shown in the report to creditors.
In the event that the assets are not held in trust or the way in which they are to be dealt with is not provided for in the terms of the IVA, and there is a surplus in the value of the assets over the expenses of the supervisor the official receiver, as Trustee, should take control of the assets and deal with them in the usual way.
Official receivers should also be aware that certain assets (most commonly the matrimonial home) may have been excluded from the IVA and, subject to any charge in favour of the supervisor, these should be dealt with in the usual way.
31.10.51 Assets from a previous bankruptcy
In circumstances where a bankruptcy order is made against an undischarged bankrupt any assets (including income) acquired by him/her after the date of the earlier bankruptcy and not yet distributed by the trustee are to be transferred to the later bankruptcy [note 14][note 15]. Any such money or property will then form part of the estate in the later bankruptcy but subject to a first charge in favour of the earlier trustee for any expenses he/she may have incurred in dealing with those assets [note 16].
Where, on receiving notice of a bankruptcy petition, a trustee has any after-acquired property he/she should hold and protect the property until the petition is disposed of. Any disposal after receipt of notice is void unless the consent or ratification of the court dealing with the earlier bankruptcy is obtained [note 16].
Assets belonging to a subsequent bankrupt who is discharged from an earlier bankruptcy would vest in the subsequent bankruptcy estate and should be dealt with in the usual way. The official receiver should be aware that, particularly with properties, the trustee of the earlier bankruptcy may have transferred the bankrupt’s beneficial interest to a third party.
See also Chapter 21 paragraph 21.21 for a possible, though unusual, exception to the general rule outlined in this paragraph.
See also Chapter 21 paragraphs 21.6 to 21.20.