PART 1
March 2012
Stock, work in progress, plant and machinery and fixtures and fittings - general
31.6.2 Dealing with stock, work in progress, plant and machinery and fixtures and fittings – general
In most cases it should be possible to easily realise the insolvent’s interest in stock and plant and machinery, following the guidance in this chapter, with the involvement of agents – possibly specialist agents (see Chapter 32.3, Part 1).
Dealing with work in progress and fixtures is likely to be more difficult and, in many cases, it will be necessary to seek the appointment of an insolvency practitioner as liquidator or trustee. Nevertheless, guidance on those types of assets is given in this chapter.
31.6.3 Encountering stock, work in progress, plant and machinery and fixtures and fittings
The official receiver is most likely to encounter stock, work in progress, plant and machinery and fixtures and fittings in the early stages of a case, whether that be during an inspection (see Chapter 8) or as part of an initial enquiry following the making of an order.
Such initial enquiries (see Chapter 3, Part 4 for guidance on company initial enquiries and Chapter 4, Part 3 for guidance on bankruptcy initial enquiries) should seek to establish the whereabouts of the items, the extent to which they are safely stored/located and whether they are adequately insured (see paragraph 31.6.9). The enquiries should also seek to establish the extent to which there are third party claims over the items (see paragraph 31.6.7).
In addition, Chapter 59 gives advice on dealing with unusual businesses.
31.6.4 Sources of information regarding stock, work in progress, plant and machinery and fixtures and fittings
Information concerning stock, work in progress, plant and machinery and fixtures and fittings may be available or forthcoming from the petitioning creditor, or other trade creditors/suppliers.
Reference should also be made to the last set of accounts (draft or otherwise), or accounting records, which may give an indication of stock/asset levels, and the value of that property at the time of the preparation of the accounts.
31.6.5 Valuation of stock, work in progress, plant and machinery and fixtures and fittings
Unless the likely value of the stock, work in progress, plant and machinery and fixtures and fittings is apparent from the accounts/accounting records (see paragraph 31.6.4), the official receiver is likely to require a valuation from his/her agents. Many agents will provide an informal valuation for no charge.
Valuations received from the company directors, bankrupt or parties connected thereto should be treated with circumspection and the official receiver should arrange for his/her own valuation where there is doubt.
In some cases, it will be apparent that the property is worthless (such as old office furniture or obsolete stock), and the official receiver can use his/her discretion not to obtain a formal valuation.
31.6.6 Disclaimer of stock, work in progress, plant and machinery and fixtures and fittings
In some cases it will be necessary to issue a disclaimer (see Chapter 34) of stock, work in progress, plant and machinery and fixtures and fittings where, for example, the property has no value and there is an onerous obligation. An example of this may be potentially dangerous plant requiring public liability insurance.
The official receiver cannot disclaim such property without also disclaiming the land/property on/in which the property is situated, so it will be necessary to ensure that the land/property has no value to the estate.
Specific guidance on disclaiming items of stock is given in the following paragraphs:
Controlled drugs – paragraph 31.6.30
Explosives – paragraph 31.6.38
Flowers – paragraph 31.6.65
Food – paragraph 31.6.55
Livestock – paragraph 31.6.44
Medicines – paragraph 31.6.24
Pet animals – paragraph 31.6.62
31.6.7 Third party claims over stock, work in progress, plant and machinery and fixtures and fittings
The official receiver should establish whether any or all of the stock, work in progress, plant and machinery or fixtures and fittings have valid third party claims over them – such as a fixed or floating charge (see Chapter 40, Part 5), finance agreement (see Chapter 40, Part 5), retention of title (see Chapter 63), a lien (see Chapter 9, Part 5), walking possession (see Chapter 9, Part 2) or distress (see Chapter 9, Part 1).
The validity of such claims should, of course, be verified and, if valid, the official receiver should not seek to realise the items. Instead he/she should arrange for the ‘owners’ of the property to collect (where possible) the property, following the guidance in Chapter 31.0, Part 2.
31.6.8 Protection of stock, work in progress, plant and machinery or fixtures and fittings
The official receiver should ensure that items of stock, work in progress, plant and machinery or fixtures and fittings are secured (see Chapter 31.0, Part 3) and/or, if necessary, dealt with promptly (see paragraph 31.6.12).
31.6.9 Insurance of stock, work in progress, plant and machinery or fixtures and fittings
(Amended February 2014)
Where the items require insurance, it should be arranged in line with the guidance in Chapter 49. Where the value or existing cover of the items is uncertain, cover should still be arranged but cancelled if/when the items are discovered to be worthless or the property of a third party – notifying the third party of the whereabouts and possibly uninsured status of the property (see Part 2 of Chapter 31.0). When the items have been sold or otherwise disposed of or the case has been handed over to an insolvency practitioner appointed as liquidator or trustee the official receiver should cancel the policy in accordance with paragraph 49.27B.
31.6.10 Realisation of stock, work in progress, plant and machinery or fixtures and fittings
Assuming there are no valid third party claims (including a claim for the items to be treated as exempt property – see paragraph 31.6.81) over the stock, plant and machinery or fixtures and fittings (see paragraph 31.6.7) and the guidance in this chapter has been considered, the official receiver’s usual agents should be instructed to sell the items. Where the assets are of an unusual or specialist nature the agents may, instead, suggest a specialist agent. Any sale price agreed should, of course, take into account the need to remove the items, as appropriate.
Work in progress is likely to require different treatment – following the guidance in Part 3.
31.6.11 Sale of stock, work in progress, plant and machinery or fixtures and fittings to a connected party
It may be the case that the official receiver’s agents advise that the best price for the items may be achieved through a sale to a third party connected to the company officers or bankrupt. Indeed, this may be the most cost-effective method of realisation when the costs of removal are taken into account – particularly for specialist equipment.
Where, in such a sale, the purchaser maintains that the items have a low value, the official receiver should not be averse to seeking the employment of a specialist valuer, at the expense of the prospective purchaser, with the purchaser to provide the funds for the valuation in advance.
It may be necessary to realise certain items of stock, work in progress, plant and machinery or fixtures and fittings promptly. Such circumstances may include:
In these, or similar circumstances, it is possible for the official receiver to deal with the realisation even if he/she is still receiver and manager (see Chapter 24, paragraph 24.14). Assets which cannot ,or need not, be realised by the official receiver as receiver and manager should be protected pending a trustee taking office (see Chapter 24, Part 4).
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