Chapter 46 Part 7
Part 7 - Restrictions imposed on debtors subject to a Debt Relief Order, Debt Relief Restrictions Order, Interim Debt Relief Restrictions Order or Debt Relief Restrictions Undertakings
(Inserted March 2013)
When an individual is subject to a debt relief order (DRO), he or she is subject to a range of disabilities or restrictions until the end of the moratorium period (usually one year) [note 1]. These restrictions are imposed by a variety of sources including the Insolvency Rules 1986 (IR86), the Company Directors Disqualification Act 1986 (CDDA86) and other Acts of Parliament, regulations under consumer legislation and local government bye-laws. The restrictions were brought into force by The Tribunals Courts and Enforcement Act 2007 and subsequent consequential amendments orders.
It should be noted that the restrictions listed here cannot be guaranteed to be exhaustive, and non-insolvency legislation affecting restrictions against a debtor subject to a DRO or DRRO/IDRRO may be subject to revision at any time.
This Part is divided in to two sections, Section 1 - Restrictions applicable while subject to a DRO, and Section 2 - Restrictions applicable while subject to a DRRO, IDRRO and DRRU - A list of abbreviations used in this Part can be found at 46.109.
Section 1 Restrictions applicable while Subject to a DRO
Subsection 1 - Restrictions imposed on individuals subject to DROs by insolvency legislation (including CDDA86) (paragraph 46.110 – 46.117) Subsection 2 – Restrictions imposed on individuals subject to DROs by other legislation (paragraph 46.118 – 46.138)
Section 2 Restrictions applicable in DRROs/IDRROs and DRRUs
Subsection 3 - Restrictions imposed on individuals subject to DRROs/IDRROs and DRRUs (paragraph 46.139 - 46.152) Annex B – Effects of a debt relief restriction (schedule issued by Enforcement Section March 2010).
Annex C - Bodies where membership is impacted by being subject to a DRO, DRRO/IDRRO or DRRU.
The following abbreviations are used in this chapter :
DRO – Debt Relief Order
DRRO – Debt Relief Restriction Order
IDRRO – Interim Debt Relief Restriction Order
DRRU – Debt Relief Restriction Undertaking
IR86 - The Insolvency Rules 1986
IA86 – The Insolvency Act 1986
CDDA 86 - The Company Directors Disqualification Act 1986
EA2002 - The Enterprise Act 2002
Subsection 1 - Restrictions imposed on individuals subject to DROs by insolvency legislation (including CDDA86)
46.110 Obtaining credit over the prescribed amount
A person subject to a DRO commits an offence if they, alone or jointly with another person, obtain credit of £500 or more without disclosing that he or she is subject to a DRO. [note 2]
46.111 Engaging in business under a different name
A person subject to a DRO commits an offence if they engage in any business under a name other than the one in which the DRO was made without disclosing to all that they enter into business transactions with the name under which the DRO was made. [note 3].
46.112 Promotion, formation and management of a company
It is an offence for an individual to act as a director of, or directly or indirectly take part in or be concerned in the promotion, formation or management of a company, except with the leave of court [note 4]. An application by an individual subject to a DRO for leave to act as a director or to take part in the promotion, formation or management of a company is made to the court pursuant to Insolvency Rules 1986 rule 6.203.
46.113 Acting as an Insolvency Practitioner
A person subject to a DRO is not qualified to act as an Insolvency Practitioner. A person commits an offence if they act as an insolvency practitioner whilst not qualified to do so. [note 5]
46.114 Acting as a receiver and manager of company property on behalf of a debenture holder
A person is guilty of an offence if they act as receiver or manager of a company’s property on behalf of a debenture holder whilst subject to a debt relief order. This is not the case if the person is acting under an appointment made by the court [note 6].
An individual subject to a moratorium period under a DRO may not represent a member of a liquidation committee [Note 7].
Equivalent provisions to those in paragraph 46.115 apply in relation to a member of a creditors’ committee [Note 8].
46.117 Limited Liability Partnerships
Regulation 4(2) of the Limited Liability Partnership Regulations 2001 [Note 9] applies the CDDA86 to limited liability partnerships (LLPs), all references to a company are to include an LLP and all references to a director include a member of an LLP. As a result of the application of section 11 of the CDDA86, an individual who is the subject of a moratorium period under a debt relief order (or is subject to a DRRO) cannot be a member of an LLP except with the leave of court [Note 10].
Subsection 2 – Restrictions imposed on individuals subject to DROs by other legislation
46.118 Auditor under the Public Trustees Act 1906
An individual who has a DRO made in respect of him or her may be removed as a Public Trustees Act auditor under section 13(4) of the Public Trustees Act 1906 [note 11].
46.119 Holder of a consumer credit licence
A licence held under the Consumer Credit Act 1974 terminates upon the licence holder becoming subject to a DRO (section 37(1)(b) of the Consumer Credit Act 1974) [note 12].
A solicitor’s practicing certificate is suspended upon the making of a DRO in respect of the solicitor under section 15(1) of the Solicitors Act 1974 [note 13]. A solicitor who has had their practicing certificate suspended due to this provision is able, at any time prior to the expiry of the practicing certificate, to apply to the Solicitors Regulatory Authority (SRA) for the suspension to be terminated. The SRA are able to either terminate the suspension unconditionally; terminate the suspension subject to such conditions as the Authority thinks fit; or dismiss the solicitor’s application.
An individual in respect of whom a DRO is made shall not engage in any estate agency work except as an employee of another person (section 23, Estate Agents Act 1979) [note 14].
46.122 Holder of a public service vehicle operator’s licence
It is the duty of the holder of a Public Service Vehicle (PSV) operator's licence, within 28 days of the occurrence of the making of a debt relief order in respect of the holder, to give notice in writing of that event to the traffic commissioner by whom the licence was granted [note 15].
Where an individual applies for a licence to be a licensed conveyancer while or after being subject to a Debt Relief Order (DRO) the Council (Council of the Law Society) may grant a licence with such conditions as it feels appropriate. These restrictions are outlined in the Administration of Justice Act 1985, section 16 [note 16].
A council or local authority tenant will not be able to exercise a right to buy the property in which they reside while they are subject to a debt relief order moratorium. This limitation is applied by the Housing Act 1985, section 121 [note 17].
46.125 Assessors Of Compensation For Miscarriages Of Justice (Criminal Justice Act 1988)
The Secretary of State may at any time remove a person from office as an assessor if satisfied that has had a debt relief order made in respect of him [note 18].
46.126 An appointed person under the Trade Marks Act 1994
An appointed person (an individual appointed by the Lord Chancellor to hear and decide appeals) under the Trade Marks Act 1994 may be removed from office by the Lord Chancellor if he be becomes subject to a Debt Relief Order [note 19].
46.127 Goods Vehicle Operators Licence
A Goods Vehicle Operators licence may be revoked, suspended or curtailed by the traffic commissioner who issued the licence upon the making of a Debt Relief Order [note 20]. A Goods Vehicle Operators Licence may have certain specific obligations attached to it regarding notifying the appropriate traffic commissioner of the making of a DRO or the occurrence of any other insolvency event. The licence should be checked to establish if there are specific reporting requirements. There is also an obligation imposed upon a licence holder to notify the traffic commissioner, within 28 days, of any circumstances that would affect their ability to hold a licence.
46.128 Trustee of a Occupational Pension Scheme
The trustee of an organisational Pension Scheme may, by order, be suspended upon an application of the Occupational Pensions Regulatory Authority where the trustee is the subject of an application for a debt relief order, Pensions Act 1995, section 4. The order for suspension, if made, will last until the application for the debt relief order has been determined. Upon the making of a debt relief order the individual will be disqualified from holding office as a trustee of an occupational pension scheme [note 21].
46.129 The Judicial Appointments And Conduct Ombudsman
The Lord Chancellor may remove the Judicial Appointments and Conduct Ombudsman from office if he is satisfied that the Ombudsman is a person in relation to whom a moratorium period under a debt relief order applies [note 22].
46.130 Power of Attorney - Appointing a donee
An individual who has a debt relief order made against them may not be appointed as donee of a lasting power of attorney in relation to an individual’s property and affairs [note 23].
46.131 Power of Attorney – Revocation
Where a lasting power of attorney is in place and the donee becomes subject to a DRO the power of attorney shall be revoked so far as it relates to the donor’s property and affairs (Where the donee remains subject to a DRO as a result of the existence of a IDDRO the power is simply suspended for so long as the IDDRO has effect).
The making of a debt relief order in respect of a donee does not terminate his appointment, or revoke the power, where his authority relates to the donor’s personal welfare [note 24].
46.132 Power of Attorney – Effect on registration
The Public Guardian must cancel the registration of an instrument as a lasting power of attorney on being satisfied that the power has been revoked or a debt relief order has been made in respect of the donor [note 25].
The Public Guardian must cancel the registration of an instrument creating an enduring power of attorney if satisfied that the power has been revoked by the making of a debt relief order in respect of the donor or attorney [note 26].
For joint and several attorneys see paragraph 22 of the Mental Capacity Act 2005 [note 27].
In the case of an operating licence issued to an individual, the licence shall lapse if a debt relief order is made in respect of the licensee [note 28].
In the case of a premises licence issued to an individual, the licence shall lapse if a debt relief order is made in respect of the licensee [note 29].
A Family Entertainment Centre Gaming Machine Permit held by an individual shall lapse if a debt relief order is made in respect of him [note 30].
A Prize Gaming Permits held by an individual shall lapse if a debt relief order is made in respect of him [note 31].
46.134 National Health Service Act 2006
A person in relation to whom a moratorium period under a debt relief order applies, may not become or continue as a member of the council of governors of a public benefit corporation [note 32].
46.135 Assessors Of Compensation For Miscarriages Of Justice (Armed Forces Act 2006)
The Secretary of State may at any time remove a person from office as an assessor if satisfied that a debt relief order has been made against them [note 33].
The Commission may remove a charity trustee by order made of its own motion if within the last 5 years, the trustee previously having been the subject of a debt relief order, has been discharged from all the qualifying debts under the debt relief order [note 34].
A person is disqualified from being a charity trustee or trustee for a charity if he is subject to a moratorium period under a debt relief order; or a debt relief restrictions order or interim debt relief restriction order [note 35].
This disqualification does not apply if leave has been granted under section 11 of the Company Directors Disqualification Act 1986 [note 36].
46.137 MOT Authorised examiner
A Motor Vehicles Test (MOT) authorised examiner shall cease to be authorised if he has a debt relief order made against him [note 37]. This provision does not related to nominated testers.
46.138 Births, Marriages and Deaths Registration Officer
No person shall be qualified for appointment to any registration office if he is a person in relation to whom a moratorium period under a debt relief order applies, or he is the subject of a debt relief restrictions order or an interim debt relief restrictions order [note 38].
Subsection 3 – Restrictions imposed on an individuals subject to DRROs/IDRROs and DRRUs
46.139 Obtaining credit over the prescribed amount
A person subject to a DRRO, DRRU, IDRRU or IDRRO commits an offence if they, alone or jointly with another person, obtain credit of £500 or more without disclosing there status [note 39].
46.140 Engaging in business under a different name
A person subject to a DRRO, DRRU or IDRRO commits an offence if they engage in any business under a name other than the one in which the DRO was made without disclosing to all that they enter into business transactions with the name under which the DRO was made [note 40].
46.141 Promotion, formation and management of a company
It is an offence for an individual subject to a DRRO, DRRU or IDRRO to act as a director of, or directly or indirectly take part in or be concerned in the promotion, formation or management of a company, except with the leave of court [note 41]. An application by an individual subject to the above restrictions for leave to act as a director or to take part in the promotion, formation or management of a company is made to the court pursuant to Insolvency Rules 1986 rule 6.203.
46.142 Acting as an Insolvency Practitioner
A person subject to a DRRO, DRRU or IDRRO is not qualified to act as an Insolvency Practitioner. A person commits an offence if they act as an insolvency practitioner whilst not qualified to do so [note 42].
46.143 Acting as a receiver and manager of company property on behalf of a debenture holder
A person is guilty of an offence if they act as receiver or manager of a company’s property on behalf of a debenture holder whilst subject to a DRRO, DRRU or IDRRO. This is not the case if the person is acting under an appointment made by the court [note 43].
46.144 Limited Liability Partnerships
Regulation 4(2) of the Limited Liability Partnership Regulations 2001 [Note 44] applies the CDDA86 to limited liability partnerships (LLPs), all references to a company are to include an LLP and all references to a director include a member of an LLP. As a result of the application of section 11 of the CDDA86, an individual who is the subject of a moratorium period under a debt relief order (or is subject to a DRRO, DRRU or IDRRO) cannot be a member of an LLP except with the leave of court [Note 45].
An individual subject to a moratorium period under a DRRO, DRRU or IDRRO may not represent a member of a liquidation committee [Note 46].
Equivalent provisions to those in paragraph 46.115 apply in relation to a member of a creditors’ committee [Note 47].
46.147 Trustee of a Occupational Pension Scheme
The trustee of an organisational Pension Scheme will be disqualified from holding office as a trustee of an occupational pension scheme while subject to a DRRO, IDRRO or DRRU [note 48].
46.148 Births, Marriages and Deaths Registration Officer
No person shall be qualified for appointment to any registration office if he is a person in relation to whom a moratorium period under a debt relief order applies, or he is the subject of a DRRO, IDRRO or DRRU [note 49].
A person is disqualified from being a charity trustee or trustee for a charity if he is subject to a moratorium period under a debt relief order, DRRO, IDRRO or DRRU [note 50].
This disqualification does not apply if leave has been granted under section 11 of the Company Directors Disqualification Act 1986 [note 51].
46.150 Power of Attorney – Revocation
Where a lasting power of attorney is in place and the donee becomes subject to a DRO the power of attorney shall be revoked so far as it relates to the donor’s property and affairs (Where the donee remains subject to a DRO as a result of the existence of a IDDRO the power is simply suspended for so long as the IDDRO has effect).
The making of a debt relief order in respect of a donee does not terminate his appointment, or revoke the power, in so far as his authority relates to the donor’s personal welfare [note 52].
46.151 Disqualification from Parliament
A person who is subject to a DRRO/IDRRO or a DRRU is disqualified from membership of the House of Commons or from sitting and voting in the House of Lords. That person will also be prevented from sitting or voting in any committee of the House of Lords or any joint committee of both Houses. [Note 53].
46.152 Local Government Act 1972
A person shall be disqualified for being elected or being a member of a local authority if he is the subject of a debt relief restrictions order or interim debt relief restrictions order [note 54].
[Back to Part 6 – Competent authorities and approved intermediaries]