Managing Records and Reporting Requirements for Trustees and Liquidators (Including the Official Receiver)
December 2011
The Insolvency Practitioners Regulations 2005 and The Insolvency Regulations 1994 set out the requirements for insolvency practitioners in respect of the keeping, maintenance and preservation of records relating to case administration and accounts. The regulations set rules regarding the type of records to be kept, the time for which they must be kept and the persons to whom, and the terms on which, they must be produced or sent.
55.38 Case administration records
The Insolvency Practitioners Regulations 2005 set out the minimum requirements on insolvency practitioners in respect of the records they should keep regarding the administration of cases [note 1]. Each record must be capable of being produced separately from any other record [note 2] and must be preserved until the later of [note 3]:
The insolvency practitioner is under a duty to notify his/her authorising body and the Secretary of State of the place where the records are maintained [note 4]. On the giving of reasonable notice, the records must be made available to the authorising body and/or the Secretary of State [note 5]. The records required to be kept cover the following areas [note 6]:
The insolvency practitioner must also keep records of specific penalties currently in force and preserve the cover schedule (see paragraph 55.20) relating to each appointment [note 7].
55.39 Financial records - liquidation
In addition to the rules regarding those records required to be kept by insolvency practitioners relating to case administration, there are rules, set out in The Insolvency Regulations 1994, relating to the keeping and preservation of financial records of the administration of insolvencies.
In relation to a liquidation (other than a members’ voluntary liquidation), the liquidator is required to prepare and keep separate financial records of each company; and such other financial records as are required to explain the receipts and payments entered in the records, including an explanation of the source of any receipts and the destination of any payments [note 8]. The liquidator is required to submit records to the liquidation committee when required [note 9] and, in the case of a winding-up by court, if the liquidation committee is not satisfied with the contents of the financial records it may so inform the Secretary of State who may take such action as he/she thinks fit [note 10].
In the case of a winding up by the court, the liquidator shall, within 14 days of receipt of a request for a statement of his receipts and payments as liquidator from any creditor, contributory or director of the company, supply free of charge to the person making the request, a statement of his receipts and payments as liquidator during the period of one year ending on the most recent anniversary of the appointment as liquidator which preceded the request [note 11]. In the case of a voluntary liquidation, the liquidator shall, on request from any creditor, contributory or director of the company for a copy of a statement sent to the Registrar of Companies under section 192, send a copy free of charge within 14 days to the person making the request [note 12].
Where, with the exception of a members’ voluntary liquidation, a liquidator carries on any business of the company he/she shall keep a separate and distinct account of the trading and, in a compulsory liquidation, a record of all local bank account transactions should be kept [note 13].
The liquidator is required to keep all financial records, including any such records received from a predecessor, for a period of six years following his vacation of office [note 14].
The liquidator is under a duty, if so directed, to send to the Secretary of State an account of his/her receipts and payments for any such period not previously accounted for [note 15] and to produce to the Secretary of State for inspection any accounts, books and other records kept by him/her [note 16].
See paragraphs 48.23 and 48.34 for information on the provision of accounts to the Secretary of State following release as liquidator.
55.40 Financial records - bankruptcy
The record keeping requirements for a trustee in bankruptcy are essentially the same as those relating to liquidators [note 17] and the information and advice in paragraph 55.37 can be followed in this respect.
55.41 Information about time spent on a case
An insolvency practitioner is required to provide certain information about time spent on a case, free of charge, upon request by specified persons [note 18]. The persons entitled to ask for this information are:
The information which must be provided is
The period for which the information must be provided is the period from appointment to the end of the most recent period of six months reckoned from the date of the practitioner’s appointment, or where he has vacated office, the date that he vacated office. The information must be provided within 28 days of receipt of the request by the insolvency practitioner, and requests must be made within two years from vacation of office.
This provision applies in any case where the insolvency practitioner is appointed on or after 1 April 2005.
55.42 Records of professional development
An insolvency practitioner authorised by the Secretary of State is required to keep records relating to his/her continuing professional development, which must be kept for six years from the date of the event, and are available for inspection by the Secretary of State [note 19].
55.43 Disposal of books, papers or other records relating to companies or bankrupts
See chapter 10 – Preservation and Destruction of Records (specifically 10.67) for information on the disposal of records other than those created by the liquidator or trustee.
55.44 Disqualification reporting duties
The office holder in relation to an insolvency is required to make a report to the Secretary of State on the conduct of a director or ex-director of a company where it appears that his/her conduct of that company make him/her unfit to be concerned in the management of a company [note 20]. Relevant office holders for this purpose are:
If the insolvency practitioner is a new practitioner who is appointed to replace an existing practitioner, who has already reported in respect of that director, he/she is not required to submit a report.
The office-holder must submit a return in respect of each director, or shadow director, appointed at the relevant date and each person appointed as director or shadow director at any time in the three years prior to that date [note 21]. The relevant date is calculated as follows:
[note 22]
The return must be submitted to the Secretary of State within six months of the relevant date [note 23]. Case Targeting Team (Enforcement) has a system of reminders for those practitioners who have failed to submit a return within six months and will report failures after reminder to the relevant authorising body. Case Targeting Team may also refer the matter to solicitors to consider whether to bring proceedings against the office-holder.
Any office holder who, without reasonable excuse, fails to comply with his/her duty to submit a return is guilty of an offence and is liable, on summary conviction, to a fine and, on continued contravention, to a daily default fine [note 24].
55.45 Reporting criminal offences
In respect of liquidations, insolvency practitioners are under a duty to report suspected criminality to the Secretary of State [note 25] and subsequently assist any investigation [note 26]. Insolvency practitioners acting in other capacities as office-holder have a common law duty to report criminal conduct to the Secretary of State.
If the report results in an investigation being commenced the office-holder is expected to co-operate with the investigator and IPPS considers any incidences of non-cooperation for reporting to the relevant authorising body.
55.46 Insolvency Services Account (amended June 2013)
The Insolvency Services Account was established in the early 1970s to provide estate accounting, banking and investment services for insolvency practitioners and official receivers. The requirements for use of the account are set out in legislation (see paragraphs 55.48-49). The account is administered by the Estate Accounts Directorate (Business Services Directorate: Insolvency Practitioner Services) of the Insolvency Service (see paragraph 55.47).
55.47 Estate Accounts Directorate
Estate Accounts Directorate provides estate accounting and investment service to insolvency practitioners and official receivers using the Insolvency Services Account. The directorate is organised into two parts:
55.48 Use of Insolvency Services Account - Liquidation
In the case of a winding up by the court the liquidator must pay, without deduction, all monies received in the course of carrying out his/her functions into the Insolvency Services Account once every 14 days or immediately if £5,000 or more has been received [note 27].
Where, in a compulsory liquidation, the liquidator is carrying on the business of a company in liquidation, he/she may apply to the Secretary of State for permission to use a local bank account if there will be an administrative advantage from doing so. The authorisation will be given subject to a limit on the amount of deposits and payments, and any monies received over that limit must be remitted to the Insolvency Services Account. As soon as the liquidator ceases to carry on the business, or if the authorisation to operate the account is withdrawn, he/she must close the account and pay any balance into the Insolvency Services Account [note 28] (see also paragraph 55.37).
In the case of a voluntary winding up, the liquidator may make payments into the Insolvency Services Account to the credit of the company [note 29].
55.49 Use of Insolvency Services Account - Bankruptcy
The trustee must pay, without deduction, all monies received in the course of carrying out his/her functions into the Insolvency Services Account once every 14 days or immediately if £5,000 or more has been received [note 30].
Where a trustee is carrying on the business of a bankrupt, he/she may apply to the Secretary of State for permission to use a local bank account if there will be an administrative advantage from doing so. The authorisation will be given subject to a limit on the amount of deposits and payments, and any monies received over that limit must be remitted to the Insolvency Services Account. As soon as the trustee ceases to carry on the business, or if the authorisation to operate the account is withdrawn, he/she must close the account and pay any balance into the Insolvency Services Account [note 31].
Where the liquidator or trustee is of the opinion that the balance on an account held in the Insolvency Services Account is in the excess of that required for the immediate purpose of winding-up or bankruptcy, he/she may require that the monies be invested in Government securities to the benefit of the insolvent estate [note 32].
The estate of a company or bankruptcy is entitled to interest paid from the Insolvency Services Account in respect of monies invested in the account. Currently, the rate payable is 6% and is payable until the liquidator or trustee gives notice that the accrual of interest should cease [note 33].
55.51 Distributions and payments
The liquidator or trustee is required to apply for payment instruments for payments in respect of his/her expenses properly incurred and payments to other persons from any credit balance held in the Insolvency Services Account [note 34].
Similarly, the liquidator or trustee is required to apply for payment instruments for payment of dividends to creditors or return of capital to contributories. In the case of a voluntary liquidation, payment of the sum required may be made directly to the liquidator or may be issued to the liquidator for delivery by him to the persons to whom the payments are to be made. Any unclaimed or undelivered payment instructions are to be returned to the Insolvency Services Account, endorsed “cancelled” [note 35].
In the case of a company which has been dissolved, any money in the hands of any liquidator, or former liquidator, at the date of dissolution of the company, or the earlier vacation of office, representing unclaimed or undistributed assets of the company or dividends due to any person or member must be paid forthwith into the Insolvency Services Account [note 36].
Any monies in the hands of a trustee in bankruptcy at the date of his/her vacation of office, or which comes into his/her hands after vacation of office representing, in either case, undistributed assets or dividends, should forthwith be paid into the Insolvency Services Account [note 37].
55.52 Claiming money paid into the Insolvency Services Account
Any person claiming to be entitled to any money paid into the Insolvency Services Account may apply for payment and shall provide such evidence of his/her claim as may be required. Any dissatisfaction with a decision in this regard may be appealed to the court [note 38].
[Back to Part 3 - Insolvency Code of Ethics, SIPs and Guidance Papers]