Chapter 10

July 2006

The term "records" includes all books of account, papers and other documents that report something that has happened. Computer records and other non-documentary records also form part of the records [note 1]. Records referred to in this chapter include all records in existence at the date of the winding up or bankruptcy order which belong to the company, partnership or bankrupt

A company is required to keep accounting records sufficient to show and explain the company's transactions [note 2]. The accounting records must be preserved for three years from their creation by a private company and for six years by a public company [note 3]. Where the company goes into liquidation the court may require any person who has in his/her possession any records to deliver those records to the liquidator [note 4]. If any officer of the company does not deliver up any records to the liquidator he/she commits an offence and may be liable to imprisonment or a fine [note 5].

There is no specific legal requirement for a partnership to maintain accounting records but partners are under a duty to render an account of the partnership dealings to another partner or their legal representative if requested [note 6], must maintain sufficient records to deal with their tax affairs [note 7] and on the insolvency of a partnership must deliver up records to the liquidator or trustee depending on the type of insolvency proceedings that have been applied to the partnership [note 8].

The requirement on a bankrupt to keep accounts was repealed by the Enterprise Act 2002 with effect from 1 April 2004. The bankrupt is however still required to account to the official receiver for the loss of any substantial part of his/her property [note 9], and deliver to the official receiver, on request, any records in his/her possession or control [note 10] [note 11]. Additionally an individual must maintain sufficient records to deal with their tax affairs [note 7]

The official receiver has a duty to investigate the affairs of a failed company [note 12] and where he/she thinks necessary the affairs of each bankrupt [note 13]. The examination of the records of the insolvent may be an important part of the official receivers' investigation and they should be recovered in every company case and all bankruptcy cases where the official receiver has not made a decision that investigation of the bankrupt's affairs is unnecessary.

The liquidator [note 14] or trustee [note 15] is required to take into custody, realise and distribute the insolvent's estate according to the provisions of the Act. The liquidator/trustee will need to refer to the books and records in order to discharge his/her duties in the liquidation/bankruptcy. The records comprise part of the insolvent's estate. The liquidator or trustee of an insolvent's estate will require the records in order to discharge his/her duties to identify all the assets, establish the creditors claims, investigate the cause of failure and discover any voidable transactions or in a company wrongful trading that may result in civil proceedings for recovery.

A liquidator has a duty to creditors, in addition to his/her duty to the company, to not act in such a way whereby a breach of that duty might cause creditors some loss. In Pulsford v Devenish [1903] 2 ch.625 it was held that the liquidator had been negligent in his statutory duty and was liable in damages to unpaid creditors of the liquidating company of whose claims he was aware and who had no notice of the liquidation until long after the dissolution of the company.

The Official Receiver can apply to the court for an order that any officer of the company, any person who is known or suspected of having in his/her possession any property of the company or supposed to be indebted to the company or any person whom the court thinks capable of giving information concerning the company, produce any books, papers or other records in his/her possession or under his/her control relating to the company. [note 16]. The House of Lords held [note 17] that the official receiver could use his powers under section 236 for the purposes of considering and conducting disqualification investigations and proceedings but that those powers were subject to the discretion of the court as to allow their use in such circumstances.

Consideration of the use of the power contained in section 236 by the official receiver to obtain information solely for the purpose of disqualification related investigations should be the exception rather than the rule. It will mostly be appropriate where a bank/solicitor is willing to provide the information but only subject to a court order.

In the period prior to the issue of proceedings, and in particular in cases targeted for an investigation aimed at the preparation of a draft disqualification report, great care should be taken when considering using or threatening to use, the power against directors or their associates or advisors (as opposed to the company's advisors). In these circumstances if the official receiver has any concerns that the application should be construed as being for the purposes of a disqualification Enforcement Directorate should be approached for advice before the application is issued.

The Criminal Procedure and Investigation Act 1996 (CPI 1996) and the Code of Practice issued under it (the Code) which came into effect on 1 April 1997, contain the procedures regulating the disclosure of unused material in criminal prosecutions. In broad terms unused material is material obtained during a criminal prosecution which is not then used as part of the prosecution case. Previously the disclosure of such material was governed by rules of common law, but the CPI 1996 has sought to place the treatment of such material on a statutory footing, the intention being to streamline the disclosure process. A failure to comply with the requirements of the CPI 1996 and the Code can lead to prosecutions being stayed on abuse of process or other grounds.

The requirements of the CPI 1996 mean the need for a greater concentration by official receivers on the collection, registration, storage and security of books and records and on the maintenance of the official receivers’ files. Official receivers need to be able to say when any accounting or statutory records were collected or received, from whom, in what form, what the records comprised and where they are stored.

The Service’s guidelines (as set out in this chapter) regarding recording, etc. of records to ensure compliance with disclosure, apply to all cases although the requirements go further for cases which result in prosecution see Part 5.

Every official receiver’s office must nominate a person to act as disclosure liaison officer (DLO) who must be an assistant official receiver unless the official receiver decides to assume the role. The DLO is responsible for co-ordinating the response to disclosure requests within the office and ensuring that disclosure related targets are met. The DLO will be the contact point in the office for Legal Services D2 and the Enforcement Directorate Authorisations Team.

Although the DLO will not be expected to deal personally with all matters arising in a particular case, he/she will be responsible for managing the process for liaising as necessary with current or former case officers to put them in direct contact with Legal Services D2 for example. The DLO has an important role in affording co-operation and enhancing a spirit of team work with Departmental lawyers and investigation officers. Any changes of DLO must be notified to the Enforcement Directorate Authorisations Team immediately. Arrangements must be made for cover for the DLO when that person is absent from the office.

Further information on disclosure is provided in Chapter 47 - Disclosure of information

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