10.8 Location of records - company, partnership and creditor petition bankruptcies
The location of the records of a company or a partnership or the bankrupt should be established as soon as possible after the making of the winding up order or bankruptcy order. It will then be for the examiner to decide whether to obtain custody of the records and how to obtain custody of the records depending on the circumstances of the case, see paragraphs 10.9 to 10.22.
10.9 Obtaining possession of records - company, partnership and creditors petition bankruptcies
When the location of the records has been established, it is important that the official receiver obtains immediate possession of the trading records of the company, partnership or of a bankrupt who has carried on a business, and of any other papers and documents relating to the insolvent’s affairs. In the case of a company, its seal (if any), certificate of incorporation, register of charges, minute book, share register and any other formal documents should also be recovered. If the official receiver requires possession of records to carry out his/her investigative or any other function, he/she is entitled to have them (see paragraph 10.2).
When telephone contact is made with a director, partner or the bankrupt in a creditors' petition case (for debtors' petition case please see paragraph 10.10) he/she should be asked about the whereabouts of the records and instructed to bring them to the first interview, unless this is impractical due to the volume of records (see paragraph 10.22 ) or for some other valid reason, whereupon arrangements should be made for their collection. If the records are with a third party the records should, if possible, be obtained prior to the first interview. If there is no contact with a director, partner or the bankrupt prior to the interview and no records, or only some of them, are brought in, the whereabouts of all of the (remaining) records should be established at that interview and they should be obtained as soon as possible thereafter.
If a decision is made that the records are not to be recovered, the reasons for this decision should be included in the CAR or a separate file note should be made setting out the reasons for the decision and endorsed by the official receiver or assistant official receiver.
10.10 Location and obtaining of records - debtors petition cases
In debtor's petition cases the examiner will carry out a review of the statement of affairs and decide how to approach the case. The case will be classified into type 0, type 1 or type 2 and the appropriate appointment letter will be sent which details how accounting records of the bankrupt are to be dealt with. Further details of the classification of cases and what type of interview should be held are provided in Chapter 15 Aims and conduct of OR's investigation paragraph 15.21.
The relevant appointment letters are:
LIC - for use where the bankrupt has been seen at court or in the office immediately after the making or the order. The letter provides a list of accounting records to be handed over together with a checklist of any further accounting records required.
LNI - for use in type 0 cases - where the examiner is of view that no interview is required and the case is no further enquiry the letter sent will place no requirement upon the bankrupt to provide to the official receiver or to retain any records.
LTI - for use in type 1 cases and for some type 2 cases where the interview is conducted by telephone the bankrupt will be required to complete the PIQDP and to send certain documents to the official receiver which are listed in the letter and is informed of a requirement where he/she has been self employed or operated a business to keep all accounting records for the 2 years prior to the bankrupt until the date of their discharge from bankruptcy.
NTB1 - for standard face to face interviews of bankrupts in type 2 cases. In this appointment letter the bankrupt is requested to bring to the interview all the accounting records in his/her possession which relate to his/her trading in the last 2 years. The bankrupt is also requested to keep any further accounting records until the official receiver informs him/her that they may be destroyed.
10.11 Failure to deliver up records
If the official receiver requires possession of records to carry out his/her investigative or any other function, he/she is entitled to have them. If the bankrupt or a director fails to deliver up the records, they should be reminded of their statutory duty to do so [note 1] and informed of the consequences of non compliance with those provisions, including in the case of a director, that the court may require any person having possession of the company’s records to deliver them to the office-holder.
10.12 Records held by other office holders
Where there has been previous insolvency proceedings, for example a voluntary liquidation, the records should be obtained from the previous office holder. The office holder is required to deliver up the records [note 2] though an administrative receiver may be permitted to retain custody of records that he/she requires for the purpose of the receivership for the time being [note 3].
Where a liquidator or trustee other than the official receiver is appointed by the court immediately on the making of the winding-up or bankruptcy order, or where an administrative receiver is in office, the insolvency practitioner might wish to retain custody of the records. In these circumstances, arrangements should nevertheless be made by the official receiver for the registration of the records, particularly if the case is to involve further investigation, if necessary through attendance on the insolvency practitioner. If a decision is made not to schedule the records this must be recorded on the CAR and endorsed by the assistant official receiver or official receiver.
10.13 Receipt for delivery
A form of receipt [note 4] must be issued and a copy retained by the official receiver each time records are delivered to the office or come into the official receiver’s possession. If the records are not all delivered together, a separate receipt form must be completed on each occasion records are delivered to the office or recovered. The receipt will enable the official receiver to establish an audit trail of which records were received, when they were received and from whom they were recovered.
The receipt need not describe the records in detail, only the number of boxes or other containers delivered or, if there are only a few items, the number of books, envelopes of vouchers etc. It is possible that discretion and initiative may have to be used to adapt the basic approach to suit the circumstances of a particular case but this will in no way alter the fundamental requirement that it must be possible to show which records were obtained on a particular date, where the records came from and how they were dealt with.
10.14 Recovery of records
There are many possible permutations for the collection and recovery of an insolvent’s accounting records and these are discussed in paragraphs 10.16 to 10.21 In every case where records have been recovered a receipt must be issued and the records registered.
10.15 Registration of records
All records recovered must be registered on LOIS screen 27 no later than the end of the next working day after receipt. This is irrespective of whether or not a schedule of records handed over is completed with the deliverer and whether or not an interview is held.See also paragraph 10.25.
10.16 Delivery and scheduling of records prior to interview
Reception staff should be instructed to ascertain the identity and capacity of the person delivering any records to the office. Reception staff should notify the case clerk immediately of the delivery of records to the office. The person delivering the records should be given a form of receipt [note 4] and a copy retained on the office file. If records are delivered by third parties such as accountants, it would be best practice that a copy of the receipt issued to the third party was copied to the bankrupt or director thereby preventing disputes regarding the number and description of records recovered.
If a director, partner or the bankrupt delivers the records other than when attending for interview, every effort should be made to ask the person to remain and complete a schedule of records handed over [note 5].
If delivery of the records was by arrangement with the examiner for a specific day, then the examiner should ensure that he/she is available to deal with the records.
If a director, partner or the bankrupt delivering the records refuses to complete a schedule of records handed over [note 5], this should be recorded on a file note, which should be kept with a copy of the form of receipt [note 4].
10.17 Delivery and scheduling of records by insolvent at interview
10.18 Delivery and scheduling of records by insolvent after vetting interview
10.19 Recovery by insolvency staff
If records which have been held by a third party are delivered directly to the official receiver’s commercial storers, the storers should issue a standard receipt to the deliverer and send a copy to the official receiver.
10.20 Recovery by agents
Agents are likely to be instructed to recover assets in cases where there are a large amount of records and in this regard please refer to paragraph 10.22 for suggested strategies.
10.21 Records received by post
In all but no further enquiry debtor's petition cases an appointment will need to be arranged with the bankrupt or director, if not already done so, to complete a schedule of records handed over [note 5].
10.22 Accounting records strategy, large cases
10.23 Company seal
Although an incorporated company may have a common seal to enable it to execute legal documents, there is no statutory requirement for it to have one [note 6] . A company seal recovered in a liquidation may therefore be disposed of when there is no further prospect of its being used.