October 2007
The official receiver is empowered to authorise an allowance, payable out of the estate, towards expenses to be incurred in employing an accountant or other person to assist in preparing a statement of affairs or accounts required in the proceedings [Note 1] [Note 2] [Note 3] [Note 4] [Note 5]. This course of action should only be considered on receipt of a written application from the person who has been required to supply the information. Form SAPA provides first a “turn-down” letter, or an agreement to make an allowance in which case the terms of the allowance are set out. There is no provision for a debtor presenting his/her own petition to be made an allowance to assist in the preparation of a statement of affairs. An allowance may be made for the preparation of accounts in the event of such a person being made bankrupt [Note 5].
12.72 Allowance not a matter of course
The official receiver may only authorise an allowance for the preparation of a statement of affairs or accounts when the person concerned is unable to prepare for themselves, a proper statement of affairs or accounts. The majority of company officers, partners or the bankrupt should normally be able to complete the statement of affairs forms, using the accompanying guidance notes, without the need for professional assistance, using form SAWU (winding-up, including guidance notes), or form SABK (bankruptcy, including guidance notes).
An allowance towards expenses to be incurred by a person in employing an accountant or other person to assist him/her in preparing accounts should only be authorised if the official receiver considers that the person concerned cannot prepare them and that the benefit to be received by the production of such accounts will warrant the cost to the estate. The application for assistance must be accompanied by an estimate of the costs involved, with particulars of the individual or firm whose employment is to be specifically approved by the official receiver.
12.74 Employment by official receiver
The official receiver may decide it is necessary for him/her to employ an accountant or other person to assist in preparing a statement of affairs or accounts but should only do so if he/she is not satisfied with the individual or firm put forward for this purpose by the nominated person or the bankrupt, or is concerned as to the safety of any records which may have to be released to them. The official receiver needs to be aware that such action would make him/her personally liable for the costs of employing such a person if there were insufficient funds in the estate to make payment in accordance with the due order of priority [Note 6] [Note 7].
In considering whether accounts should be required the official receiver should have regard to the probable high cost of their preparation, the ultimate use to which they may be put (e.g. prosecution, tax recoveries, etc) and the state of the company’s or bankrupt’s accounting records from which any such accounts are to be drawn which may increase the cost of obtaining the information.
If an allowance is authorised by the official receiver this should be noted on the file. If an insolvency practitioner is ultimately appointed as liquidator or trustee this information must be included in the record book (IPROH) on hand over. The sanction of Headquarters is not required before authorising or making any such allowance.
12.77 Notification of allowance
The official receiver should send written notification (form SAPA) of an authorised allowance to the person required to submit the statement of affairs or accounts. The notification should specifically name the individual or firm approved by the official receiver, the specific manner in which they are to act in relation to the relevant records and the fee agreed for their services (stated as inclusive or exclusive of VAT).
12.78 Responsibility of person making the statement of affairs
It must be stressed in the notification that the person on whom the requirement is placed is still responsible for the submission of the statement of affairs and/or the production of the accounts and that payment of the person employed to assist is his/her responsibility. The official receiver has merely authorised an allowance towards the cost of assistance.
The official receiver may lay down conditions as to the manner in which access to relevant records may be obtained by the parties involved and if the official receiver is concerned, for example, about the safety of records which may be needed as evidence in criminal proceedings, he/she may insist that any work on them is undertaken at the official receiver’s office [Note 8] [Note 9] [Note 10]. Basic information held about assets and liabilities should normally be made available on request to any person employed unless such information is privileged or has been provided to the official receiver in confidence.
12.80 Sufficiency of allowance
At the time that the allowance is agreed, the person employed should be informed that the allowance is only payable from the assets of the estate and that the payment will be affected by the following factors:
The person employed should be informed that if he/she considers at any stage that the allowance agreed is too low, the official receiver should be consulted before proceeding with the work. It must be clearly stated in writing, that if, notwithstanding the official receiver’s clear instruction, further work is done which is not covered by the allowance, he/she cannot expect to receive payment for the extra work out of the estate. It should also be made clear to the company officer, partner or the bankrupt and the person assisting that the statement of affairs is to be the person making the statement ’s own statement, verified by his/her own statement of truth, for which he/she is responsible in any proceedings concerning him/her.
The person employed to assist in the preparation of the statement of affairs or accounts should be informed that payment will not be made until the completed work is submitted to the official receiver. The official receiver can only pay any allowance out of the insolvent’s estate in accordance with the order of priority of expenses (the allowance appears at item (k) of Rule 4.218(3) [Note 11] [Note 12] and Rule 6.224(1) [Note 13] and the allowance cannot in any event be made unless funds are available for that purpose [Note 14].
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