February 2006

15.2 Aim of the Department of Business, Enterprise and Regulatory Reform

(August 2008)

The Department of Business Enterprise and Regulatory Reform has the clear aim of generating wealth for everyone in the UK by helping people and businesses to become more productive and more successful.

The strategic objectives to achieve this are to:

• Promote the creation and growth of business and a strong enterprise economy across all regions.
• Ensure that all Government Departments and agencies deliver better regulation for the private, public and third sectors.
• Deliver free and fair markets

15.3 Aims of the Insolvency Service

(August 2008)

The Insolvency Service is an executive agency within the Department of Business Enterprise and Regulatory Reform and part of the Department’s Fair Markets Group. The Insolvency Service supports the strategic objectives of the Department of Business Enterprise and Regulatory Reform by ensuring that financial failure is dealt with fairly and effectively, encouraging enterprise and deterring and detecting fraud and financial misconduct.

15.4 Statutory duties of the official receiver (companies)

The official receiver has a statutory duty to investigate every compulsory winding up order made by the court.

Section 132(1) states that where a winding-up order is made by the court in England and Wales, it is the duty of the official receiver to investigate -

1. if the company has failed, the causes of the failure; and
   
2. generally, the promotion, formation, business, dealings and affairs of the company, and to make such report (if any) to the court as he thinks fit.

There are no exceptions to the official receiver's duty to investigate in a compulsory liquidation.

15.5 Statutory duties of the official receiver (bankruptcy)

The investigatory duties of the official receiver in relation to bankruptcies are detailed in section 289(1) which states:

The official receiver shall -

1. investigate the conduct and affairs of each bankrupt (including his conduct and affairs before the making of the bankruptcy order), and
   
2. make such report (if any) to the court as the official receiver thinks fit.

Under section 289(2) the official receiver has discretion to decide that an investigation is unnecessary in a bankruptcy. In practice the official receiver should carry out an initial investigation into each case. See also Part 2 and Part 3.

15.6 Aim of the official receiver's investigations

The aim of the official receiver's investigations is to achieve the following;

1. to obtain information about the past and present assets and liabilities of the company or bankrupt;
   
2. to obtain a numerical explanation of the deficiency where appropriate;
   
3. to establish and test the reasons for the insolvency;
   
4. to establish in a compulsory liquidation whether the conduct of directors and others involved in the company’s management is such as to warrant the submission of a disqualification report to the Authorisations Team;
   
5. to establish in a bankruptcy whether the conduct of the bankrupt is such to warrant the submission of a BRO report to the Authorisations Team.

A full enquiry into the above matters may reveal that criminal offences might have been committed which should then be reported to the Authorisations Team.

15.7 Extent of inquiry

It is not possible to prescribe an exact procedure which all investigations should follow, because every case is different.

As a general rule, the investigation should be proportionate to the circumstances of the case and the size of the deficiency. The likely outcome of the investigation should also be considered. There must be some prospect of a positive outcome, whether that is the protection of the public from culpable individuals or the recovery of assets for the estate. Inquiries should not be continued only as an interesting exercise.

15.8 Investigations and the Police and Criminal Evidence Act 1984

The role of the official receiver is to establish the facts of what has occurred i.e. relevant dates, amount of debts, names and addresses of creditors, to protect and secure assets and to establish the causes of failure [note 1]. It is not the role of the official receiver to investigate offences, although where it becomes apparent that criminal offences may have been committed, the official receiver should report the facts to the Authorisations Team (see paragraph 15.6).

The enquiries conducted by the official receiver in the proper performance of his/her duties are not subject to the Police and Criminal Evidence Act 1984.The official receiver is not investigating offences within the meaning of the Police and Criminal Evidence Act 1984 section 67(9).

If the Police and Criminal Evidence Act 1984 and the related Code of Practice on interviewing did apply to the duties of the official receiver, a director or a bankrupt could refuse to offer any explanations of their conduct or decline to answer questions on either the whereabouts or disposal of assets which ought to be available to creditors, on the grounds of incriminating themselves.

The official receiver should therefore exercise caution when carrying out further investigations to ensure that the enquiries being made are in order to discharge his/her statutory duties. If the purpose of a particular line of enquiry is solely to gather information about a possible criminal offence, the Police and Criminal Evidence Act 1984 and the Code of Practice might apply.

15.9 Further Investigation

Recommendations that further investigation are necessary are often asset related, in that there has been;

1. non-disclosure of property,
   
2. concealment, by false statements or other acts, of property,
   
3. failure to account for a loss,
   
4. fraudulent disposal of property.

The purpose of the investigation is to establish what has happened to the assets of the company, partnership or bankrupt, and to carry out the official receiver's statutory obligations as set out in paragraph 15.4 and paragraph 15.5. Where this investigation provides evidence that a criminal offence might have been committed, the official receiver has a duty to report this to the Authorisations Team.It is not the purpose of the official receiver's enquiries to investigate offences.

Recommendations for further investigations may also concern matters of conduct. Disqualification proceedings and BRO proceedings are civil proceedings and are not subject to the Police and Criminal Evidence Act 1984.

15.10

Note: [s235 and s291]

The official receiver is entitled to ask all questions necessary to enable him/her to carry out his functions under the insolvency legislation and a director or the bankrupt has a statutory duty to answer.

However, statements obtained under compulsion cannot generally be used as evidence in any subsequent criminal proceedings [note 2](see Chapter 47 Part 1 and Part 5 - Disclosure).

15.11 Admissibility in evidence of statements of affairs etc

The use of statements of affairs or any other statement made in pursuance of a requirement imposed by the Insolvency Act 1986 in subsequent criminal proceedings is limited by section 433(2) which states -

"However, in criminal proceedings in which any such person is charged with an offence to which this subsection applies -

1. no evidence relating to the statement may be adduced, and
   
2. no question relating to it may be asked,

by or on behalf of the prosecution, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person."

Section 433(3) states -

"Subsection 2 applies to any offence other than - 

1. an offence under section 22(6), 47(6), 48(8), 66(6), 67(8), 95(8), 98(6), 99(3)(a), 131(7), 192(2), 208(1)(a) or (d) or (2), 210, 235(5), 353(1), 354(1)(b) or (3) or 356(1) or 356(2)(a) or (b) or paragraph 4(3)(a) of Schedule 7;
   
2. an offence which is -
   
   (i) created by rules made under this Act, and(ii) designated for the purposes of this subsection by such rules or by regulations made by the Secretary of State;
   
3. an offence which is -
   
   (i) created by regulations made under any such rules, and
   
   (ii) designated for the purposes of this subsection by such regulations;
   
4. an offence under section 1, 2 or 5 of the Perjury Act 1911 (false statements made on oath or made otherwise than on oath); or
   
5. an offence under section 44(1) or (2) of the Criminal Law (Consolidation) (Scotland) Act 1995 (false statements made on oath or otherwise than on oath)."

15.12 Criminal Procedure and Investigation Act 1996

The Criminal Procedure and Investigation Act 1996 made reforms to the criminal justice system and laid down various rules regarding disclosure (in particular the rules of disclosure of unused material). It contains provisions which impose obligations on prosecutors to disclose documents to the defence in any case in which criminal charges are brought. Prosecutors must follow these rules for all criminal investigations.

The official receiver should consider the requirements of the Criminal Procedure and Investigation Act 1996 whilst carrying out his/her statutory duties and be aware that the guidelines on disclosure will apply to all cases but the requirements go further for cases which result in prosecution. See also Part 3 and Chapter 10 Part 2 - Custody, storage, preservation and destruction of records.

15.13 Data Protection Act 1998

During the course of the official receiver's investigations personal data about individuals will inevitably be collected and processed. The provisions of the Data Protection Act 1998 will therefore apply. The official receiver is the Data Controller for the purposes of the Data Protection Act 1998.

For full details of the implications of the Data Protection Act 1998 for official receivers, see Chapter 81 Part 2 - Data Protection Act 1998.

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