Matters relating to prosecution, disqualification and bankruptcy restrictions orders proceedings



(AUGUST 2008)

15.75 Disqualification following a successful prosecution

The court may make a disqualification order where a person is convicted of an indictable offence (whether on indictment or summarily) in connection with the promotion, formation, management, liquidation or striking off of a company.

Where the disqualification is made by a court of summary jurisdiction, the maximum period of disqualification is 5 years. In any other case, the maximum period of disqualification is 15 years.

Where a CDDA86 section 2 order is made, but there are further matters of unfitness not considered in the criminal case an application can subsequently be made under CDDA86 section 6 with the aim of obtaining a longer period of disqualification (In re Cedarwood Productions Ltd Times Law Reports 12 July 2001).


15.76 Parallel criminal and bankruptcy restrictions order proceedings

(August 2008)

Lawyers have advised that there is no conflict between prosecution and bankruptcy restrictions order proceedings. As there is no equivalent of CDDA86 section 2 for BRO proceedings, it is expected that there should be a BRO application in every case where a statement of facts is submitted.

The BRO proceedings are likely to be concluded much sooner than the criminal proceedings, and the official receiver should not wait for the outcome of criminal proceedings before submitting a BRO report to the Authorisation Team.


15. 77 Competition disqualification orders and undertakings

If the Office of Fair Trading or specified regulator (listed below) has reasonable grounds for suspecting that a breach of competition law has occurred, they may carry out an investigation to decide whether to make application for a disqualification order or to accept a disqualification undertaking [Note 1].

Specified regulators for the purposes of a breach of competition law are;

  1. the Director General of Telecommunications;
  2. the Gas and Electricity Markets Authority;
  3. the Director General of Water Services;
  4. the Rail Regulator; and
  5. the Civil Aviation Authority.

When considering a disqualification application for breach of competition law the court will not have regard to any matters in CDDA86 Schedule 1. It is not envisaged that the Office of Fair Trading or specified regulator will continue an investigation following the making of a winding-up order unless a disqualification application has already been made.

If the official receiver becomes aware of any breaches of competition law which he/she feels should be drawn to the attention of the court in a disqualification application, he/she should contact the Enforcement Technical Team for further guidance.


15.78 Civil action not to prejudice criminal proceedings

Where there is a likelihood of prosecution and there is also the prospect of a civil action, it is important to ensure that the civil action does not prejudice the success of any current or prospective prosecution. The Authorisations Team should be informed of all such cases. Reference should be made to Part 7 if an insolvency practitioner has been appointed as liquidator or trustee. The approach to be adopted in each case will depend on its own facts.

It does not necessarily mean that the civil action should be delayed until any prosecution is concluded, as that might in some cases prejudice the success of the civil action, e.g. where an urgent injunction is necessary to restrain someone from removing assets or disposing of funds.


15.79 Recovery actions

(August 2008)

Where the official receiver submits a statement of facts alleging that property has not been disclosed, property has been concealed and/or there has been a fraudulent disposal of property, the official receiver should continue to take the necessary action to recover the property concerned. If there are insufficient assets to attract a nomination at a meeting of creditors or to enable a Secretary of State appointment from the official receiver's office rota, the official receiver can consider referring appropriate cases to the next insolvency practitioner on the national civil recovery rota.

The submission of a statement of facts is not a reason to put on hold any work which needs to be undertaken by the official receiver in his/her capacity as liquidator or trustee to secure all property which ought to have been made available to creditors.

The official receiver should continue to conduct interviews and where appropriate public examinations with the director, partner or bankrupt to obtain further information or in order to discharge his/her statutory duties as official receiver, or as liquidator or trustee. If following the submission of a report the official receiver recovers the property, which was the subject of the allegation, he/she must inform the Authorisations Team. Departmental lawyers from BERR Legal Services Directorate (Legal Services) will consider these factors in deciding whether it is in the public interest to bring a prosecution.

The fact that monies fraudulently obtained, transferred or disposed of have been repaid (whether voluntarily or in civil proceedings) does not mean that Legal Services cannot subsequently institute criminal proceedings but it is essential that the Authorisations Team should be advised of the repayment as this may be an important mitigating factor which needs to be considered by the Legal Services in making the decision to prosecute. The Director of Public Prosecutions has stated in the Code for Crown Prosecutors that a prosecution is less likely to be in the public interest if the defendant has put right the loss or harm that was caused (but defendants must not avoid prosecution simply because they can pay compensation).

Similarly if the loss to creditors has been mitigated by a recovery action the official receiver should consider this as a factor when deciding whether to commence or continue disqualification or BRO proceedings. If it is in the public interest to bring disqualification or BRO proceedings, details of the repayment must be included in the report, or reported to the Authorisations Team where a report has already been submitted.


15.80 Contact with bankrupts/directors following acceptance of a statement of facts

(August 2008)

Any contact with a bankrupt or director complaining about the action of Legal Services after a statement of facts has been accepted must be very carefully handled.  Under no circumstances should the detail of the potential prosecution case be discussed with the bankrupt/director. The proper course of action is to refer the complainant to Legal Services and to refer only in very general terms to The Service’s duty to report potential offences. Under no circumstances, should there be any attempt to justify a referral to Legal Services because this may compromise the ongoing investigation. 


15.81 Prosecution and financial recoveries

(August 2008)

Conflicting considerations of policy sometimes arise in connection with a contemplated prosecution of officers of a company. It may be the duty of the official receiver, as liquidator, to take civil proceedings against the officer for misfeasance or fraudulent or wrongful trading but it may also be desirable for Legal Services to prosecute him/her for a related criminal offence [Note 2].


15.82 Offers to settle

(August 2008)

If a pecuniary compromise of recovery proceedings (e.g. under sections 212, 213, 214 or 217) or a voluntary restitution without such proceedings is offered when a question of prosecution has arisen or is likely to arise, the offer should not be accepted without first consulting Legal Services. It is important that where criminal proceedings are still being contemplated any offer of pecuniary compromise is accepted "without prejudice to the right of the Director of Public Prosecutions or the Secretary of State to issue criminal proceedings in respect of any offence which may have been committed". Legal Services will advise on the appropriate form of words. The fact that an asset has been realised pre or post-submission of the statement of facts is a factor that Legal Services will consider when deciding whether it is in the public interest to bring a prosecution.


15.83 Income payments orders (IPOs) and income payments agreements (IPAs) in prosecution and BRO cases

(August 2008)

When reporting an offence to the Authorisations Team, the official receiver should state clearly whether an IPO or IPA has been obtained against or agreed with the bankrupt, how much is being paid, whether the bankrupt consented to making payments and whether payments are being maintained.

This information is used by the Authorisations Team and Legal Services to decide whether or not it is in the public interest to investigate and/or prosecute the possible offence. Although the Code for Crown Prosecutors states that offenders should not avoid prosecution simply because they can afford to pay compensation, if the loss or harm has been put right that is a factor to take into account when deciding whether it is in the public interest to prosecute.

As some time can elapse between the submission of a statement of facts and the case coming to court the official receiver may be asked to provide an up to date position in time for the court hearing, as this may affect the level of sentence if the bankrupt is convicted.

Details of any IPA or IPO agreed or obtained, together with the current payment status, should also be included in a BRO report.


15.84 Prosecution of third parties

(August 2008)

Third parties may have conspired with a company officer, partner or the bankrupt to commit or may have aided and abetted the commission of offences. Where this is the case the official receiver may properly consider including them in any report alleging offences committed by a company officer, partner or the bankrupt. Enforcement Directorate will consider whether there are sufficient grounds for including them in the proceedings to be taken against a company officer, partner or the bankrupt. There may also be cases in which it will be desirable for Legal Services to institute or continue criminal proceedings solely against third parties for frauds against the company, partnership or bankrupt (e.g. money stolen by an employee).


15.85 Reports to court

Where a conviction is obtained, either in respect of Insolvency Act offences or any other offences which are closely related to the insolvency proceedings and/or have contributed to the insolvency, or have a bearing on a company officer’s or the bankrupt’s conduct, the official receiver should submit a report to the court under section 132(1) or 289(1). He/she should also submit such a report in a winding up where a disqualification order is obtained, and in a bankruptcy where a bankruptcy restrictions order is obtained.


15.86 Certificate of conviction

(August 2008)

In every case where a conviction is obtained by the Investigations and Enforcement Directorate of the Department of Business Enterprise and Regulatory Reform, a form called a return of proceedings (also known as ROP) is drawn up which gives details of the court, date of hearing, date of sentencing, the charges, the results and the details of any disqualification order obtained under section 2 of the Company Directors Disqualification Act 1986. A copy of this form is always forwarded to the official receiver by Authorisations Team. A ROP is not available if the conviction was obtained by another agency, such as the police or HM Revenue and Customs, but similar information will be obtainable from those agencies. The ROP is an adequate substitute for a certificate of conviction (memorandum of conviction). If the official receiver intends to file his report in court under section 132 or 289 (as suggested above) or refer to the matter as evidence of misconduct in disqualification proceedings, then the ROP may not be an adequate substitute for a certificate of conviction. If an official receiver decides that a ROP is not adequate for his/her purposes, he/she should obtain a certificate of conviction by making a written request to the clerk of the relevant Magistrates' or Crown Court in which the individual was tried. The cost of obtaining the certificate of conviction should be charged to the Vote Account.


15.87 Keeping complainants informed of the progress of the investigation

(August 2008)

The official receiver often receives information provided by complainants, which may lead to the submission of a statement of facts, disqualification or bankruptcy restrictions order report. The statement of facts, if accepted, may lead to a criminal investigation carried out by BERR Investigation Officers, which can be a lengthy process.

Official receivers should, as far as possible, keep such complainants informed of the progress of the case. The official receiver should inform complainants when a case has been turned down for prosecution, disqualification or bankruptcy restrictions order proceedings.

When an investigation leads to a successful prosecution, disqualification or bankruptcy restrictions order, the complainant should similarly be informed. In addition, a further report to creditors should be sent to all known creditors, reporting the successful outcome of the investigation.


15.88 Entries on the bankruptcy restrictions register

When an interim bankruptcy restrictions order or a bankruptcy restrictions order is made against a bankrupt, or a bankruptcy restrictions undertaking is given by a bankrupt, the official receiver must enter onto the bankruptcy restrictions register [Note 3];

  1. the name, gender, occupation (if any) and date of birth of the bankrupt,
    (aa) the bankrupt's last known address,
  2. a statement that an interim bankruptcy restrictions order or bankruptcy restrictions order has been made, or that a bankruptcy restrictions undertaking has been given,
  3. the date of the making of the order and the court reference number, or the date of the acceptance of the undertaking by the Secretary of State, and
  4. the duration of the order or the undertaking.

All information regarding an interim bankruptcy restrictions order, bankruptcy restrictions undertaking or bankruptcy restrictions order must be removed from the register after receipt of notification that the order or undertaking has ceased to have effect, or after the expiry of the order or undertaking [Note 4].

Where the Secretary of State becomes aware of any inaccuracy on the register, the inaccuracy must be remedied as soon as reasonably possible [Note 5].

Where notice of the death of a bankrupt against whom information is held on the register is received, the fact and date of the bankrupt's death must be entered onto the bankruptcy restrictions register [Note 6].

In practice, the official receiver will enter these details onto LOIS, and the information is drawn across to the Bankruptcy Restrictions Register automatically.



15.89 Publicity following a conviction

(August 2008)

In the case of high profile prosecutions, Legal Services brief BERR Press Office with the facts of the case, relevant background, trial dates and sentencing date in advance of the court hearings.  The Press Office then draft a press release, which is forwarded to the case lawyer to check that it is accurate in relation to the facts.  Similarly, where the court passes a significant sentence on a case not previously notified to Press Office, or where the facts are considered to be newsworthy, Legal Services will brief a Press Officer so that they can draft a Press Release. The official receiver does not need to take further action in regard to publicising prosecution results.


15.90 Allowances as witness

(August 2008)

Witness expenses (also known as "conduct money") paid to an official receiver or a member of his/her staff in connection with a prosecution should be forwarded to the Enforcement Directorate, with the appropriate subsistence expenses being claimed from the Enforcement Directorate. If the official receiver or any of his/her staff attends court as a witness in a prosecution case brought by the Department, he/she is not entitled to claim expenses on the basis of an ordinary witness allowance, but should submit a claim for travel and subsistence costs incurred (which are charged on normal BERR rates) direct to Enforcement Directorate for authorisation and payment.

For more information on acting as a witness in court see Chapter 19 Part 6 - Court Practice and Procedure.


[Back to Part 5 - The investigation process post the initial case assessment] [On to Part 7 - Trustee or liquidator other than the official receiver]