October 2010
Part 5
Trading bankrupt
When the official receiver becomes aware that the bankrupt is trading he/she should consider the following in addition to the actions mentioned in Part 4.
The official receiver should identify all trading premises and deal with them in accordance with part 8.
24.56 Public liability insurance cover
The official receiver should ensure that where the public may be at risk through access to or contact with the bankrupt’s premises public liability insurance is in place. Public liability insurance protects the estate from personal injury claims. The official receiver after checking the bankrupt’s policy, if any, should confirm that it includes cover for public liability. When deciding whether to continue the bankrupt’s policy the official receiver should take into account the factors mentioned in paragraph 24.31. If the bankrupt does not have an insurance policy or it is not sufficient the official receiver should effect his/her own insurance cover. Further guidance may be obtained from Chapter 49.
The official receiver should not be influenced by the bankrupt or any creditor to carry on trading after the bankruptcy order. The official receiver should invariably close the business whilst he/she considers the merits of continuing to trade. The bankrupt or the official receiver may put an appropriate sign at the business premises. A business should not be carried on unless the official receiver is satisfied that to do so will be beneficial to the creditors in general and he/she has obtained a satisfactory indemnity, supported by a cash deposit, to cover any resultant losses. If the official receiver proposes to carry on the business without such cover Technical Section must be consulted first. Further advice on continuing a bankrupt’s business can be obtained from Chapter 62 and Chapter 2 part 2.
If a bankruptcy order is made against a solicitor who is in practice alone his/her clients will need to be dealt with. It is likely that the solicitor may be dealing with a number of property transactions and divorce proceedings. In order to ensure that the concerns of the bankrupt’s clients are dealt with the Legal Complaints Service will appoint a solicitor as an intervenor to take over the work of the practice. The official receiver should contact the Solicitors Regulation Authority, telephone number 08706062555 to request an intervention in the practice.
The official receiver may receive payments in respect of book debts from the bankrupt or via re-directed post. The official receiver may also receive monies directly from trade debtors after giving them notice of the bankruptcy order. Any monies received should be credited to the estate account and, if applicable, the relevant costs and fees should be charged. Further information regarding the appropriate costs and fees can be found in Chapter 36, part 1. The official receiver should not hold cheques or cash pending a meeting of creditors.
The official receiver should ensure that he/she indentifies all the bankrupt’s livestock and its location. It is not unknown for livestock to be kept on land not owned by the bankrupt usually under a formal grazing agreement. The official receiver should determine whether the bankrupt pays rent for the use of the land or whether any other arrangement applies. The formal grazing agreement is likely to impose obligations upon the bankrupt, for example, removing dead animals and caring for the animals in accordance with the Welfare of Livestock Regulations 1994 or other statutory provision for the time being in force. If the official receiver intends to care for the livestock pending the appointment of the trustee he/she may have to pay rent to the landlord, fulfil the bankrupt’s obligations or arrange for any transportation of the animals. If the official receiver has any concerns over the physical condition of the livestock or other animals, or the conditions in which they are being kept, a representative of a reputable animal welfare organisation, such as the RSPCA, should be asked to inspect the animals. If so advised, the official receiver should arrange for the animals to be destroyed by a vet, slaughterhouse or knackers yard.
24.61 Livestock – no realisable value
The official receiver will need to make arrangements for any livestock to be looked after and fed pending a decision on their future. This may include making adequate provision for dealing with animal waste. If there is any doubt regarding the physical condition of the livestock or if the livestock do not have a realisable value he/she should arrange for their disposal by contacting a reputable wildlife organisation, such as the Royal Society for the Prevention of Cruelty to Animals or a vet, slaughterhouse or knackers yard (see paragraph 31.6.40).
24.62 Livestock – realisable value
If the livestock have a resale value the official receiver should ensure that they are fed and cared for. However if the costs of care and feed are likely to exceed the sale proceeds the official receiver should deal with the livestock immediately [Note 1]. If the livestock are going to be held pending the appointment of a trustee then the official receiver may buy feeding stock and employ a special manager (who may be the bankrupt) to ensure that they are properly cared for [Note 2] until the appointment of the trustee. The official receiver should only become responsible for post bankruptcy order feed and, if appropriate rent, and should pay the accounts submitted. Any debit balance should then be passed to the trustee. If maintaining the livestock is likely to be beneficial to the estate but the costs of care and feed may be substantial, the official receiver should approach creditors for them to contribute to the cost of caring for the animals until the appointment of the trustee on the basis that any funds advanced by creditors for this purpose should be reimbursed from the sale proceeds. For further information on livestock see Chapter 8, paragraph 8.81 and Chapter 31, paragraph 31.6.40. For further information about the appointment of special managers see Chapter 32, part 4.
The government has from time to time introduced restrictions on the movement of animals or have introduced limited slaughter. When considering how to deal with livestock the official receiver should check the relevant government department’s website, currently Defra, to see whether there are any restrictions in place at the time of the bankruptcy order.
Where the livestock comprises dangerous animals or in any case where the public could be at risk, for example sheep or horses straying on to the public highway, the official receiver should determine whether the animals have a realisable value. If they do he/she should urgently consider applying either to the Secretary of State for the appointment of a trustee (after first issuing the notice of no meeting to creditors) (See Chapter 17, part 5 for further information) or to the court for the appointment of a special manager (see Chapter 32.4). The official receiver should ensure that adequate insurance is held regarding the animals, including a suitable public liability clause. If the bankrupt’s insurance is not suitable or cannot be continued (see paragraph 24.31) the official receiver should discuss the matter with Technical Section and, if agreed contact Willis Limited (Rachael Norris, telephone 0118 949 8082) to place the insurance separately in the open insurance market. All the relevant information should be supplied to Willis Limited by the official receiver. Once agreement has been reached the official receiver should complete the appropriate forms for submission to Willis Limited (see paragraph 49.28 for further information with the relevant organisation (see paragraph 8.82 for further details).
24.65 Controlled and Hazardous Waste
The official receiver is under a duty of care in respect of any controlled or hazardous waste which the bankrupt has in his/her possession [Note 3]. It is a criminal offence to keep or dispose of 'controlled waste', i.e. waste from households, commerce or industry, in a manner likely to cause pollution of the environment or harm to human health. In all cases the official receiver must take prompt action to deal with the waste. Paragraph 8.91 provides advice when discovering waste on inspection. Chapter 82 provides detailed instructions for dealing with both controlled and hazardous waste.
The official receiver, as receiver and manager, is unable to accept a landlord’s attempt to serve a notice to elect in respect of a rented trading premises. The notice to elect must be served upon the trustee [Note 4]. The official receiver should inform the landlord and/or his/her solicitors that service of the notice to elect can only be accepted by the trustee. The official receiver should undertake to supply the landlord with the name and address of the trustee on his/her appointment to enable the matter of the disclaimer to be considered. A notice to elect served upon a receiver and manager does not become effective on the appointment of a trustee.
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