Please note that Rules 4.137 and 6.145 of the Insolvency Rules 1986 provide that a liquidator/trustee must give at least 21 days notice of his intention to vacate office to the OR together with notice of any creditors’ meeting. The notice must contain details of any property which has not been realised, applied, distributed or otherwise fully dealt with in the liquidation/bankruptcy. Once the final meeting of creditors has been held, the liquidator/trustee must, under Rule 4.125(4) and 6.137(4) notify the Court on Form 4.42/6.50 and send a copy of that notice to the OR.

Rules 4.125 and 6.137(4) apply transitionally to "old Act" cases and therefore notice must be given to the Court and the OR once the final meeting has been held.

(This applies to England and Wales only)

1. Creditors Voluntary Liquidations

Under Section 171(6) of the Insolvency Act 1986 the liquidator must give notice of the "decisions, (if any), of the final meeting or meetings" to the Registrar of Companies. By virtue of Rule 4.126 - CVL (2) of the Insolvency Rules 1986, the creditors can only resolve against the liquidator having his release at the final meeting. The Rule therefore limits the requisite notification to the Registrar of Companies in this instance to a single decision.

[It is still intended to amend paragraph 2 of Form 4.72 to include details of any resolution passed against the liquidator having his release. In the meantime the practitioner should provide these details on the existing Form 4.72.]

The final meeting of the company is called in accordance with Section 106(2) and although there are no specific rules governing it, the meeting could pass resolutions which would be decisions notifiable to the Registrar of Companies under the provisions of Section 171(6). Although the company meeting cannot prevent the liquidator from having his release – (Section 173(2)(e) and Rule 4.126 – CVL providing that only the creditors' meeting is important in this respect), such release is not of course effective until the liquidator has vacated office under section 171(6) i.e when the Registrar of Companies has been notified of the decision of the meetings (and section 106(3) has been complied with).

Accordingly, until such time as the decision (if any) of the final meeting of the company has been notified to the Registrar of Companies, Section 171(6) will not have been complied with. A liquidator cannot vacate office, and his release cannot therefore be effective. In this case, paragraph 1 of Form 4.72 will be amended to ensure that a liquidator notifies the Registrar of Companies of any decisions taken at the company's final meeting. In the meantime the practitioner should provide these details on the existing Form 4.72.

2. Members Voluntary Liquidations

The final meeting of the company is called in accordance with section 94(2) and, as with creditor voluntary cases although there are no specific rules governing it, the meeting could pass resolutions which would be decisions notifiable to the Registrar of Companies under section 171(6).

By virtue of Section 173(2)(d) the release of a liquidator in a members voluntary liquidation is effective from the time he vacates office. Accordingly, until such time as the decision (if any) of the final meeting of the company has been notified to the Registrar of Companies, Section 171(6) will not have been complied with. A liquidator cannot vacate office, and his release cannot be effective. In this instance Form 4.71 will be amended to ensure that a liquidator notifies the Registrar of Companies of any decision taken at the company's final meeting. In the meantime practitioners should provide these details on the existing Form 4.71.

3.    OBJECTIONS TO THE RELEASE OF OFFICE-HOLDERS

IPs will be aware that any application to the Secretary of State for the release of a trustee or liquidator (in the various circumstances set out in the Insolvency Rules 1986) is processed by IPCU. 

Applications for release can be routinely processed upon receipt of the correct form in cases where the trustee/liquidator is:

•  removed by the Court – subject to provision of a copy of the relevant Court order; or

• where a liquidator in a members’ voluntary liquidation resigns or is removed.

In circumstances where the creditors have resolved against the release of the trustee/liquidator, ie in cases where:

• the trustee/liquidator resigns and the creditors meeting called to receive his resignation resolves against his release (rules 4.121, 4.122, and 6.135); or

• the trustee/liquidator is removed by a meeting of creditors which also resolves against his release (rules 4.121, 4.122, and 6.135); or

• a final meeting of creditors is held and the creditors resolve against the release of the trustee or liquidator (rules 4.125. 4.126 and 6.137);

then the trustee/liquidator must still apply to IPCU for release. Any such application will be given careful consideration. IPCU will contact the creditor(s) who object to the release of the trustee/liquidator in order to seek the reasons for their objections.  The trustee/liquidator will then be asked to respond on the matters raised by the objecting creditor(s).  This may then lead to a further exchange of correspondence before sufficient information is available to enable IPCU to determine whether or not to release the IP.   

IPCU will particularly consider the  extent to which the office holder has fulfilled his statutory duties in relation to the case, e.g.whether he has realised all the assets, and whether there is any further benefit to be gained from the continuing administration of the case. If, however, the only ground for objection is that the remuneration of the trustee/liquidator is excessive, then IPCU will draw to the attention of the objecting creditor(s) the powers of the Court to consider a claim that the remuneration is excessive.  It will not be necessary to seek the views of the trustee/liquidator and the application for release will be processed without further delay.  

In order to assist IPCU in processing applications for release, where the creditors have resolved against the release of the trustee/liquidator, please submit all applications to:

Mrs Jane Knight, IPCU, 5^th floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ. 

Please also provide the following information in each case: 

• a copy of the final report to creditors
• a full statement of receipts and payments for the case, including the dates of all transactions
• the name(s) and current address(es) of the objecting creditor(s)
• a copy of any proxy/ies submitted by the objecting creditor(s)
• details of the objections raised by the creditor(s), if known.

Enquiries arising from the above should be addressed to:-

Mrs Jane Knight at the above address

Tel: 0121 698 4098

email: jane.knight@insolvency.gov.uk

Enterprise Act (Individual Insolvency Provisions)

4. Notice to Creditors in Final Meeting in Bankruptcy (and Compulsory Liquidation)

Rule 6.137(1) has been amended to provide that where a trustee calls a final meeting of a bankrupt’s creditors, after 1 April 2004 the notice must be sent to all creditors of whom he/she is aware, not just the creditors who have proved their debts.  This will improve the level of information provided to a bankrupt’s creditors.  The requirement to send a copy of the notice to the bankrupt will remain.

A new rule, 6.137A, has been introduced from 1 April 2004, to provide that where the trustee is of the opinion that it would be unnecessarily onerous to comply with his/her statutory duty to send notices under rule 6.137(1) to all creditors, the trustee will be able to apply to the court to be relieved of the duty.  It is expected that this provision will be used only in exceptional circumstances.

Equivalent provisions have been introduced for compulsory liquidation cases (amended rules 4.125(1) and new rule 4.125A), and for those cases where the official receiver is liquidator and trustee (amended rules 4.124(1) and 6.136(1).

Enquiries arising from the above should be addressed to Steve Quick, Director of Policy, on 020 7291 6747.

5. Objections to Release

Practitioners are aware that the Insolvency Practitioner Unit (IPU), Birmingham, has the Secretary of State’s delegated responsibility for dealing with applications for release as Office Holder.

Legal advice has been obtained concerning the way in which applications for release where creditors have resolved against the Office Holder obtaining his release (Objections to Release) should be dealt with, and as a result of this IPU are changing the way in which they deal with these applications.

When a practitioner wishes to apply for release in a case where the creditors have resolved at the final meeting against the release of the Office Holder he should make an application on Form 4.41 or 6.49.  Additionally the following information should be attached:

• A copy of the Insolvency Practitioner’s report laid before the meeting, including a summary of the receipts and payments.
• A copy of the minutes of the final meeting where the resolution against his release was passed.
• A copy of the voting schedule for that meeting.

• The names, addresses and amount of claim for each objecting creditor.

IPU will contact the objecting creditor(s) to ascertain whether they still have an objection, and to give them an opportunity to explain their objections.

The role of IPU is to establish whether any assets which are reasonably capable of realisation have not been realised and whether any assets have been misappropriated.  Where there is an objection to release in relation to a commercial decision taken by the Office Holder, when considering the release, IPU needs to be satisfied that the decision is one which a reasonable insolvency practitioner might have made.

Civil actions such as wrongful trading do not have a bearing on how IPU will view the Office Holder’s actions where there are not funds to pursue an action.  Where funds are available, the Office Holder’s actions will be reviewed on a case-by-case basis.

Where the creditor wishes to object on the grounds of remuneration of the Office Holder this is not a valid reason for IPU to withhold release.  The creditor should be guided to Rules 4.131 (liquidator) and 6.142 (trustee) of The Insolvency Rules 1986 which entitle him, with the concurrence of at least 25% in value of the creditors (including himself) to apply to the court for an order that the remuneration be reduced, on the ground that it is, in all the circumstances, excessive. 

It follows, therefore, that if IPU are satisfied that the winding up/bankruptcy proceedings and disposal of the property has been dealt with satisfactorily, release will be granted.

Insolvency Practitioners are also reminded of their duty to give notice of the decisions (if any) of the final meeting to the Registrar of Companies.

Enquiries arising from the above should be addressed to Catherine Collinson, IPU, Tel 0121 698 4419 and Nicholas Nuade, IPU, Tel: 0121 698 4355

6. Notice to Official Receiver of Intention to Vacate Office: Returning Proofs of Debt.

Under rules 4.137 and 6.145 of the Insolvency Rules 1986 a liquidator/trustee must give at least 21 days notice of his intention to vacate office to the official receiver together with notice of any creditors’ meeting. The notice must contain details of any property which has not been realised, applied, distributed or otherwise fully dealt with in the liquidation/bankruptcy.

With effect from 1 April 2004 the requirement that a liquidator/trustee file proofs of debt in court on the conclusion of his/her administration under rules 4.138(2) and 6.146(2) of the Insolvency Rules 1986 were repealed. (Insolvency (Amendment) Rules 2004 (SI 2004/584)).

Official receivers are now in the position of being required to deal with assets without the ability to recover the proofs of debt from the Court file.

Where a practitioner vacates office having notified the official receiver of property which has not been realised, applied, distributed or otherwise fully dealt he/she is requested to forward any proof of debt held to the official receiver.

Any enquiries regarding the above should be directed towards Shona Manson, Technical Section, Area 4.1, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7291 6778; email: shona.manson@insolvency.gov.uk

7. Release where bankruptcy is annulled 

Insolvency practitioners are reminded that where the court annuls the bankruptcy order, section 299(4) of the Insolvency Act 1986 provides that the court also determines the timing of the trustee’s release.  Although rules 5.61(4) and 6.214(4) of the Insolvency Rules 1986 provide that the court may determine the date of the trustee’s release by reference to the filing of the final account under the provisions of either rule 5.61(2) or 6.214(2)), in the absence of a court order, the mere filing of the account does not by itself provide for the release of the trustee. 

A review by IP Banking has revealed that some insolvency practitioners have failed to ensure that the court order annulling the bankruptcy has also dealt with the trustee’s release. As insolvency practitioners will appreciate, the date of their release as trustee of any estate has bonding implications and in the circumstances insolvency practitioners are requested to ensure that appropriate orders of the court have been obtained in those cases where they have acted as trustee and the bankruptcy order has subsequently been annulled. 

In future where a final account is sent to IP Banking without an appropriate court order the account will be returned to the insolvency practitioner who may consider applying to the court for an amended order. Where the date of the trustee’s release is the only issue outstanding The Insolvency Service will not charge the banking fee which may fall due during the time it takes to resolve this issue. For those cases where the timing of the release is dependant upon the date the final account is filed in court it would be useful if the insolvency practitioner could confirm the date the account was filed with the court when submitting a copy of the account to IP Banking.

Any enquiries regarding the above should be directed towards Devorah Burns, IP Policy Section 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7291 6770; email: devorah.burns@insolvency.gov.uk  

8. Payment of a Surplus in Bankruptcy Cases

The Insolvency Service has become aware that following the decision in the case of Gill v Quinn [2005] BPIR 129  some insolvency practitioners have sought to conclude their administration of a bankrupt’s estate whilst leaving funds in the ISA.  

Although the Quinn case established that the debtor was unable to obtain an annulment, because all creditors had not been paid, the view of the Insolvency Service is that the case of In Re Ward, Ex parte Hammond and Son v The Official Receiver and the Debtor [1942] Ch 294  establishes that for the purposes of section 330(5) Insolvency Act 1986 ( payment of surplus to debtor), the payment to creditors means creditors who have proved in the bankruptcy; and that, after payment of statutory interest, (and any debts due to a spouse or civil partner, pursuant to section 329, Insolvency Act 1986) this case may be used as the authority to pay any surplus funds to the debtor. 

Insolvency practitioners should be aware that in dealing with such cases official receivers have been advised that they need to ensure that prior to the declaration of a dividend, appropriate steps to include the unproved creditors in the distribution have been taken. This includes the issuing of individual notices to unproved creditors to prove their claims and the advertisement of the intended dividend payment. It has further been suggested that when issuing the notice of intended dividend, where it is expected that rate of dividend will reach 100p in the £, a sentence should be added indicating that, as it is possible that the rate of dividend will be 100p in the £, creditors who have not proved should be aware that if they do not participate in the dividend  remaining funds will be used to pay statutory interest to the proved creditors. 

Provided that such steps are taken The Insolvency Service considers that any remaining surplus may then be paid to the (former) bankrupt and the estate account may then be closed.  

Insolvency Practitioners are reminded that they may access The Insolvency Service Technical Manual from The Insolvency Service website look under “Freedom of Information  - Policy and Technical Directorate” 

Any enquiries regarding the above should be directed towards Devorah Burns Insolvency Practitioner Policy Section area 5.6, 21 Bloomsbury Street, London    WC1 B 3QW telephone: 0207291 6770 email: devorah.burns@insolvency.gov.uk

9. Applications for release of trustee or liquidator following removal by court order 

Against a background of increasing movement of insolvency practitioners between firms resulting in the transfer of large numbers of cases by court order, insolvency practitioners are reminded of the following:

• Section 174(4) of the Insolvency Act 1986 provides that where a liquidator is removed by court, the liquidator must apply to the Secretary of State for release.  A similar provision relating to trustees is found in section 299(3).
• Insolvency practitioners are asked to note that the terms of a court order of transfer will include a provision that the creditors in each case are given notice of the transfer details together with a notice period in which to object.
• When applying to the Secretary of State for release, insolvency practitioners are required to confirm that a period of notice has been given to creditors and that no objections have been received from them.   

Any enquiries regarding this article should be directed towards Joe Clogan at Insolvency Practitioner Unit, Cannon House, 18 Priory Queensway, Birmingham, B4 6FD. Telephone: 0121 698 4105.  Email: joe.clogan@insolvency.gov.uk

General enquiries may be directed to: IPU@insolvency.gov.uk. Telephone 0121 698 4000.