The Book Debt Contractor

October 2014

31.1.4 The book debt contract (amended October 2014)

The Insolvency Service has a contract for the services of an agent to work on behalf of the official receiver to collect book debts due to companies or partnerships against which a winding-up order has been made, or due to individuals (including members of a partnership) subject to a bankruptcy order. The contract extends to the collection of monies due under income payments orders (IPOs) or income payments agreements (IPAs) antecedent and other collections. Details on IPOs and IPAs is provided in Chapter 31.7.

 

31.1.4A Book debt contractors (Amended October 2014)

The current contract is with Clarke Willmott. Information on the service provided by Clarke Willmott and full guidance on using their Debt View website is available on the Clarke Willmott intranet page.       

Throughout this chapter Clarke Willmott will be referred to as the contractor.

 

31.1.4B Acceptance of all instructions for collection of book debts and IPAs/IPOs (amended September 2011)

The contractor undertakes to accept all instructions received from the official receiver for the collection of book debts and IPAs/IPOs regardless of the age of the debts or whether the book debts have been described as irrecoverable by the company director, bankrupt or partner.

 

31.1.4C Debt collection agreement is exclusive (amended September 2011)

The debt collection agreement is exclusive and means that the contractor is the only party that the official receiver can instruct to undertake book debt collections. Where instructed by the official receiver the contractor must undertake to collect, or attempt to collect, those debts on behalf of the official receiver. The official receiver should make no attempt to actively recover book debts other than through the contractor (but see paragraphs 31.1.19 and 31.1.20 for information on cheques in hand, found at the insolvent’s premises or otherwise recovered by the official receiver after the insolvency order).

 

31.1.5 Conflict of interest

In the event that a book debtor is represented by the contractor, the contractor will inform the official receiver forthwith and return the responsibility for the collection of that debt to the official receiver. The official receiver should pursue the debt.

 

31.1.6 Official receiver not to write to book debtor

Using the contractor means that the official receiver has no need to contact book debtors at the initial notices stage and thus no letters requesting payment should be sent to book debtors by the official receiver.

 

31.1.7 Existing debt collectors at date of insolvency order

Book debt collectors may have been appointed by the insolvent prior to the date of the insolvency order. The official receiver has the discretion to retain the services of the book debt collection agent instructed by the insolvent if he/she feels it to be appropriate.

Otherwise, the official receiver should disengage himself/herself from any existing agreement at the earliest opportunity, and instruct the contractor. The official receiver should instruct the existing debt collectors to forward all payments already collected and any supporting documentation held in respect of book debts still to be realised to the official receiver (not to the contractor).

 

31.1.8 Official receiver as receiver and manager

The official receiver can still instruct the contractor to collect the book debts even if the notices have not been issued in a case and he/she is not yet the trustee. If the official receiver feels that the book debts are at risk and should be protected for the estate, the contractor should be instructed to begin the collection process whilst the official receiver is receiver and manager.

 

31.1.9 Insolvency Practitioner appointed by the court

Where an insolvency practitioner has been appointed by the court on the making of an insolvency order or has been appointed by the Secretary of State shortly after the order, the contractor should not be instructed by the official receiver as he/she is not the liquidator or trustee.

 

31.1.10 Instructing the contractor

(Amended October 2014)

Book debts become more difficult to collect as time passes and it is important that the instruction to collect the books debts is given to the contractor as soon as possible after the existence of book debts are notified to the official receiver even where it is likely that an insolvency practitioner liquidator or trustee will be appointed at the first meeting of creditors.

The official receiver should instruct the contractor by uploading a completed IMB letter to the Debt View website. See Referring Book Debts on the Clarke Willmott intranet page.  Within 2 working days of receipt of instruction the contractor will set up on Debt View a separate record of each book debt. The record will be accessible to the Case Officer and he/she will become responsible for monitoring the progress of the book debt collection and respond to any requests for additional information from the contractor.

.If an insolvency practitioner is subsequently appointed to act as liquidator or trustee the contractor should be informed so that contact can be made with the new office holder (see paragraph 31.1.32).

 

31.1.11 Informing the insolvent of the contractor’s appointment

(Amended October 2014)

At the same time as instructing the contractor the official receiver should inform the directors, partners or bankrupt of the contractors appointment by issuing a BDTLTB letter. The letter requests that they cooperate fully in the collection of debts. If they fail to cooperate with the contractor, the contractor will report this failure to the official receiver.

 

31.1.12 Initial action by contractor

The contractor will notify book debtors of the official receiver's instruction within 3 working days of receiving such instructions and follow the method of collection agreed in the Service Level Agreement.

If on investigation the contractor considers any book debt irrecoverable notification will be sent to the official receiver within 7 working days and the official receiver may then write off the bad debt.

 

31.1.13 Information to be supplied to the contractor by the official receiver

(Amended October 2014)

The contractor will need all the information requested in the IMB letter as follows;

  • the name and court details of the case and the name and address of the official receiver dealing with it.
  • the name, address and telephone number of the company director, partner or bankrupt who may be able to provide additional information,
  • the name, address, telephone number and reference number of the book debtor,
  • the amount of the debt
  • the date the debt was incurred
  • the consideration for the debt, and
  • any documentary evidence held in support of the debt.

Where this information is not available to the official receiver or where the contractor needs further information, the contractor must be prepared to make further enquiries at their own expense.

 

31.1.14 Supporting information

(Amended October 2014)

Successful debt recovery is dependent on the official receiver supplying the contractor with as much information as possible as early as possible. The official receiver should ensure that when he/she receives any of the following information, after the initial instruction, it is uploaded to the contractor via Debt View (See paragraph 31.1.10).

Payments made to the official receiver in respect of book debts other than via the contractor (see paragraphs 31.1.19 and 31.1.20),

Further useful supporting evidence (from whatever source) about the debts,

Further information provided by the directors, partners or bankrupt.

 

31.1.15 The accounting records/documentary evidence

(Amended October 2014)

Documentary evidence in support of the book debts will probably be in the accounting records of the insolvent. Copies of any accounting records needed for the collection of the book debts should be uploaded to the contractor via Debt View (See paragraph 31.1.10).

Where practical to do so the supporting documentation should be uploaded to the contractor via Debt View with the initial IMB letter. Where the volume of accounting records is large or it is not practical to upload via Debt View the case officer assigned to the case and/or the examiner should discuss the matter with the contractor to arrange the transfer of the records. See Contacts on the Clarke Willmott intranet page.

Where the accounting records are held electronically the official receiver should contact the contractor to ensure that they can access the information in that form.

 

31.1.16 Companies House information

(Amended October 2014)

Where book debtors are limited companies information about their status can be found at Companies House. Where the official receiver has had cause to check for information on a limited company book debtor via Companies House Direct, such information should be uploaded to the contractor via Debt View (See paragraph 31.1.10) to assist them in the debt collection.  

 

31.1.17 Private Examinations

No longer applicable

 

31.1.18 Information to be supplied to the official receiver by the contractor

(Amended October 2014)

The contractor provides an online enquiry facility which allows access to cases for monitoring progress and to provide instructions online. This can be accessed via the website https://debtview.clarkewillmott.com The case officer assigned to the case at either the command office or the LTADT has a login account and password to allow access.

Information on the service provided by Clarke Willmott and full guidance on using their Debt View website is available on the Clarke Willmott intranet page.        

 

31.1.19 Cheques received by the official receiver

(Amended October 2014)

If the official receiver recovers cheques from the business premises of the insolvent or if they are handed over at interview by the bankrupt/director, they should be banked as normal and the official receiver’s usual fees charged if the contractor has not yet been instructed. The official receiver must take steps to ensure that the instruction to the contractor does not then include the debt(s) which have already been paid. If the contractor has already been instructed, they should be notified of the remittance received by the official receiver via the ‘payments’ screen on Debt View (See Debtview instructions on the Clarke Willmott intranet page). The contractor will not be entitled to the usual commission if the remittance to the official receiver does not result from any action on their part.

 

31.1.20 Remittance of book debts to the official receiver after the contractor instructed

(Amended October 2014)

Occasionally, a book debtor may remit payment for a debt direct to the official receiver notwithstanding the fact that he/she has been requested to pay the contractor. Where the official receiver is satisfied that the remittance is as a result of the action of the contractor, e.g. a letter sent to the book debtor requesting payment, the contractor is entitled to his/her commission on that debt. The official receiver should inform the contractor of the remittance via the ‘payments’ screen on Debt View (See Debtview instructions on the Clarke Willmott intranet page) so that he/she does not continue to pursue the debt and bank the cheque. The contractor will deduct his/her commission on that debt from other receipts in the accounting to OR Banking (see paragraph 31.1.33).

 

31.1.21 Appointment of liquidator/trustee other than the official receiver

(Amended October 2014)

Where an insolvency practitioner is appointed the official receiver should inform the contractor of his/her appointment by issuing the NACT letter. The contractor will account for any monies in their hands at the date of the handover direct to the insolvency practitioner and forward a copy of the account to the official receiver via Debt View.

It will be a matter for the insolvency practitioner after appointment to determine whether the contractor will continue to collect the book debt and on what terms.

 

31.1.22 Transfer of case to another official receiver

(Amended October 2014)

Where a case is transferred internally within The Insolvency Service or to another court after initial instruction, the contractor should be informed of the transfer.      When cases are transferred to the LTADT in ISCIS they will be picked up by the LTADT Central Operations Team (COT) in Birmingham. The COT team will allocate each case to a LTADT case clerk and notify the contractor of the changes. Court transfer details can be passed on via the ‘instruct us’ tab on Debt View (See Debtview instructions on the Clarke Willmott intranet page) 

 

31.1.23 Legal action in progress

(Amended October 2014)

At the time of an insolvency order, the insolvent may have ongoing legal proceedings against book debtors. The contractor may still be able to assist the official receiver by arranging for the recovery of files from solicitors to be considered by its own legal advisors as to the merit of pursuing the matter. Whilst it is rare for any legal work to be worth continuing, especially in bankruptcy cases, there may be an approach to the official receiver to assign the rights of action. The contractor will consider the advice from their legal advisors on the collectability of the debt and suggest a course of action to the official receiver. If this course of action involves legal action, the contractor will need to be funded to pursue the debts. An estimate of the likely future expenditure will be provided by the contractor and the official receiver should then consider contacting the principal creditors to ask for funding prior to instructing the contractor to issue legal proceedings. (In practice it is likely that such cases will only be taken forward by insolvency practitioner trustees and liquidators) (see paragraph 31.1.30). If any legal files in respect of book debts have already been passed to the official receiver, these should be uploaded via Debt View to the contractor with the initial instruction or as soon as possible thereafter.

 

31.1.24 Compromises and negotiated settlements

(Amended October 2014)

The contractor may consider a compromise to be more productive than taking proceedings against a book debtor. Where a book debtor suggests a compromise i.e. admits to a level of debt but offers a payment less than that, the contractor will exercise their discretion as to whether to accept the proposals for settlement. All such matters are to be reported to the official receiver via Debt View within 7 days of acceptance. 

 

31.1.25 Payment by instalments

Where there is full admission of a debt by any book debtor who then offers to pay the full sum in instalments, the contractor may exercise their discretion as to whether to accept the proposals for settlement. All such matters should be reported to the official receiver within seven working days of their acceptance.

 

31.1.26 Book debtors abroad

(Amended October 2014)

Where the book debtor is overseas the contractor may, in appropriate circumstances, pass details of the debt to a local agent for recovery. Inevitably this will lead to a greater commission being charged by the contractor and the contractor will liaise with the official receiver in advance to agree the fee payable.

 

31.1.27 No trace book debtors

Where a book debtor cannot be found the contractor will decide whether to trace the book debtor. Any additional costs (see paragraph 31.1.34 for limits of these costs) incurred in tracing the book debtor will only be charged to the estate if the debtor is found and the debt recovered. These costs are in addition to the usual commission charged by the contractor.

 

31.1.28 Bad debts

The decision to discontinue the collection of a debt and return the debt to the official receiver uncollected rests with the contractor. This decision is not affected by the size of the debt.

The contractor will inform the official receiver that in his/her opinion the debt is irrecoverable within seven working days. The official receiver will review the situation but in practice it is unlikely that the official receiver will take further steps to recover a debt where the contractor considers it irrecoverable and the debt will be written off.

 

31.1.29 Book debtor subject to insolvency proceedings

Where a book debtor becomes subject to any insolvency proceedings the contractor will contact the insolvency practitioner to register the official receiver's interest as a creditor and ascertain whether any dividend is likely to be paid. The contractor will lodge a claim in the proceedings on behalf of the official receiver and the collection of the debt can then be treated as concluded by the official receiver.

If a dividend becomes payable at a later date the contractor will be entitled to his/her commission on the dividend.

 

31.1.30 Legal Action to recover book debts (amended May 2015)

If the contractor believes that there is a good chance of recovering a book debt, but cannot progress the recovery without funding, e.g. to commence legal action, all relevant details should be supplied to the owning official receiver or the LTADT. The official receiver will consider the request to institute legal proceedings within six weeks of receipt during which time creditors may be consulted.

The official receiver will decide whether or not to ask the creditors of the estate if they are willing to fund the action. If the official receiver decides not to refer the matter to creditors (or if he/she does so) and the creditors are not willing to fund the action, the matter will be concluded. 

If the creditors are willing to fund the action, on receipt of the funds, the official receiver may instruct the contractor, in writing, to continue with the recovery. The contractor will act as solicitors on behalf of the official receiver and they will be entitled only to recover their legal fees not the fees they would be entitled to as collection agents (see paragraph 31.1.32).

Alternatively, the creditors may choose to appoint an insolvency practitioner as liquidator or trustee of the estate to deal with the matter. The official receiver should notify the contractor of the appointment. It will then be up to the insolvency practitioner to decide whether to continue with the recovery and whether he/she will continue to use the contractor to recover the book debts.

 

31.1.31 Completed collections

(Amended October 2014)

When the contractor has completed collection activity in respect of the book debts, the official receiver will be informed via Debt View. In the meantime, the official receiver can monitor progress of the collection via the contractor’s website https://debtview.clarkewillmott.com 

 

31.1.32 Fees charged by the contractor

(Amended October 2014)

The contractor has agreed a fees structure and no fee is payable where no realisation has been made. In addition where a book debt payment is recovered by the official receiver and the payment is not the result of any action taken by the contractor no fee is payable (see paragraphs 31.1.20 and 31.1.21).

Where the average value of each debt in a case is £25 or less, subject to the official receiver's agreement that the case is one that falls into this category, a flat rate fee of £1 plus VAT will be payable on each debt recovered. On other book debts the fee is fixed at 4% of the realised sum plus VAT.

Fees will include disbursements except where,

  • tracing agents are used; an additional fee of £100 can be charged for a positive trace where recovery of the debt is made, or  
  • legal proceedings are in hand at the date of the insolvency order and the files of the solicitor formerly instructed by the insolvent might need to be obtained by the contractor in order to review them and report to the official receiver on the merits of the case. There will be no charge for this additional work unless realisations result when the additional fee, not exceeding the sum realised, would be a maximum of £100.

Where collections are made outside the UK the contractor will liaise with the contracts manager to agree a fee in advance of any collection action.

Where the contractor is instructed to take legal action on behalf of the official receiver their fees will be covered by a standard conditional fee agreement provided that,

  • the payment was their fee plus an uplift of no more than one hundred percent in accordance with the Conditional Fee Agreement Order 2000;
  • the conditional fee agreement is in the prescribed form and, in particular, stated the particular proceedings to which it relates.

A new agreement is required for each piece of litigation.

 

31.1.33 Remittances to the official receiver

(Amended October 2014)

All money collected by the contractor on behalf of the official receiver must be placed into a global dedicated client account in the name of The Insolvency Service and remitted weekly by CHAPS to Estate Account and Insolvency Practitioners Services (EAIPS) net of fees charged. Each remittance is accompanied by an electronic statement giving details of the case and a breakdown of money collected and fees charged. This statement will be copied to the Contract Manager.

 

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