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October 2006
Introduction
The Insolvency Practitioner Unit (IPU) in Birmingham is part of IP Policy in London. The Unit carries out a number of Secretary of State functions that include not only dealing with Secretary of State (SoS) applications from official receivers but also the registration of Individual Voluntary Arrangements, as well as the licensing and regulation of insolvency practitioners (IPs). The Secretary of State currently licenses some 100 of the 1700 IPs nationwide. The Unit is also responsible for maintaining accurate details of all IPs on Central Index including the Individual Insolvency Register and deals with IPs' sanction applications in the absence of a creditors' committee and any objections to release.
IP Policy deals with policy issues and all matters concerning the conduct of non Secretary of State licensed IPs and the regulation of their recognised professional bodies.
1. What is a Secretary of State appointment?
The Secretary of State has the power to appoint an IP in place of the official receiver as trustee or liquidator. This power has been delegated to IPU, who act on behalf of the Secretary of State in making insolvency practitioner appointments and in the consideration of those cases which require prior agreement before the appointment. Such an agreement is often referred to as an agreement in principle.
As an alternative to holding a meeting of creditors, the Insolvency Act 1986 provides for the appointment of an IP as a trustee or liquidator by the Secretary of State, in certain circumstances. Technical Notice: T41/06 provides guidelines for Secretary of State appointments as to the circumstances where the official receiver may make an application for the appointment of a trustee/liquidator by the Secretary of State and should be referred to when making an application.
Before the official receiver makes such an application, the creditors' views must have been sought and adhered to. A file note should always be kept detailing the creditors consulted together with their views and amounts of their claims. This information must then be included in the official receiver's application for an SoS appointment.
Where a request is made for the appointment of a particular IP in bankruptcy cases after a no meeting notice has been issued, the official receiver must exercise his/her discretion as to whether to seek an SoS appointment. Any such requests should be referred to the examiner. More detailed guidance is given on this in T38/05 and in the Technical Manual Chapter 17 Part 5.
When discussing a possible SoS appointment with an IP, the official receiver must never suggest that the appointment is a foregone conclusion. Further, the Secretary of State's power to make an appointment should not be used simply for the convenience of the official receiver.
2. When should the official receiver make an application?
Once the official receiver is trustee or liquidator of an insolvent estate, he/she may make application at any time to appoint an IP in his/her place.
Cases will fall into one of two criteria:
3. Urgent agreement in principle applications
February 2009
Where an urgent appointment is essential, the examiner should contact IPU by telephone (0121 698 4441). Callers should state that they require agreement in principle for a Secretary of State appointment and the effective date of the appointment can then be agreed, before any written application explaining the reasons for the urgency is sent. The written application (form IPASSA) must include details of the telephone conversation together with the name of the officer who agreed the appointment in the "general remarks" section of the application form. The application should be marked "Urgent agreement in principle” and noted with the date that the notice of no first meeting (NNM) was filed at court, if appropriate. The application and two draft certificates of appointment (form IPSSC) should then be faxed immediately to IPU (0121 335 4522), who will send one signed copy of the certificate of appointment direct to the IP and the other copy to the official receiver as normal. This procedure applies only to urgent agreements in principle.
In bankruptcy cases, it is imperative that a notice of no meeting (form NNM) has been produced and filed at court to give the official receiver trustee status, before any application for an SoS appointment can be dealt with.
In routine SoS appointments the certificate of appointment will be sent to the official receiver by IPU for handing over to the IP together with the case records.
4. Applications to the Secretary of State
Before an SoS application is made, the examiner must have agreed with the official receiver or an assistant official receiver the need for the appointment of an IP.
The official receiver must also ensure that the proposed office holder is not only prepared to act but is qualified.
An IP is not required to provide a written consent in connection with the SoS appointment. The proposed office holder should normally be the next person on the official receiver’s rota who is prepared to act, unless the majority of the creditors have indicated a preference.
Each application (form IPASSA - IP appointment, SoS application) must be signed according to office practice and a copy placed on the file.
If an urgent appointment is needed, the effective date of appointment will have been agreed with IPU. Where the official receiver is not seeking an urgent appointment, the date of appointment will be 3 working days after IPU process the application. If a later date of appointment is required, it should be made clear in the 'General Remarks' section on the application (see paragraph 6).
January 2009
Once the official receiver is in a position to apply for an SoS appointment (i.e. either he/she has obtained an agreement in principle to the appointment or prior agreement is unnecessary) he/she should submit a completed signed application form (IPASSA).
For help in completing LOIS screens see: LOIS Workbooks - Provisional allocation of an IP or IP Appointment.
All relevant parts of the form must be completed. Specifically:
In non urgent applications, the application (IPASSA) and the three certificates of appointment (IPSSC) should then be sent to IPU at Cannon House,18 Priory Queensway, Birmingham B4 6FD or via DX post to: Insolvency Practitioner Unit, DX 713987, Birmingham 37. It should not be addressed to a specific officer unless so requested.
Applications based on agreements in principle should be faxed to IPU immediately after the agreement in principle is given.
The appointment of an IP as liquidator or trustee within twelve weeks of the date of the insolvency order does not relieve the official receiver from a duty to report to creditors (and contributories) with respect to the winding up or bankruptcy proceedings and the state of the company’s or bankrupt’s affairs.
The General Remarks section of the application must also include any additional information required in support of the application for the appointment of an IP. If the grounds are not properly made out, IPU may return the application unprocessed to the official receiver. Information which should be covered in this section, include:
a where the creditors have agreed to the official receiver making application as an alternative to holding a meeting:
b any request for a delayed appointment date,
c any special reasons for the appointment of the proposed IP if not next on the rota,
d any objections to the IP by creditors or others,
e any prior insolvency proceedings and any connection between the insolvent and IP in any capacity should be separately noted.
Each official receiver's office will hold a list of local licensed IP firms in their area who have indicated that they are willing to accept SoS appointments. Each firm will nominate the insolvency practitioner(s) to represent them on the list. This is more commonly known as the 'IP Rota' and the official receiver is required to make a clean (i.e. unmarked) copy available for public inspection. Where there is to be an SoS appointment, the case officer will consult the IP rota. Guidelines for Official Receivers on Rotas of Insolvency Practitioners for Secretary of State trustee/liquidator appointments can be found on the Intranet on the OROS homepage.
Each time the rota is consulted, the next named firm on the list must be approached. The strict order of "next in turn" must always be followed unless there is a particular reason why the "next" practitioner is not suitable, e.g. the IP has acted for the insolvent previously. The details of why an IP firm has "missed a turn" should be recorded in the comments column of the rota.
When an IP wishes to be included on the rota he/she must provide the official receiver with details of his/her license and bond. The official receiver must be satisfied that the proposed IP is duly authorised and qualified to act, in order to accept the appointment of cases from the rota. Individual official receivers remain responsible for ensuring that IPs included on their rota are duly authorised and qualified to act.
IPU also maintain the IP Database and IPs should notify them of any changes in their details, such as retirements, deaths, change of main address etc. Amendments made to the Database are updated at the end of every month and it is available to view on the IPU homepage on the Intranet. Official receivers should regularly check the spreadsheet to ensure that their IP Rotas are kept up to date.
8. IP Rotas for the Regional Trustee Liquidator Unit
It has been agreed that the RTLUs will use the local office IP rota for the appointment of IPs in any appropriate case. Such appointments are not frequent, and RTLUs will need no special arrangement for their own rotas. The RTLU will need to contact the local office for the name and contact details of the next IP on their rota and make the appointment as usual. If an IP declines an appointment the case will be offered to the next on the list in the usual way.
The RTLU will access the local official receiver's rota for information only, and the responsibility for the maintenance of the rota will continue to be that of the local official receiver, and it will be operated in accordance with The Service’s policy for IP rotas.
9. Insolvency Practitioner appointed
The effective date of an IP's appointment as trustee or liquidator is important, as this is when he/she becomes personally responsible for the assets of the estate. Consequently, the official receiver must ensure that the trustee/liquidator is promptly informed of the date of his/her appointment so that the IP may take appropriate action to deal with any assets. The handover should be effected immediately where the IP is appointed at a meeting, and as soon as is practicably possible in an SoS appointment. In any event, official receivers should aim to hand over cases to IPs within 8 working days of their nomination, appointment or subsequent agreement to act.
The official receiver has a 'duty of care' to a practitioner upon handing over the insolvent's estate. The official receiver should ensure that the IP is supplied with proper, complete and accurate information regarding the case so that the trustee/liquidator is able to deal promptly and effectively with the estate. If a member of the official receiver's staff fails to do this properly and the IP can prove that he/she has suffered a loss due to any negligence on the official receiver's behalf, then he/she might be able to make a claim against the official receiver for damages contrary to breach of this common law duty of care. For more information on this please refer to the Case Help Manual part: Insolvency Practitioner - Handover to IP.
10. Notification to court where the official receiver has been replaced as liquidator or trustee
(July 2010)
Where the official receiver is replaced as liquidator or trustee as a result of the appointment of an IP following a Secretary of State appointment and the bankruptcy or winding up petition was presented after 6 April 2010 notification must be given to court in order for the official receiver to obtain his/her release.
Word templates for these two forms (bankruptcy and company) have been created and can be found in the ‘forms to be used’ section.
Note: In pre 6 April 2010 petition cases the court receives such notification through the filing of the certificate of appointment of the IP but the filing of these certificates has been discontinued for later cases.
HMRC has indicated that the official receiver may assume it is agreeable to a rota appointment subject to the following. The official receiver need only contact HMRC in cases where HMRC is not the petitioner but is a substantial or major creditor and there are issues surrounding the appointment which, in the official receiver's judgment, HMRC ought to be aware. Where HMRC is the petitioning creditor it will contact the relevant official receiver directly should it have information relevant to the case or a preference as to the IP to be appointed. The contact names and telephone numbers are Jon Bennett on 01903 701181 or, in his absence, Kathy Alexander on 01903 701085.
The official receiver cannot assume the agreement of HM Revenue & Customs to a non-rota appointment.
The Department for Work and Pensions has indicated that they expect to be consulted like any other creditor.
The Insolvent Partnership Order 1994 requires the official receiver to consider whether or not to hold a meeting of creditors in partnership cases, bringing partnership proceedings into line with compulsory liquidations and bankruptcies.
In Article 11 matters (joint bankruptcy petitions) an IP may be appointed by the Secretary of State under section 296, i.e. where the official receiver is trustee. The IP will also be automatically appointed to act in respect of any other member of the partnership against whom an insolvency order is subsequently made. In Article 8 and 10 cases, any Secretary of State appointment is made under section 137 (as amended) and as above, where an insolvency order is subsequently made against any other member of the partnership, the IP would be automatically appointed as trustee/liquidator. However, please note that in Article 8 cases if bankruptcy orders are made against the partners before a winding-up order is made against the partnership, an SoS appointment cannot be made until a winding-up order has been made against the partnership. For more information on this see Case Help Manual part: Partnerships.
Notes:
a An SoS application cannot be made once a meeting has been called but not yet held. Application can only be made in bankruptcy cases where the official receiver is already trustee this means that a notice of no meeting has been filed at court or a meeting of creditors has been held but an insolvency practitioner was not appointed.
b In a few cases it may be appropriate to appoint two or more insolvency practitioners as joint office holders. Any such appointment must include a declaration as to whether the joint office holders are required to act together or may act separately and an appropriate paragraph should thus be added to the certificate of appointment to explain this. The examiner will provide the appropriate text.
Where can I find out more?
The Insolvency Act 1986:
Section 295 - Failure of meeting to appoint a trustee.
Section 296 - Where Official receiver has given notice of his decision not to summon a meeting of creditors in a bankruptcy.
Section 300 - Vacancy in office of trustee or liquidator.
Section 136(3) and 137 - Secretary of State appointment of liquidator
Section 390-391 - Requirements of an Insolvency Practitioner.
The Insolvency Rules 1986 as amended:
Rule 4.104 - Appointment by Secretary of State
Rule 6.122 - Appointment by Secretary of State
The Insolvent Partnerships Order 1994
Technical Manual:
Chapter 17- Appointment of liquidators and trustees -Part 5 - Appointment by Secretary of State
Case Help Manual:
Insolvency Practitioner - Handover to IP
Technical Notices:
T38/05 Request for appointment of IP in bankruptcy cases after notice of no meeting issued
T41/06 Guidelines for Secretary of State appointments (revision of guidance for bankruptcy cases)
OROS Homepage:
Guidelines for Official Receivers on Rotas of Insolvency Practitioners for Secretary of State trustee/liquidator appointments
LOIS Workbooks:
IPHBP- OR’s letter forwarding certificate of appointment
IPHBP - OR’s letter forwarding copy of Court’s order
IPSSC - Trustee/Liquidator - certificate of appointment by Secretary of State
IPHBP - Trustee/Liquidator - OR’s letter forwarding copy of Secretary of State’s certificate
IPASSA -Trustee/Liquidator - OR’s application to Secretary of State for appointment
FAC Trustee/Liquidator Appointment - OR's letter to court delivering Secretary of State's certificate of appointment of IP for filing (pre 6.4.10 cases only)
NNM - Notice of No Meeting
Notice to Court under section 174 that Official Receiver has ceased to be Liquidator- for Word template Click HERE
Notice to Court under section 299 that Official Receiver has ceased to be Trustee- for Word template Click HERE
Click HERE to view the flowchart for Insolvency Practitioners: Appointment by the Secretary of State
Procedure
LOIS screen references are given in brackets e.g. (DO73).
The procedure for applications for Secretary of State appointments differs in the early stages depending on whether the appointment is urgent requiring an agreement in principle or not. For this reason the procedures are described as "Procedure A - Urgent Appointments Requiring Agreement in Principle" and "Procedure B - Routine Appointments". From step 8 onwards, the procedure for both types of appointment are the same.
Procedure A - Urgent Appointments Requiring Agreement in Principle
A1 Examiner receives authorisation from assistant official receiver to proceed with SoS application. The examiner/case officer consults the IP rota and contacts the next IP to obtain consent (verbally). With the IP's verbal consent to act if appointed, IPU are telephoned to agree the appointment in principle (0121 698 4441).
A2 Receive details of appointment from examiner:
A3 Prepare form IPASSA (application to Secretary of State) on LOIS (D073) clearly marked “urgent – agreement in principle”. Any details or comments should be included in the "General Remarks" section of the application. Matters for inclusion in this section are:
A4 Where the appointment has been agreed, enter IP details on LOIS (CA23).
A5 Prepare a draft form IPSSC (certificate of appointment) and fax the draft certificate, together with the completed IPASSA form to IPU (0121 335 4522), immediately after agreement has been reached. (D073).
A6 The IPASSA must be signed according to office practice and a copy placed on the office file.
A7 Record the date of application on LOIS (CA23).
Now go to “IP appointed” at point 8 below
Procedure B - Routine Appointments
B1 Receive instructions to make an application for an SoS appointment from the rota. This could be from the examiner or via the chairman of a meeting that did not resolve the appointment of an IP.
B2 Check the rota and obtain the details of the 'next' IP.
B3 Contact the proposed IP (or his/her representative who is authorised to accept appointments on his/her behalf) and obtain consent. Should he/she refuse or be unavailable, make an appropriate note on the rota with the explanation and then approach the 'next' IP firm.
B4 Prepare 2 copies of form IPASSA (application to SoS) on LOIS (DO73). It is important to enter an explanation of why an SoS appointment is being sought in the "General Remarks" section. If you have any problems in doing this, please refer to the examiner.
B5 Prepare form IPSSC (certificate of appointment) leaving the effective date of appointment blank. Obtain 3 copies of the certificate and attach to the application (D073).
B6 The IPASSA must be signed according to office practice and a copy placed on the office file.
B7 Send one copy of the application (IPASSA) and 3 copies of the certificate (IPSSC) to IPU. Record the date of application on LOIS (CA23).
IP appointed
The handover should be effected immediately where the IP is appointed at a meeting and as soon as is practicably possible in an SoS appointment. In any event, official receivers should aim to hand over cases to IPs within 8 working days of their nomination, appointment or subsequent agreement to act.
8 Receive signed copy(ies) of IPSSC from IPU. Record the date of the appointment on LOIS (CA23).
9 On the date of appointment, in non-urgent applications, send one copy of IPSSC to the IP with form IPHBP, or alternatively arrange for this to be handed over on the day (DO73). In urgent applications IPU will have despatched a signed copy of the certificate direct to the IP.
10 In cases where the date of the bankruptcy or winding-up petition is before 6 April 2010 prepare and send FAC (DO73) to the court enclosing one copy of the certificate (IPSSC). This action is not required in cases where the petition was on or after 6 April 2010 – see paragraph 11.
11 In cases where the bankruptcy or winding-up petition was presented after 6 April 2010 the official receiver must send notification to the court that he/she has been replaced as liquidator or trustee as a result of the appointment using the Word template forms in the ‘forms to be used’ section.
12 Once the date of handover is known it should be diarised. You will only be able to record the date of handover on LOIS (CA23) on the appointed day. This entry will then generate the production of the estate cash book.
Follow the procedure outlined in the Case Help Manual part: Insolvency Practitioners – Handover to Insolvency Practitioner.
13 If, for some reason, the IP appointment is not agreed by IPU, refer the matter immediately to the examiner or assistant official receiver.