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2.2 Application for appointment
The official receiver will in most cases be served with copies of the application and supporting affidavit. In certain cases, because of extreme urgency, it may not be practicable for a copy of the application to be served, but the official receiver should always be given sufficient notice of the application to enable him to be present at the hearing.
Notes: [R4.25(3) or 6.51(4)]
The official receiver should attend the hearing to make any representations he considers necessary, especially in regard to the terms of the order in the context of its practicability and the inclusion of references to the payment of his expenses and remuneration. He should also ensure that a sufficient deposit or security has been provided to cover his costs in carrying out his duties and that appropriate details will be included in the court’s order. The amount of the deposit or security should be commensurate with the level of any trading to be continued, coupled with an indemnity against loss and possible damages (see paragraph 2.11).
Notes: [Form 4.15 or 6.32] [R4.27 or 6.53]
The court does not, however, fix the official receiver’s remuneration. This is charged on the scale set out in Regulation 20. Details of the time spent on the case by the official receiver and his staff should be recorded for the purpose of calculating that remuneration, which is on a time and rate basis. Time sheets should be divided into units of 15 minutes. The maintenance of proper records in this respect will avoid any dispute as to the amount to be charged.
Before the order is issued, the person who made the application ("the applicant") must deposit with the official receiver, or provide satisfactory security for, such sum as the court directs to cover the expenses and remuneration which may be incurred by the official receiver. The court will fix the amount on the official receiver’s advice.
Notes: [R4.27(1) or 6.53(1)]
2.6 Amount of deposit or security
Where the applicant is not the Secretary of State or a Government department the official receiver should always require at least £500 and should ask for a greater sum if it is clear from the outset that more will be needed. If the official receiver becomes aware that the applicant is unlikely to be able to provide some or all of the deposit or security but he considers it likely that the court will make an order, he should immediately consult with Technical Section at Headquarters.
2.7 Secretary of State or Government Department indemnity
The Secretary of State or a Government Department should be asked to indemnify the official receiver for his costs instead of providing a monetary deposit or other security. Where Companies Investigation Branch (Investigations Division) instigates a Secretary of State petition and application is made for the official receiver to be appointed as provisional liquidator, there is a standing indemnity. In these circumstances there is no need for the official receiver to obtain a separate indemnity on an individual case basis or for an indemnity to be mentioned in the court order appointing the provisional liquidator. Where, however, substantial expenditure, or disbursements such as the costs of a special manager or solicitors are to be incurred in respect of which an indemnity might ultimately be called on, the official receiver should consult Companies Investigation Branch by telephone.
2.8 Deposit inadequate: further report
If the deposit proves to be insufficient, the official receiver must, as soon as he is aware that a further deposit is required, apply to the court (with notice to the original applicant) for an order that the required additional sum be deposited with him or security given. At that stage the official receiver should give the applicant advance notice (by telephone followed up in writing) of the sum for which he will be asking.
Notes: [R4.27(2) or 6.53(2)] [form PRADEP]
2.9 Official receiver’s applications; abridging notice
Formal notice of the application will almost certainly have to be shorter than normal, since this application (and, indeed, most applications in a provisional liquidatorship or interim receivership) are likely to be urgent. The official receiver should have regard to Rule 7.4(5) and (6) concerning urgent applications and remember to ask the court to authorise short notice. This can be done at the hearing.
The official receiver must in his application give sufficient details of his requirements to enable the court to make the appropriate order. If the further sum is not paid to the official receiver within two days after the making of the court’s order, the official receiver should draw the court’s attention to the default and ask the court to discharge the original order of appointment. The official receiver should not normally incur any substantial expenditure beyond the amount of the original deposit until the further deposit is received, but if this is impractical Technical Section at Headquarters should be consulted immediately.
Notes: [R4.27(2) or 6.53(2)]
2.11 Indemnity to continue business
If the terms of the proposed order are to include a direction to the official receiver to continue the insolvent’s business, he should, at the hearing of the application, draw the court’s attention to his additional need for a satisfactory indemnity supported by a cash deposit against loss in trading, so that provision can be made for these to be supplied by the applicant (see paragraphs 2.28 and 2.29 below). The official receiver should also consider whether it is appropriate to extend the limit of the indemnity to include any possible claim against him for damages.
Notes: [form PRAGAR]
2.12 Failure to honour undertaking
The official receiver should endeavour to persuade the court not to issue the order until the requirements of a satisfactory indemnity supported by a cash deposit are met. However, if the court nevertheless issues the order on the basis of an undertaking and the applicant then fails to comply within a reasonable time (usually no later than the day after the order is made), the official receiver must immediately draw the court’s attention to the default with a view to the order being discharged.
If a winding-up or bankruptcy order is subsequently made any deposit should (assuming the assets are sufficient) be repaid to the person who made it in the correct order of priority, unless it was provided out of the insolvent’s own property, in which case it simply forms part of the insolvent’s estate.
Notes: [R4.218 or 6.224]
The official receiver should endeavour to ensure that the order appointing him sets out a short but clear description of the property of which he is expected to take possession. This will in most cases extend to all the insolvent’s property, but if the official receiver considers that he may have difficulty identifying this he should ask the court to refer in its order to "all the [company’s] [debtor’s] property of which the official receiver, as [provisional liquidator] [interim receiver], becomes aware". The order should also define the duties which the official receiver is expected to perform in relation to the insolvent’s affairs.
Notes: [R4.26(1) or 6.52(1)]
If the official receiver is aware at the time the order is made that service of documents on a company director or debtor will be difficult (eg because he is residing abroad), the official receiver may wish to seek an appropriate order at that time or subsequently (for example, and order to serve outside the court’s jurisdiction).
Notes: [R12.12]
2.16 Notification of appointment [R4.25A]
When an order appointing the official receiver as provisional liquidator has been made, the court will forward notice of the appointment to the official receiver. This should be placed on the official receiver’s file and a copy forwarded to OR Banking Section, Birmingham. A copy of the order, when received from the court, should also be sent to OR Banking Section. Where the official receiver is appointed interim receiver he/she should send a copy of the order to OR Banking Section when it is received from the court.
Notes: [Form 4.14A]
The court will send the official receiver three sealed copies of the order appointing him/her as provisional liquidator. One sealed copy of the order should be sent to the liquidating company at its registered office, or, if there is no registered office, the principal or last known principal place of business. If a liquidator has been appointed for a company’s voluntary winding up a copy of the order is sent to that person rather than to the company. The copy sent to the company or its voluntary liquidator should be accompanied by a letter based on form PRAN.
One sealed copy of the order should be sent to the Registrar of Companies with Form 4.15A.
The remaining sealed copy of the order should be filed on the official receiver's file.
In a bankruptcy a copy of the order should be sent to the debtor at the address referred to in the bankruptcy petition. A copy of the order should also be sent to any other address referred to on the court file if it appears likely that the debtor is not at the address referred to in the petition but has been served other documents at or via the other address, e.g. care of his solicitors.
Notes: [R4.26(2)] [Form PRAN] [Form 4.14A] [R6.52(2)]
If, for any reason, the official receiver has no address at which to serve the order appointing the provisional liquidator or interim receiver, he must apply to the court for directions.
Notes: [R10.3]
2.19 Property not covered by order
If the official receiver becomes aware of any property not covered by the terms of the order which he considers ought to be protected he must tell the applicant so that he (the applicant) can apply to have the order amended. If the applicant does not so apply, the official receiver should apply to the court for directions, giving notice to the insolvent and the applicant. No steps should be taken to protect assets excluded from an order until the order has been varied to permit this.
Notes: [R10.3]
If there are any circumstances which suggest doubt or risk in taking possession of any property specified in the order and immediate recourse to the court to clarify the position is not possible, the official receiver must obtain an adequate indemnity from the applicant before taking possession. Where such an indemnity cannot be obtained, the official receiver should take no action until he is able to report his doubts to the court and seek its directions as to the steps he should take.
Notes: [R10.3]
Agents should only be instructed to make an inventory when the stock is valuable or if for any reason it is essential to have a full record. The court must always be asked to sanction such an expense, so that there can be no dispute about whether the official receiver needed to incur it. The cost of the valuation should be charged against the deposit paid by the applicant.
2.22 Powers and duties: companies
When he is acting as provisional liquidator the official receiver will have such powers as the court confers on him. If the official receiver considers that any proposed action may conflict with the terms of the order appointing him, application should be made to the court for directions.
Notes: [s135(4)]
2.23 Powers and duties: debtors [s386(3)
However, when he is interim receiver the official receiver normally has the same powers as when acting as receiver and manager under section 287 after a bankruptcy order has been made, although the court can limit these powers in the context of an interim receivership. He will therefore normally have power to realise property which will depreciate in value if not realised without delay, but if the official receiver considers that such a realisation or any other proposed action conflicts with the terms of the order appointing him, application should be made to the court for directions.
Notes: [R10.3]
In relation to any application for directions in respect of the management of any property or business, in addition to giving notice to the original applicant it is good practice to give additional notice to any solicitors acting for him.
Any interference with the insolvent’s affairs outside the terms of the court’s order may involve a claim for damages, especially if the petition is eventually dismissed.
2.26 Co-operation of directors
The provisions of sections 234-236 (getting in company property, duty to co-operate and inquiry into dealings) are available to a provisional liquidator if required to assist him in complying with his duties and exercising the powers conferred on him by the court. The official receiver should only interview the directors for the purpose of establishing the existence of assets and their whereabouts: he does not have an investigative role at this stage. If he considers it necessary he may require a statement of the company’s affairs to be lodged under section 131; any request should be made on Form 4.16 suitably amended. Notification of the official receiver’s appointment as provisional liquidator should be sent to the company’s directors, using form PRAN, depending whether or not a statement of affairs is required.
Notes: [s131]
The provisions of sections 286(5) (duty of debtor to provide information), 366 and 367 (inquiry into dealings and court’s enforcement powers) are available to an interim receiver if required to assist him in complying with his duties and exercising his powers. Again, the official receiver should only interview the debtor for the purpose of establishing the existence of assets and their whereabouts, because he does not have an investigative role at this stage. He has no authority to request a formal statement of affairs, but the debtor does have a duty to provide information and the official receiver should obtain from the debtor details of assets and liabilities and any other information which he considers necessary.
If the official receiver considers that the insolvent’s business ought to be continued and this has not been dealt with in the order appointing him, he should apply to the court and obtain its directions as to the amendment of the order in so far as it limits his powers. Before doing so the official receiver must ensure that he has an adequate indemnity and sufficient cash deposit or security from the applicant for the continuation of the business. The same provisions relating to deposits apply as if the original order included reference to the continuation of the business (see paragraphs 2.5-2.12); only in rare cases and with the prior approval of Technical Section at Headquarters should the official receiver seek the leave of the court to continue a business without an adequate guarantee against loss in trading.
In this connection the official receiver must bear in mind all liabilities which may arise in connection with claims for damages under performance clauses, loss or depreciation of assets, any tax liability arising as a result of capital gains, etc, all liabilities to employees, eg under the Employment Protection Acts (see paragraphs 2.50-2.52 of this chapter and chapter 76) and other statutory provisions, eg Offices, Shops and Railway Premises Act 1963. So that the basis of any claim in relation to the loss or depreciation of assets is ascertainable, the official receiver should consider the advisability of arranging for valuations. The failure of the applicant to increase his deposit when required to do so must also be reported to the court so that it may, if it thinks it the right course, terminate the provisional liquidator’s or interim receiver’s appointment.
Notes: [R4.31(1) or 6.57(1)]
2.30 Guarantee introduced by insolvent
However, where the applicant has failed to provide an increased deposit or security, the insolvent may be able to introduce a third party guarantee against trading loss and/or a cash deposit. If this is acceptable, the circumstances should be reported to the court and an appropriate order sought.
[Form PRAGAR]
A business must be adequately supervised to prevent any misdealings and the official receiver should consider applying to the court for an order appointing a special manager to assist him in the carrying out of his duties (see chapter 32).
Notes: [R4.206; 6.167]
Whether or not a special manager is appointed, if the and handling insolvent is allowed to continue to trade the official receiver should ensure that such proper accounting records are maintained as he considers appropriate in regard to the insolvent’s business. Where there is no special manager the insolvent should normally account on a weekly basis to the official receiver and pay over to him all receipts, after deducting all business payments and, in the case of a debtor, sufficient monies (on a basis agreed with the official receiver) to cover his household and personal expenses.
2.33 Supervision by official receiver
If the official receiver supervises the business himself, he must collect all takings and ensure that purchases and services are not obtained on credit. If it is necessary to allow sales on credit, due regard must be had to the cash-flow position of the business and the credit-worthiness of the buyers.
2.34 Liabilities; credit dealings
The official receiver should not assume personal liability for expenses, either expressly or by implication, and undertakings in respect of the payment of overhead expenses such as rent, rates and electricity should not be given unless the amounts incurred are covered by the deposit or security. In this regard the provisions of section 233 or 372 should be borne in mind: they enable the provisional liquidator or interim receiver to negotiate for continuing supplies of electricity, gas, water and telecommunication services if he personally guarantees payment for such a supply. A guarantee should only be given if it is covered by an indemnity, deposit or security. Payment of outstanding sums in respect of supplies at the date of the provisional liquidator’s or interim receiver’s appointment cannot be a prerequisite for the new supply. Any difficulties encountered in this area should be reported immediately to Technical Section at Headquarters.
2.35 Termination of appointment
The appointment of the official receiver as provisional liquidator may be terminated by the court on the official receiver’s application, or on that of a creditor, a contributory, the Secretary of State or any person able to present a petition for the winding up of the company, including the company itself. The appointment of an interim receiver may be terminated by the court on the application of the official receiver, a creditor or the debtor. The appointment of an interim receiver terminates automatically if the petition against the debtor is dismissed or a bankruptcy order is made. In relation to a winding-up petition, the appointment of a provisional liquidator will terminate when a winding-up order is made by virtue of the fact that another liquidator (normally the official receiver under section 136(2)) takes office. Where a winding-up petition is dismissed and a provisional liquidator is in office the court should deal with the termination of his appointment at the same time. (See chapter 37 as to the release of a provisional liquidator.)
Notes: [R4.31(1)] [R6.57(1)] [s286(7)]
The official receiver should consider whether he needs to attend the hearing of the petition or relevant application for the purpose of ensuring that the court is aware that any order made needs to provide for payment of the amount payable by or due to him in respect of his expenses and remuneration; if he does not attend he should lodge a report setting out those details. Unless the court otherwise orders the official receiver may retain sufficient of the insolvent’s property to settle the amount due to him.
Notes: [R4.30(3A); 6.56(4)]
2.37 Attendance at hearing of petition
The official receiver’s sole purpose in attending the hearing of the petition is to make representations about the amounts due to him. The official receiver should not make any representations in respect of the petition itself (General International Agency Co (1865) 326. Beav.1 with reference to provisional liquidatorship). However, if the judge or registrar asks the official receiver whether there are any matters which he considers should be brought to the court’s attention, he may refer to the insolvent’s financial position by reference to the information which he has received during his conduct of the case.
2.38 Account of administration
It may also be useful if the official receiver before the hearing inquires of the court whether he will be expected to lodge an account of his administration, so that this may be included in any report he files.
Notes: [R4.31(2); 6.57(2)]
2.39 Notification to Headquarters
Whether or not a winding-up or bankruptcy order is made, the official receiver should inform OR Banking Section at Headquarters when his appointment has ceased and supply, either at the same time or subsequently, a copy of any order terminating the appointment.
After the appointment of a provisional liquidator or interim receiver no creditor who has a claim which would be provable in insolvency proceedings has any remedy against the insolvent or his property, including the commencement of an action. The official receiver should therefore inform any creditor who appears likely to continue or commence an action that any costs he incurs may not be recoverable from the insolvent’s property unless the court has given leave for the proceedings to be continued or commenced.
Notes: [s130(2); 286(6)]
[Back to Part 1 - Appointment (2.1(a) amended 9/02)] [Onto Part 3 - Insolvency Practitioner as Provisional Liquidator or interim receiver]