31.6.1 General Policy (amended November 2007) 

Where an asset of this type can be realised quickly and easily, and there are no assets of a complex nature in the case then the official receiver should deal with it.  In those circumstances, the information and guidance in this chapter should be followed. 

It may be the case that the appointment of an insolvency practitioner as liquidator or trustee will be appropriate (see paragraph 17.3 of Chapter 17 – Appointment of Liquidators and Trustees  - for guidance on circumstances where the appointment of a liquidator or trustee other than the official receiver may be appropriate).  In those circumstances, the official receiver's role would be to protect those assets pending the appointment of an insolvency practitioner.

When initial enquiries reveal that there are such assets, the nature of the assets, their whereabouts, if they are insured, and whether they can safely remain in their current position should be established. The examiner or inspecting officer should also ascertain whether they are subject to a fixed or floating charge, finance agreement, retention of title, a lien, walking possession, if a landlord has levied distress, or is likely to do so in the near future. The director or bankrupt should also be asked to give an approximate valuation of the stock, work in progress or plant.

 Information concerning stock could also be obtained from the petitioner, if they are a trade creditor, or from other suppliers. Crown creditors may have information about stock, work in progress and plant if they visited the premises, as may bailiffs. Reference should also be made to the last audited accounts, or to any draft accounts prepared subsequently, which may give an indication of the levels of stock held and work in progress, together with details of plant owned.

A valuation may be required to assist the official receiver in arriving at a decision whether to sell or disclaim assets, or for insurance purposes. As valuations can be costly, wherever possible an informal valuation at no cost should be obtained. Where an official receiver has a long standing working arrangement with an agent this may be possible, but many agents may be unwilling to carry out such work for no payment. The bankrupt or director may have their own motives for valuing an asset at a price higher or lower than its true market value. Quantity surveyors may need to be employed to value work in progress such as partially completed building works. If the asset is of a specialist nature, then experts in that field should be employed to give a valuation.

There will be instances where it appears obvious that the asset is worthless (such as old office furniture or obsolete stock), where it has been seen during an inspection, or was of such a small quantity that it could be brought into the office at first interview. n those circumstances there would be no need for a valuation, unless the director or bankrupt disputes the official receiver's assessment of the object's value. In such cases it may be prudent to obtain a valuation. If a creditor disputes the official receiver's valuation of the asset as worthless, then they should be asked if they are willing to fund an independent valuation, but a valuation should still be obtained if the creditor is unable provide funds.

If the realisation of an asset will not result in a net gain to the estate it should be disclaimed (see paragraph 31.1.16).

Where assets are of an unusual nature or not easily identified (such as engineering parts or computer components), or there is a vast quantity it may be necessary to employ a specialist to carry out an inventory on the official receiver's behalf. The bankrupt or directors should not be employed in such a capacity as this may afford them a prime opportunity to over or undervalue unusual items to deceive the official receiver. If assets are not unusual inventories should be completed by the examiner or inspecting officer.

In all cases steps should be taken to ensure that assets with a value are in the first instance physically secure. Where the value of assets is uncertain, they should be treated as having a value until their true value can be established.

Small items of value should be delivered up by the insolvent, and either delivered by a staff member or collected by the official receiver's agents before being sold. Out of business hours such items should be stored in the office safe, until they can be delivered to or collected by the agents. Wherever possible this should be done on the next business day, to prevent items being forgotten and remaining in the office safe for long periods of time. Where an insolvency practitioner is likely to be appointed the items may be kept in the safe until hand over. See paragraph 49.25 for details of insurance for assets stored at the official receiver's office.

Premises should be secured, and where necessary locks changed. Where premises cannot be secured, items of value should be removed and sold (see paragraph 31.6.9 below) or placed in storage pending the appointment of an insolvency practitioner. Assets should not be left in unsecured premises or uninsured during the period it takes to convene a meeting of creditors to secure the appointment of an insolvency practitioner.

Adequate insurance cover should be arranged for the assets of the bankrupt or company ( see Chapter 49 Insurance).Where the value of the assets is uncertain, cover should be arranged but immediately cancelled if the assets are subsequently found to be worthless or the property of a third party (see paragraph 31.6.52).Similarly, the amount of cover should be reduced if assets are found to have been overvalued.

The intention when selling an asset is to produce a net gain to the estate, after the payment of all costs associated with the sale e.g agent's charges, and any insurance or storage costs. If it appears that a sale would not result in a gain then the asset should be disclaimed (see 31.6.16 and Chapter 34 Disclaimer ).

Any sale should be conducted by agents acting on the official receiver's behalf. If the assets are of a specialist nature, e.g antiques, works of art, then specialists in that field should be employed. The official receiver's usual agents may be able to suggest such a specialist. Stock will usually be sold at auction.

Even in circumstances where the official receiver's agents advise that a private sale would be the most cost- effective method of realisation, the agents should be requested to act for the official receiver during the sale. Steps should be taken to ensure that if the purchaser does not pay the purchase price, the assets will remain the property of the trustee or of the company in liquidation (this should be a standard instruction to agents acting for the official receiver in private sales).

An offer may be made to purchase items which appear worthless or are of such a low value that their sale proceeds would be exceeded by the costs of employing an agent. In such circumstances, the official receiver should ensure that he is certain that the items are of little value, and that the purchaser is not attempting to deceive him, especially if the items are of an unusual nature. If there is any concern then an agent should be employed at the expense of the potential purchaser, or the offer refused. The purchaser should be asked to fund the valuation, and no steps should be taken to instruct agents until they have provided written agreement to pay the agent's charges. he official receiver may wish to contact the principal creditors informally to explain that such an offer has been made and canvass their opinions on the merits of his acceptance of the offer.

There may be occasions when assets should be realised promptly. Such circumstances may include:-

To avoid assets being lost if it is likely a landlord will distrain.

Perishable or seasonal stocks (see also paragraphs 31.6.37,31.6.38 and 31.6.40 ).

Assets that would incur large storage costs in relation to their value.

Livestock, where the costs of foodstuffs and care may become prohibitive in the long term (see also paragraph 31.6.40).

Assets in premises that cannot be made secure, or where the costs of securing and insuring such premises would be prohibitive.

Where a good offer is subject to a time condition.

The court may, at any time after the presentation of a bankruptcy petition and before the making of the bankruptcy order, appoint the official receiver to be interim receiver of a debtor's property if it is shown to be necessary for the protection of that property. An insolvency practitioner may be appointed as interim receiver instead of the official receiver.

The court may direct that an interim receiver's powers shall be limited or restricted in any respect; but save as so directed, an interim receiver has, in relation to the debtor's property, all the rights, powers, duties and immunities of a receiver and manager under section 287 of the Insolvency Act.

Notes:[S286(1)(2)][S286(3)]

The official receiver is receiver and manager of the bankrupt's estate after the making of the bankruptcy order and until the estate vests in a trustee. When acting as receiver and manager the official receiver is entitled to sell or otherwise dispose of any perishable goods comprised in the estate and any other goods so comprised the value of which is likely to diminish if they are not disposed of. Reference should be made to paragraph 31.6.10 - Prompt sale above which gives examples of such items (see also Chapter 24 Receiver and Manager for details of this, in particular paragraphs 24.16, 24.17, 24.18 and 24.19).If there is an urgent need to sell any other types of property, application should be made to the court for permission to do so.

Assets which cannot or need not be realised by the receiver and manager should be protected pending a trustee taking office, whether that is to be the official receiver or an insolvency practitioner.

Fuller details of the role of the receiver and manager are contained in Chapter 24: Receiver and Manager.

Notes:[S287(1)][S287(2)].

The trustee has the general power to sell any part of the property for the time being comprised in the bankrupt's estate. Where bankruptcy orders are made against the members of an insolvent partnership, but the partnership itself is not wound up as an unregistered company, the official receiver becomes trustee of the bankrupts' estates from the date of the order. Similarly, where bankruptcy orders are made against one or more the members of an insolvent partnership, and a winding up order is made in respect of an insolvent partnership, the official receiver becomes the "responsible insolvency practitioner", and he will be trustee of the estates of the individual members' bankruptcies from the date of the order. Responsible insolvency practitioner is an expression used to describe the person appointed as the liquidator of the insolvent partnership or corporate members(s) and the trustee in bankruptcy of the individual member(s)(see also Chapter 53 - Partnerships). When he is trustee the official receiver may sell assets without needing the permission of any third party.

Notes:[S314(1)][Sch 5, Part II][Sch.7 Para 11 IPO.][Sch.4 Part II Para 12 IPO.][Article 2 IPO]

When he is liquidator the official receiver may sell assets of the company without any third party permission.

As liquidator, the official receiver may realise assets from the date of the winding up order.

The liquidator of a partnership wound up as an unregistered company has the right to sell partnership property (see also paragraph 53.29)

Notes:[S136][Sch 4 Part III][Sch.3 Part II Para 10 IPO]

 The powers of a provisional liquidator may be limited by the court order appointing him, and this may limit his role to collection and protection of assets. Power of sale should be sought by the official receiver at the time the order is made or shortly afterwards if there are particular assets which it is clear are likely to have to be dealt with during the course of the provisional liquidation such as perishable goods, goods that will incur large storage costs or livestock that will be costly to feed. It is important to remember that the winding up order may not be made, so extreme caution should be exercised when considering the realisation of assets.

Notes:[S135(4)(5)]

A trustee or liquidator may disclaim onerous property. Onerous property is defined as :-

any unprofitable contract, and

any other property of the company or comprised in the bankrupt's estate which is unsaleable or not readily saleable, or is such that it may give rise to a liability to pay money or perform any other onerous act.

Where the official receiver is liquidator or trustee and the realisation of the asset would not result in a net gain to the estate, if the official receiver can be satisfied that the asset is onerous property it should be disclaimed. There is no reason why more unusual types of assets should not be disclaimed; disclaimer is a legitimate method of disposal for the office holder at minimal cost to the estate. Special considerations need to be applied when more unusual assets are dealt with some of which are detailed in Part 2 of this chapter. If there is any doubt whether an asset is suitable to be disclaimed reference should be made to Technical Section. Wherever possible assets to be disclaimed should be left in situ so that the costs of removing and insuring them are not incurred.

Notes:[S178,S315]

See also Chapter 34 - Disclaimer.

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