31.6.55 General policy (amended November 2007)

Work in progress may be described as products and services in intermediate stages of completion. It is possible that the work in progress could be realised without any further preparation, or it may be that extra costs have to be incurred before work in progress is saleable. Specialists in the field should be used to advise the official receiver.

When considering whether additional expenditure should be incurred, it should be ensured that the expenditure will result in a net gain to the estate on realisation. The costs of labour, material, rents, insurances, and utilities should be considered. Where there is any doubt, the work in progress should be sold without any further processing, or either disposed of or disclaimed.  Depending on the nature of the work required to produce a realisable amount for creditors, it may be appropriate to seek the appointment of an insolvency practitioner as liquidator or trustee .  In these circumstances, the official receiver's role will usually be confined to the protection of the work in progress pending the appointment of an insolvency practitioner (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). 

Where a contract entered into by an insolvent contains a penalty clause against non - completion, steps should be taken to disclaim the contract. Where the work in progress cannot be completed profitably or sold, it should be disclaimed. See also chapter 34 - Disclaimer which details when disclaimer is available and the conditions to be satisfied before it is available.

31.6.56 Deciding to complete work in progress 

The following matters should be considered when deciding whether to complete work in progress:-

The availability of raw materials. The raw materials in the insolvent's possession may be subject to third party claims or of poor quality. Replacement materials may be costly.

Access to the insolvent's premises and therefore any machinery kept there may not be available.

The workforce may be unavailable, or unwilling to work for the official receiver. Skilled replacements may be costly to employ.

In certain cases it may be prudent not to complete the work in progress, even though in the first instance it would appear that to do so would result in a gain to the estate. These include:-

Contract catering, or the preparation of buffets. If the food has been partially prepared, it will not be possible for the official receiver to be certain that the food has been prepared hygienically (see paragraph 31.6.38)

Where the premises are unsafe, or the equipment is dangerous, or where food premises are unhygienic.

Where the business is illegal e.g producing counterfeit clothing or perfumes.

Where a business is likely to be sold as a going concern, or to protect work in progress in the period leading up to the first meeting of creditors, it may be necessary to employ a special manager. This is a costly and complex procedure which should only be considered where the work in progress is of a high value. The employment of special managers is covered fully in Chapter 32.4.

Where the bankrupt's business was of a specialised nature, it may be difficult or costly to find someone to complete the work in progress. In such circumstances, it may be possible to employ the bankrupt to complete the work in progress.

There also may be occasions where, although it is not of a specialised nature, the work in progress has to be completed quickly to ensure maximum return to the estate, and there would be insufficient time to find anyone other than the bankrupt to complete the work. An example would be flowers being prepared by a florist for a wedding or funeral. Wherever possible the work in progress should be completed away from the former trading premises. Caution should be exercised in that the bankrupt should not be left in a situation where he is able to collect monies from customers who may be unaware of the bankruptcy, nor should he be left in sole charge of any valuable tools or machinery which are not exempt property. The bankrupt should not be allowed unrestricted access to the trading premises, nor should keys to the premises be returned to the bankrupt. Where access to the premises is required, the bankrupt should be accompanied there by a member of staff, who should remain there with the bankrupt and lock up after he leaves.

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