August 1997

31.6.59 General policy (amended November 2007)

Plant and machinery are tangible fixed assets, used by a business for the purpose of providing a service to that business. If plant and machinery is of high value it is likely to be subject to hire/lease purchase agreements, or be caught under the terms of a fixed and or floating charge.

The official receiver's usual agents should be able to sell plant and machinery, or to suggest alternative agents should they not undertake that type of business. Dealings with agents other than the official receiver's usual agents is covered in more detail in Chapter 32.1. As removal costs of such large items are likely to be high, if may be more cost effective for the sale to take place in situ.

Depending on the amount and nature of the work required to produce a realisable amount for creditors, it may be appropriate to seek the appointment of an insolvency practitioner to act as liquidator or trustee.  Where the appointment of an insolvency practitioner other than the official receiver is likely , the official receiver's role will usually be confined to the protection of the plant 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). 

31.6.60 Unroadworthy vehicles

Under the provisions of the Road Traffic Act 1988, it is an offence to sell a motor vehicle which is in an unroadworthy condition (see also Chapter 31.2, but it should be noted that this chapter predates the introduction of the Road Traffic Act 1988).The Act also applies to trailers, all mechanically propelled vehicles intended or adapted for use on roads, and all vehicles drawn by motor vehicles It is therefore possible that items of plant such as tractors and JCB's will be subject to the Road Traffic Act, and this should be taken into consideration when they are sold. In such circumstances, the procedure detailed in Chapter 31.2 relating to the sale of motor vehicles should be followed.

Notes:[ S75 Road Traffic Act 1988.]

31.6.61 Goods vehicles -Road Traffic Act 1988.

Section 54 of the Road Traffic Act 1988 provides there are regulations covering the design, constructions, equipment and marking of goods vehicles known as type approval requirements. Manufacturers of goods vehicles must apply to the Secretary of State for type approval certificate stating that the vehicle complies with the relevant type approval requirements. The manufacturer may then issue a manufacturer's certificate in relation to each goods vehicle produced by him which conforms to the type approval certificate requirements.

It is an offence to sell a goods vehicle to which these regulations apply without a manufacturer's or Minister's approval certificate.

Notes:[S65 Road Traffic Act 1988] Goods vehicles

31.6.62 Exempt property (amended March 2009)

It is possible that items of plant and machinery used by a bankrupt could be considered to be exempt property. For further information on exempt property generally see Chapter 30.

31.6.63A Identifying exempt property (amended March 2009)

The official receiver should seek at an early stage to identify plant and machinery which could be considered to be exempt from the bankrupt's estate.

[note: Section 283(2)]

31.6.63B ‘Tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation’ (inserted March 2009)

Items of plant and machinery are likely to be detailed at Q2.1 of the bankruptcy preliminary information questionnaire, or at 3.1 of the debtor’s petition statement of affairs under "Machinery, plant and equipment", “Tools of your trade” or "Motor vehicles". The questionnaire does not ask specifically which items are necessary to the bankrupt for use personally by him/her in his/her employment, business or vocation, so this will have to be ascertained by additional questioning at the first interview, or by taking a statement at a later date. Stock, work in progress and trading premises are not considered to be exempt property. For examples of exempt property, see Chapter 30, Part 2.

The concept of exempt property and the trustee's ability to claim exempt property of excess value should be explained to the bankrupt. This is also covered in the “Guide to Bankruptcy” leaflet which is available at the court offices and should also be offered at the initial contact stage (see paragraph 4.38).

[note: form PIQB, Form 6.28, section 283(2)a]

31.6.64A Items of excess value (amended March 2009)

A trustee can claim certain property, which would not normally be included in the bankrupt's estate, if that property can reasonably be replaced producing a surplus for the estate (see Chapter 30, Part 3). Under the legislation property is considered to be a reasonable replacement if it is reasonably adequate for meeting the needs met by the other property.

[note: section 283(2), 308, 308(4)]

31.6.64B Valuation of asset – excess value (inserted March 2009)

The bankrupt will have provided a valuation of the assets in the debtor’s petition statement of affairs, the questionnaire or at interview. If there is any doubt as to the accuracy, or if the value appears to be high, the examiner should obtain a telephone valuation from the official receiver's agents to act as a rough guide. The agents should also be asked to provide an estimate of their charges for selling such an item. Where due to the nature of the assets (for example it may be difficult to describe highly specialised equipment or assess its condition) consideration should be given to incurring the cost of an agent's formal valuation. It should be considered likely that there will be a net gain to the estate after payment of agent's costs, insurances, and the costs of providing a replacement (if necessary). If the assets are of no value, no further action should be taken even if the assets are no longer needed (see Chapter 31.2, Part 4 in particular paragraph 31.2.31, and paragraph 34.33).

31.6.64C Valuation of asset – insurance (inserted March 2009)

If an exempt asset is considered to be of excess value and a net gain to the estate is considered likely, the official receiver should take steps to insure assets where it is appropriate to do so pending the appointment of a trustee (see Chapter 49 - Insurance).

31.6.64D Need for a net benefit to the estate (inserted March 2009)

In all cases the official receiver should not normally take any steps to claim exempt property unless the potential net realisation to the estate is at least £500 after taking into account any costs of sale and of a replacement item, see paragraph 31.2.25. This means that the official receiver should take a conservative view of the value of the property so as to provide a reasonable margin of safety, after payment of agents’ costs and the cost of a suitable replacement. Official receivers are expected to rely on advice from their agents as to whether such a net benefit can be achieved and may incur a debit balance on the estate to obtain such advice. Where a number of items of plant and machinery would together achieve a net figure, the official receiver can consider them as a group.

31.6.65 Trading - employment, business or vocation (amended March 2009)

In the case of a creditor’s petition, the bankrupt will have provided details of any trading activity in the questionnaire at questions 21.6 to 21.16, and employment details are provided in questions 21.1 to 21.4. In the case of a debtor’s petition, the bankrupt will have provided details of any trading activity in the statement of affairs at questions 2.1 to 2.12 and employment details are provided in questions 6.1 to 6.5. If the bankrupt's business has ceased trading it should be ascertained whether it has permanently ceased (because of serious illness or injury for example) or if the bankrupt is simply without work at present. If trading has ceased permanently, and the bankrupt does not intend to seek work in the same field, the assets that could have been considered exempt property, will not be necessary to the bankrupt and should be realised. The bankrupt may be in employment, but have to provide his/her own tools or equipment. In such circumstances, the assets should not be claimed unless a replacement is provided (see paragraph 30.52). On the other hand, if the bankrupt is unemployed and unlikely to gain future employment, the assets, which could have been considered to be exempt property, will not be necessary to the bankrupt in his/her employment and should be realised by the trustee.

[note: form PIQB, Form 6.28]

31.6.66 Viable business (amended March 2009)

If the bankrupt has claimed plant and machinery as exempt on the grounds that he/she intends to continue trading or wishes to re-commence trading, it should be established that the business is viable. See Chapter 62 for further information. As much information as possible should be collected and considered (see paragraphs 30.42 to 30.44 for further information).

31.6.67A Trustee’s right to reject bankrupt’s claim to exempt property (amended March 2009)

The official receiver, as trustee, may reject a claim to exempt property by the bankrupt if it is considered that none of the grounds for exemption apply. A written record should be made of any claim made by the bankrupt to exempt property in the telephone interview notes, narrative statement or additional questions as appropriate, even if it is likely to be rejected.

Where the asset is straightforward to deal with, the notice rejecting the bankrupt’s claim can be sent as soon as the official receiver becomes trustee. If there is any doubt as to whether an asset is exempt, or whether it is of excess value, the matter should be discussed with line management before notice is sent to the bankrupt. The bankrupt should not be led to believe that an asset is, or is not, exempt property in cases where an insolvency practitioner is likely to be appointed, as any decision is for the trustee to make. See paragraph 30.59.

For information regarding the bankrupt’s right to appeal a decision to reject a claim, see paragraph 30.56.

[note: section 283(2), form TCIR, form PRENAR or PREADD, form REPR and ASTCAA]

31.6.67B 42-day period to make claim to property of excess value (inserted March 2009)

The official receiver in his/her capacity as trustee must make a claim against property that is of excess value by notice in writing within 42 days of becoming aware of the property or, where the official receiver is trustee, within 42 days of becoming trustee if he/she was already aware of the existence of the property prior to becoming trustee. See paragraph 31.6.64A. Note that the time limit, set by the Act, can be extended on application to the court.

The court may refuse to permit the claim to be made after the expiry of the 42-day period.

[note: section 308(1), section 309 and form ASTCAA, section 376, Solomons v Williams [2001] B.P.I.R 112]

30.6.68 (Deleted March 2009)

Deleted

31.6.69 Information to creditors (amended March 2009)

If a decision that a bankrupt is to be allowed to retain exempt property of excess value has been made before the issue of the report to creditors, the information about exempt property should be included in the report. Similarly all other assets, which have been judged to be exempt property, should be identified in the report to creditors. Items which are generally exempt in every case, such as household goods and furniture, may be listed in a note at the bottom of the report to creditors and grouped together as such, but items that are likely to give rise to queries, such as a motor vehicle or higher value items, should be individually listed. All other enquiries from creditors about exempt property matters should be dealt with as they arise.

[note: form CARA]

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