36.62 Amount of Petition deposits

(amended January 2011)

The Insolvency Proceedings (Fees) Order 2004, article 6, makes provision for the payment of deposits as security for the payment of fees in insolvency proceedings.

Article 6 provides that the appropriate deposits are as follows (from 6 April 2010):

(a) in relation to a winding-up petition, the sum of £1000;

(b) in relation to a debtor's, bankruptcy petition presented under section 264(1)(b), the sum of £450;

(c) in relation to a bankruptcy petition presented under section 264(1)(a),(ba), (bb),(c) or (d), the sum of £600.

See Part 7 for information on the deposit required and treatment of the deposit in individual voluntary arrangements where the official receiver is acting as nominee (FTVA). See paragraph 36.71 for information on dealing with the deposit where annulment follows an FTVA.

36.63 Deposit repayment (including following annulment or rescission)

(Amended November 2009)

The deposit paid by the petitioner on presentation of a winding-up or bankruptcy petition is security for the payment of the relevant fees (fees W1 and B1, see paragraph 36.11).  In any case where an order is made (including any case where the order is made and subsequently annulled, rescinded or recalled [Note 11]), except in a case where the debtor presents their own petition,  the deposit paid to secure the fees must be repaid to the person who paid it, except to the extent where the relevant assets are insufficient to discharge the fees for which the deposit is security. This means that if there were no or insufficient assets realised but for example fee B1 was charged in a bankruptcy case, the deposit can be retained to pay part of that fee[Note 12],  [Note 13]. In a debtor’s petition case, the deposit will not be repaid unless it was paid by a third party to whom the deposit, or part thereof, should be repaid.

36.64 Repayment of deposit where petition dismissed or withdrawn

Where a petition is dismissed or withdrawn before an insolvency order is made, generally the deposit will be repaid to the person who paid it. This will not apply in a debtor’s petition bankruptcy case, where it is required to pay any fees arising should the court decide to appoint an insolvency practitioner under IA86 section 273(2), where the debtor’s unsecured debts are less than the small bankruptcies level and an individual voluntary arrangement may be more appropriate[Note 14].  Where the deposit was paid from third party funds it will be repaid to the third party who made the payment. 

36.65 Petitioner’s costs in abortive partnership winding up proceedings not claimable from bankruptcy estate

Where a petition is presented against a partnership business and an individual partner and the winding-up petition against the partnership is subsequently dismissed, the petitioner cannot claim expenses related to the winding up of the partnership from the partner’s bankruptcy estate.  If the winding-up petition is withdrawn (i.e. as a consequence of the petition debt being paid) or dismissed,  it is open to the petitioning creditor to seek an order for costs in those proceedings.  Without an order of costs in the winding-up proceedings, the petitioning  creditor must bear his/her own costs.

36.66 Deposit amount changed after petition presented

As explained at paragraph 36.61 a petition can only be filed on the production of a receipt for the deposit payable [Note 15],[Note 16].  The petition deposit will be the appropriate amount due as at the date that it is paid to the court (see paragraph 36.62).  If the amount of the deposit has changed before the making of the insolvency order (as a result of updated fees amendment legislation coming in to force in the interim period) the deposit paid is still valid and the official receiver will continue the administration of the case using the original deposit as security for payment of the fees.

Where in a bankruptcy case there is an annulment hearing and the petition is re-listed for hearing, it is open to the official receiver to seek an order of the court that any increase in the deposit amount is paid (or the difference needed to reach the increased deposit paid) as a condition of the petition being re-listed.  Without such a court order the official receiver will have no grounds to recoup any increased petition costs from the petitioner.

36.67 Frequent petitioner accounts

The Insolvency Rules 1986 (as amended) allow creditors to make alternative arrangements for the payment of deposits. The amendment provides that a deposit must be paid to the court before a petition can be filed [Note 17], unless the Secretary of State has given written notice to the court that the petitioner has made suitable alternative arrangements to pay the deposit [Note 18]. Petitioners may set up an account with EAS which will fund only the deposits on any petitions presented which result in orders being made. This means that those petitioners with approved accounts are not required to pay a deposit to the court upon filing a petition. This provision benefits those creditors who issue large numbers of petitions that are subsequently dismissed/withdrawn, as funds are only taken when the order is made. EAS will notify the Court Service with the particulars of creditors who open a frequent petitioner account with The Service.

36.68 Current frequent petitioners

The first frequent petitioner accounts were set up for the Inland Revenue and HM Customs and Excise. Although now combined as HM Revenue and Customs, currently two separate frequent petitioner accounts are maintained, one for Revenue and one for Customs,  invoiced as two separate entities. These have been in operation for all petitions presented by HM Revenue and Customs since 1 April 2004, there are no other frequent petitioners at this time, and it is not anticipated that many other petitioners will take up this option.

36.69 Dealing with the deposit in frequent petitioner cases

In practice, when a frequent petitioner presents a petition, they will not have to pay the deposit to the court. If the petition is subsequently dismissed or withdrawn, no deposit monies will have changed hands between The Service and the petitioner (however, the court fee is still payable upon presentation of the petition). This will have a positive effect on reducing the volume of cheques currently issued each day in respect of refunds of deposits. If the order is made, LOLA will automatically post from the frequent petitioner’s account (which will contain funds received in advance) the relevant deposit to the estate. Any subsequent refund of deposit, following an annulment or where there is a credit balance etc., will be processed as per current practice i.e. a cheque or BACs payment made to the petitioner. Each month (or earlier if there is significant activity on the account) the frequent petitioner will be asked to top-up the account to a pre-agreed limit. The accounts will be carefully monitored to ensure that they do not become overdrawn.

EAS will have responsibility for managing the accounts and will also be responsible for giving notice to the Court Service when frequent petitioner status is granted or revoked under Insolvency Rules 1986 Rules 4.7 and 6.10 (as amended).

Should there be in any problems or errors in connection with Frequent Petitioner Accounts please contact the Petition and Deposits team in EAS, email EAD.P&D@insolvency.gsi.gov.uk) or contact Michael Salter,  0121 698 4081.

36.70 Centralised processing of court petitions and deposits

To speed up the banking of deposits received from the courts (both High and county), and to remove the burden of work still undertaken by official receivers’ offices in relation to deposits,  the centralised Petitions & Deposits Team in EAS receives all court deposits and petition details. The team will enter case details for winding-up and creditor bankruptcy petitions onto LOIS and bank all deposit monies on the day of receipt. Debtors' petition details are checked against LOIS although it is expected that such cases will have already been input locally following contact (normally by telephone) from the court. The Court Service has not requested any change to this practice. All petition paperwork will be sent by DX from EAS to the relevant official receiver's office each day. The courts send copies of orders and statements of affairs to the official receiver. All matters such as order dates, adjournments and dismissed/withdrawn petitions and linking of partnership cases will be dealt with by the official receiver's office.

36.71 Annulment following FTVA - Petition deposit

In any case where the bankruptcy order is subsequently annulled following the approval by the creditors of an FTVA, the petition deposit shall be returned to the person who paid it. Where a bankrupt has presented his/her own petition, the deposit may have been paid by the bankrupt. In such circumstances, on the making of the annulment following the approved FTVA, the petition deposit will be returned to the bankrupt and the official receiver should ask the bankrupt to account for this in the FTVA proposal[Note 19].

36.72 Order of priority of payment of expenses from estate (pre April 1995)

Rules 4.218 and 6.224 provide details of the order of priority of payment of all expenses from the insolvent’s estate.  Where winding up proceedings commenced prior to 1 April 1995, or a bankruptcy petition was presented prior to 1 April 1995, the deposit should be refunded after the expenses of preserving, realising or getting in the assets, the expenses or disbursements incurred by the official receiver and the old administration fee. However, it is repayable before other fees including the Secretary of State fee (see paragraph 36.38). In such cases, it is possible to refund the deposit (or part of it) and leave a debit balance on the estate account[Note 20],[Note 21].   

36.73 Changes to order of priority of payment of expenses following the introduction of the Insolvency (Amendment) Rules 1995 (post April 1995)

Where winding up proceedings commenced on or after 1 April 1995, or a bankruptcy petition was presented on or after 1 April 1995, The Insolvency (Amendment) Rules 1995 apply. The amendment rules substituted new rules for the existing rules 4.218(1)(c) and (d) and 6.224(1)(c) and (d) of the 1986 Rules and changed the order of priority in which the expenses are payable. The positions in the order of priority were changed for the administration fee and the repayable deposit (see paragraph 36.51).

36.74 Deposit to be returned where petitioner’s costs forfeited

Where the trustee or liquidator proceeds with a distribution to creditors, should sufficient funds exist following payment of expenses ranked as a higher priority (see paragraphs 36.72 and  36.73), he/she is required to repay the costs of the petitioner and of any person appearing on the petition whose costs are allowed by the court [Note 22],[Note 23].  Where the office-holder requires the petitioning creditor to decide their costs by detailed assessment (see paragraph 36.75) [Note 24],[Note 25] and the petitioner fails to commence proceedings to decide these costs within 3 months of the requirement, he/she forfeits his/her claim to those costs [Note 26],[Note 27].

The instruction requiring the repayment to the petitioner of any amount repayable from the deposit lodged as security for the payment of fees [Note 28] , [Note 29]  appears higher in the order of priority of expenses at Insolvency Rules 1986 rule 4.218(1) and rule 6.224(1) than payment of the petitioner’s costs.  This means that irrespective of the forfeiture of the petitioner’s costs, the petition deposit should be repaid to the petitioner, to the extent that it is not required to pay fees where the insolvent’s assets are insufficient.