4.8 Handling funds in insolvency procedures (SIP 11) Flashcards
What records must the OH prepare and keep in a liquidation (other than an MVL)?
Cash book:
Separate financial records in respect of each appointment, and
Such other financial records as are required to explain receipts and payments,
And record receipts and payments on a daily basis
How long must an OH’s records be kept?
6 years from vacation or release.
When do the Insolvency Regulations 1994 require IPs and OH’s to pay into the ISA? (bankruptcies and comp liquidation only)
Every 14 days
Or forthwith if £5,000 or more has been received
Exception where operating a local bank account when trading, must account weekly total amounts
How long does an OH have to comply with a request for an R & P account by creditors or contributories ?
Must supply an R&P account for the last 12 months period, free of charge, within 14 days of a request
When can the SoS request an R&P account?
Secretary of State can request an R&P at any time/ for any period
What happens to unclaimed dividends in a bankruptcy or compulsory liquidation?
The office holder must return any uncashed dividend cheques to the Secretary of State upon vacating office.
The Secretary of State then pays into the Consolidated Fund
What happens to unclaimed dividends in a CVL/ Administration or Administrative Receivership?
The OH may use ISA for unclaimed dividends.
The Secretary of State then pays into the Consolidated Fund.
What happens to dividends payable to dissolved companies/ deceased persons?
Not re-credited to the estate for the benefit of other creditors
Dissolved companies: Bona vacantia
Deceased persons: Paid to executors/ if no will and no living relatives, then Bona vacantia
When can the trustee operate a local bank account in a bankruptcy case?
Where the trustee intends to exercise his power to carry on the business of the bankrupt, he may apply to the Secretary of State for authorisation to open a local bank account, and the Secretary of State may authorise him to make his payments into and out of a specified bank, subject to a limit, instead of into and out of the Insolvency Services Account if satisfied that an administrative advantage will be derived from having such an account.
Where the trustee opens a local bank account pursuant to an authorisation granted under paragraph (1) above he shall open and maintain the account in the name of the bankrupt.
What is a client account (as opposed to an estate account)?
Where an office holder receives estate money in a manner such that it cannot be paid directly into an estate account, such money may be cleared through an account maintained in the name of the office holder or an entity in which they are working. Such accounts should be operated in accordance with the client money rules and regulations as may from time to time be in force by virtue of that office holder’s authorisation.
Funds paid into such accounts should be paid out to the estate to which they relate as soon as is reasonably practicable.
How often should financial controls and safeguards, including levels of insurance cover, (fully documented) be reviewed by the office holder for their adequacy?
As and when appropriate (and at a minimum annually).
What are expenses in an insolvency?
Any payments from the estate which are neither an office holder’s remuneration nor a distribution to a creditor or a member.
Expenses also includes disbursements. Disbursements are payments which are first met by the office holder, and then reimbursed to the office holder from the estate.
What are category 1 expenses?
Expenses that do not need approval before they are charged to the estate:
Payments to persons providing the service to which the expense relates who are not an associate of the office holder.
E.g:
Expenses: Agents/ solicitors costs
Disbursements: Bond, insurance premiums and advertising costs
What are category 2 expenses?
Payments to associates or which have an element of shared costs.
Before being paid, category 2 expenses require approval in the same manner as an office holder’s remuneration.
Category 2 expenses require approval whether paid directly from the estate or as a disbursement.
When seeking approval of category 2 expenses, an officeholder should explain for each expense the basis on which the expense is being charged to the estate.
How does the Ethics code relate to connectivity of agents/ suppliers?
Threats to the fundamental principles (for example familiarity threats and self- interest threats) can arise if services are provided by a regular source within the firm or by a party with whom the insolvency practitioner, firm, or an individual within the firm, has a business or personal relationship.
The IP shall review arrangements periodically to ensure that best valueand service continue to be obtained in relation to each insolvency appointment; and
document the reasons for choosing a particular service provider.
