Insolvency Rule 1986

Question 1

6.1

Answer 1

Form and content of statutory demand

A statutory demand under section 268 must be dated, and be [authenticated] 2 either by the creditor himself or by a person stating himself to be authorised to make the demand on the creditor’s behalf.

The statutory demand must specify whether it is made under section 268(1) (debt payable immediately) or section 268(2) (debt not so payable).

The demand must state the amount of the debt, and the consideration for it (or, if there is no consideration, the way in which it arises) and—

(a) if made under section 268(1) and founded on a judgment or order of a court, it must give details of the judgment or order, and
(b) if made under section 268(2), it must state the grounds on which it is alleged that the debtor appears to have no reasonable prospect of paying the debt.

If the amount claimed in the demand includes—
(a) any charge by way of interest not previously notified to the debtor as a liability of his, or
(b) any other charge accruing from time to time,
the amount or rate of the charge must be separately identified, and the grounds on which payment of it is claimed must be stated.
In either case the amount claimed must be limited to that which has accrued due at the date of the demand.

If the creditor holds any security in respect of the debt, the full amount of the debt shall be specified, but—

(a) there shall in the demand be specified the nature of the security, and the value which the creditor puts upon it as at the date of the demand, and
(b) the amount of which payment is claimed by the demand shall be the full amount of the debt, less the amount specified as the value of the security.

Question 2

6.2

Answer 2

Information to be given in statutory demand

(1) The statutory demand must include an explanation to the debtor of the following matters—
(a) the purpose of the demand, and the fact that, if the debtor does not comply with the demand, bankruptcy proceedings may be commenced against him;
(b) the time within which the demand must be complied with, if that consequence is to be avoided;
(c) the methods of compliance which are open to the debtor; and
(d) his right to apply to the court for the statutory demand to be set aside.

(2) The demand must specify one or more named individuals with whom the debtor may, if he wishes, enter into communication with a view to securing or compounding for the debt to the satisfaction of the creditor or (as the case may be) establishing to the creditor’s satisfaction that there is a reasonable prospect that the debt will be paid when it falls due.
In the case of any individual so named in the demand, his address and telephone number (if any) must be given.

Question 3

6.3

Answer 3

Requirements as to service

The creditor is, by virtue of the Rules, under an obligation to do all that is reasonable for the purpose of bringing the statutory demand to the debtor’s attention and, if practicable in the particular circumstances, to cause personal service of the demand to be effected.

Question 4

6.4

Answer 4

Application to set aside statutory demand

(1) 1 The debtor may, within the period allowed by this Rule, apply to the appropriate court for an order setting the statutory demand aside.
That period is 18 days from the date of the service on him of the statutory demand

(4) 9 The debtor’s application shall be supported by [a witness statement] 10 —
(a) specifying the date on which the statutory demand came into his hands, and
(b) stating the grounds on which he claims that it should be set aside.

Question 5

6.5

Answer 5

Hearing of application to set aside

(4) 2 The court may grant the application if—
(a) the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt or debts specified in the statutory demand; or
(b) the debt is disputed on grounds which appear to the court to be substantial; or
(c) it appears that the creditor holds some security in respect of the debt claimed by the demand, and either Rule 6.1(5) is not complied with in respect of it, or the court is satisfied that the value of the security equals or exceeds the full amount of the debt; or
(d) the court is satisfied, on other grounds, that the demand ought to be set aside.

Question 6

6.7

Answer 6

Identification of debtor
(1) The petition shall state the following matters with respect to the debtor, so far as they are within the petitioner’s knowledge—
(a) his name, place of residence and occupation (if any);
(b) the name or names in which he carries on business, if other than his true name, and whether, in the case of any business of a specified nature, he carries it on alone or with others;
(c) the nature of his business, and the address or addresses at which he carries it on;
(d) any name or names, other than his true name, in which he has carried on business at or after the time when the debt was incurred, and whether he has done so alone or with others;
(e) any address or addresses at which he has resided or carried on business at or after that time, and the nature of that business [;] 1
[
(f) whether the debtor has his centre of main interests or an establishment in another member State.

Question 7

6.8

Answer 7

Identification of debt
(1) There shall be stated in the petition, with reference to every debt in respect of which it is presented—
(a) the amount of the debt, the consideration for it (or, if there is no consideration, the way in which it arises) and the fact that it is owed to the petitioner;
(b) when the debt was incurred or became due;
(c) if the amount of the debt includes—
(i) any charge by way of interest not previously notified to the debtor as a liability of his, or
(ii) any other charge accruing from time to time,
the amount or rate of the charge (separately identified) and the grounds on which it is claimed to form part of the debt [, provided that such amount or rate must, in the case of a petition based on a statutory demand, be limited to that claimed in that demand] 1 ;
(d) either—
(i) that the debt is for a liquidated sum payable immediately, and the debtor appears to be unable to pay it, or
(ii) that the debt is for a liquidated sum payable at some certain, future time (that time to be specified), and the debtor appears to have no reasonable prospect of being able to pay it,
and, in either case (subject to section 269) that the debt is unsecured.

Question 8

6.9A

Answer 8

Court in which petition to be presented

(1) Where the proceedings are allocated to the London insolvency district under Rule 7.10ZA(a)(i) to (iv) or (b), the creditor must present the petition to—
(a) the High Court where the petition debt is £50,000 or more;
(b) [the County Court at Central London] 2 where the petition debt is less than £50,000;

Question 9

6.10

Answer 9

(1) The petition, verified by [a statement of truth] 1 in accordance with Rule 6.12(1) below, shall be filed in court.

Question 10

6.11

Answer 10

Proof of service of statutory demand
(1) Where under section 268 the petition must have been preceded by a statutory demand, there must be filed in court, with the petition, [a certificate or certificates] 1 proving service of the demand.

Question 11

6.12

Answer 11

Verification of petition

(1) 1 The petition shall be verified by [a statement of truth] 2 .

Question 12

6.13

Answer 12

Notice to Chief Land Registrar
1 When the petition is filed, the court shall [as soon as reasonably practicable] 2 send to the Chief Land Registrar notice of the petition together with a request that it may be registered in the register of pending actions.

Question 13

6.14

Answer 13

Service of petition
(1) Subject as follows, the petition shall be served personally on the debtor by an officer of the court, or by the petitioning creditor or his solicitor, or by a person instructed by the creditor or his solicitor for that purpose; and service shall be effected by delivering to him a sealed copy of the petition.
(2) If the court is satisfied by [a witness statement] 1 or other evidence on oath that prompt personal service cannot be effected because the debtor is keeping out of the way to avoid service of the petition or other legal process, or for any other cause, it may order substituted service to be effected in such manner as it thinks [just] 2 .
(3) 3 Where an order for substituted service has been carried out, the petition is deemed duly served on the debtor.
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(4) If to the petitioner’s knowledge there is in force for the debtor a voluntary arrangement under Part VIII of the Act, and the petitioner is not himself the supervisor of the arrangement, a copy of the petition shall be sent by him to the supervisor.
] 4
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(5) If to the petitioner’s knowledge, there is a member State liquidator appointed in main proceedings in relation to the bankrupt, a copy of the petition shall be sent by him to the member State liquidator.
] 5
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(6) A bankruptcy petition may, with the permission of the court, be served outside England and Wales in such manner as the court may direct.

Question 14

6.15A

Answer 14

Proof of service

(1) Service of the petition must be proved by a certificate of service.
(2) The certificate of service must be sufficient to identify the petition served and must specify—
(a) the name of the debtor,
(b) the name of the petitioner,
(c) the court in which the petition was filed and the court reference number,
(d) the date of the petition,
(e) whether the copy served was a sealed copy,
(f) the date on which service was effected, and
(g) the manner in which service was effected.
(3) Where substituted service has been ordered, the certificate of service must have attached to it a sealed copy of the order.
(4) The certificate of service must be filed in court as soon as reasonably practicable after service, and in any event not less than 5 business days before the hearing of the petition.

Question 15

6.18

Answer 15

Hearing of petition

(1) Subject as follows, the petition shall not be heard until at least 14 days have elapsed since it was served on the debtor.
(2) The court may, on such terms as it thinks [just] 1 , hear the petition at an earlier date, if it appears that the debtor has absconded, or the court is satisfied that it is a proper case for an expedited hearing, or the debtor consents to a hearing within the 14 days.
(3) Any of the following may appear and be heard, that is to say; the petitioning creditor, the debtor [, the supervisor of any voluntary arrangement under Part VIII of the Act in force for the debtor] 2 and any creditor who has given notice under Rule 6.23 below.

Question 16

6.21

Answer 16

Petition opposed by debtor
Where the debtor intends to oppose the petition, he shall not later than [5 business] 1 days before the day fixed for the hearing—
(a) 2 file in court a notice specifying the grounds on which he will object to the making of a bankruptcy order, and
(b) send a copy of the notice to the petitioning creditor or his solicitor.

Question 17

6.22

Answer 17

Amendment of petition
With the [permission] 1 of the court (given on such terms, if any, as the court thinks [just] 1 to impose), the petition may be amended at any time after presentation

Question 18

6.23

Answer 18

Notice by persons intending to appear

(1) 1 Every creditor who intends to appear on the hearing of the petition shall give to the petitioning creditor notice of his intention in accordance with this Rule.
(2) The notice shall specify—
(a) the name and address of the person giving it, and any telephone number and reference which may be required for communication with him or with any other person (to be also specified in the notice) authorised to speak or act on his behalf;
(b) whether his intention is to support or oppose the petition; and
(c) the amount and nature of his debt.
(3) The notice shall be sent so as to reach the addressee not later than 16.00 hours on the business day before that which is appointed for the hearing (or, where the hearing has been adjourned, for the adjourned hearing).
(4) A person failing to comply with this Rule may appear on the hearing of the petition only with the [permission] 2 of the court.

Question 19

6.24

Answer 19

List of appearances

(1) 1 The petitioning creditor shall prepare for the court a list of the creditors (if any) who have given notice under Rule 6.23, specifying their names and addresses and (if known to him) their respective solicitors.
(2) Against the name of each creditor in the list it shall be stated whether his intention is to support the petition, or to oppose it.
(3) On the day appointed for the hearing of the petition, a copy of the list shall be handed to the court before the commencement of the hearing.
(4) If any [permission] 2 is given under Rule 6.23(4) , the petitioner shall add to the list the same particulars in respect of the person to whom [permission] 2 has been given.

Question 20

6.25

Answer 20

Decision on the hearing

(1) On the hearing of the petition, the court may make a bankruptcy order if satisfied that the statements in the petition are true, and that the debt on which it is founded has not been paid, or secured or compounded for.
(2) 1 If the petition is brought in respect of a judgment debt, or a sum ordered by any court to be paid, the court may stay or dismiss the petition on the ground that an appeal is pending from the judgment or order, or that execution of the judgment has been stayed.
(3) A petition preceded by a statutory demand shall not be dismissed on the ground only that the amount of the debt was over-stated in the demand, unless the debtor, within the time allowed for complying with the demand, gave notice to the creditor disputing the validity of the demand on that ground; but, in the absence of such notice, the debtor is deemed to have complied with the demand if he has, within the time allowed, paid the correct amount.

Question 21

6.26

Answer 21

Non-appearance of creditor
If the petitioning creditor fails to appear on the hearing of the petition, no subsequent petition against the same debtor, either alone or jointly with any other person, shall be presented by the same creditor in respect of the same debt, without the [permission] 1 of the court to which the previous petition was presented.

Question 22

6.27

Answer 22

Vacating registration on dismissal of petition
1 If the petition is dismissed or withdrawn by [permission] 2 of the court, an order shall be made at the same time permitting vacation of the registration of the petition as a pending action; and the court shall send to the debtor two sealed copies of the order.

Question 23

6.28

Answer 23

Extension of time for hearing

(1) The petitioning creditor may, if the petition has not been served, apply to the court to appoint another venue for the hearing.
(2) The application shall state the reasons why the petition has not been served.
(3) No costs occasioned by the application shall be allowed in the proceedings except by order of the court.
(4) If the court appoints another day for the hearing, the petitioning creditor shall [as soon as reasonably practicable] 1 notify any creditor who has given notice under Rule 6.23.

Question 24

6.29

Answer 24

Adjournment
(1) 1 If the court adjourns the hearing of the petition, the following applies.
(2) Unless the court otherwise directs, the petitioning creditor shall [as soon as reasonably practicable] 2 send—
(a) to the debtor, and
(b) where any creditor has given notice under Rule 6.23 but was not present at the hearing, to him,
3 notice of the making of the order of adjournment. The notice shall state the venue for the adjourned hearing.

Question 25

6.30

Answer 25

Substitution of petitioner

(1) This Rule applies where a creditor petitions and is subsequently found not entitled to do so, or where the petitioner—
(a) consents to withdraw his petition or to allow it to be dismissed, or consents to an adjournment, or fails to appear in support of his petition when it is called on in court on the day originally fixed for the hearing, or on a day to which it is adjourned, or
(b) appears, but does not apply for an order in the terms of the prayer of his petition.
(2) [ 2] 1The court may, on such terms as it thinks just, order that there be substituted as petitioner any creditor who—
(a) has under Rule 6.23 given notice of his intention to appear at the hearing,
(b) is desirous of prosecuting the petition, and
(c) was, at the date on which the petition was presented, in such a position in relation to the debtor as would have enabled him (the creditor) on that date to present a bankruptcy petition in respect of a debt or debts owed to him by the debtor [ (or in the case of the member State liquidator, owed to creditors in proceedings in relation to which he holds office)] 3 , paragraphs (a) to (d) of section 267(2) being satisfied in respect of that debt or those debts.

Question 26

6.31

Answer 26

Change of carriage of petition

(1) On the hearing of the petition, any person who claims to be a creditor of the debtor, and who has given notice under Rule 6.23 of his intention to appear at the hearing, may apply to the court for an order giving him carriage of the petition in place of the petitioning creditor, but without requiring any amendment of the petition.
(2) The court may, on such terms as it thinks just, make a change of carriage order if satisfied that—
(a) the applicant is an unpaid and unsecured creditor of the debtor, and
(b) the petitioning creditor either—
(i) intends by any means to secure the postponement, adjournment or withdrawal of the petition, or
(ii) does not intend to prosecute the petition, either diligently or at all.
(3) The court shall not make the order if satisfied that the petitioning creditor’s debt has been paid, secured or compounded for by means of—
(a) a disposition of property made by some person other than the debtor, or
(b) a disposition of the debtor’s own property made with the approval of, or ratified by, the court.
(4) A change of carriage order may be made whether or not the petitioning creditor appears at the hearing.
(5) If the order is made, the person given the carriage of the petition is entitled to rely on all evidence previously adduced in the proceedings […] 1 .

Question 27

6.32

Answer 27

Petitioner seeking dismissal or [permission] 1 to withdraw
[
(1) Where the petitioner applies to the court for the petition to be dismissed, or for permission to withdraw it, the petitioner must, in any case where—
(a) a creditor of the debtor has given notice under Rule 6.23 of intention to appear at the hearing of the petition, or
(b) the court so orders,
file with the court a witness statement specifying the grounds of the application and the circumstances in which it is made.
] 2
(2) If, since the petition was filed, any payment has been made to the petitioner by way of settlement (in whole or in part) of the debt or debts in respect of which the petition was brought, or any arrangement has been entered into for securing or compounding it or them, the [witness statement must also] 3 state—
(a) what dispositions of property have been made for the purposes of the settlement or arrangement, and
(b) whether, in the case of any disposition, it was property of the debtor himself, or of some other person, and
(c) whether, if it was property of the debtor, the disposition was made with the approval of, or has been ratified by, the court (if so, specifying the relevant court order).
(3) 4 No order giving [permission] 1 to withdraw a petition shall be given before the petition is heard.

Question 28

6.33

Answer 28

Settlement and content of bankruptcy order
(1) 1 The bankruptcy order shall be settled by the court.
(2) The order shall—
(a) state the date of the presentation of the petition on which the order is made, and the date and time of the making of the order, and
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(b) contain a notice referring to the bankrupt’s duties in relation to the official receiver under section 291, and in particular to the bankrupt’s duty to give the official receiver such inventory of the bankrupt’s estate and such other information, and to attend on the official receiver at such times, as the official receiver may reasonably require.
] 2
(3) Subject to section 346 (effect of bankruptcy on enforcement procedures), the order may include provision staying any action or proceeding against the bankrupt.
(4) Where the petitioning creditor is represented by a solicitor, the order shall be endorsed with the latter’s name, address, telephone number and reference (if any).

Question 29

6.34

Answer 29

Action to follow making of order
(1) At least two sealed copies of the bankruptcy order shall be sent [as soon as reasonably practicable] 1 by the court to the official receiver, who shall [as soon as reasonably practicable] 1 send one of them to the bankrupt.
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(2) Subject to the next paragraph, on receipt of the sealed copies of the bankruptcy order, the official receiver—
(a) as soon as reasonably practicable shall—
(i) send notice of the making of the order to the Chief Land Registrar, for registration in the register of writs and orders affecting land;
(ii) cause notice of the order to be gazetted; and
(b) may cause notice of the order to be advertised in such other manner as the official receiver thinks fit.

Question 30

6.35

Answer 30

Amendment of title of proceedings
(1) At any time after the making of a bankruptcy order, the official receiver or the trustee may apply to the court for an order amending the full title of the proceedings.
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(2) Where such an order is made, as soon as reasonably practicable the official receiver shall send notice of it to the Chief Land Registrar for corresponding amendment of the register.
] 1
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(3) If the official receiver thinks fit, notice of the order—
(a) as soon as reasonably practicable, shall be gazetted; and
(b) may be advertised in such other manner as the official receiver thinks fit.
] 2
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(4) In addition to the standard contents, the notice under paragraph (3) must—
(a) state that an amendment to the full title of the proceedings has been made; and
(b) specify the amendment.

Question 31

6.198

Answer 31

Power of court to order sale
(1) The court may order that the land, or any specified part of it, be sold; and any party bound by the order and in possession of the land or part, or in receipt of the rents and profits from it, may be ordered to deliver up possession or receipt to the purchaser or to such other person as the court may direct.
(2) The court may permit the person having the conduct of the sale to sell the land in such manner as he thinks fit. Alternatively, the court may direct that the land be sold as directed by the order.
(3) The court’s order may contain directions—
(a) appointing the persons to have the conduct of the sale;
(b) fixing the manner of sale (whether by contract conditional on the court’s approval, private treaty, public auction, or otherwise);
(c) settling the particulars and conditions of sale;
(d) obtaining evidence of the value of the property, and fixing a reserve or minimum price;
(e) requiring particular persons to join in the sale and conveyance;
(f) requiring the payment of the purchase money into court, or to trustees or others;
(g) if the sale is to be by public auction, fixing the security (if any) to be given by the auctioneer, and his remuneration.
(4) The court may direct that, if the sale is to be by public auction, the mortgagee may appear and bid on his own behalf.
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(5) Nothing in this Rule or the following Rule may affect the rights in rem of creditors or third parties protected under Article 5 of the EC Regulation (third parties’ rights in rem).

Question 32

6.199

Answer 32

Proceeds of sale
(1) The proceeds of sale shall be applied—
(a) first, in payment of the expenses of the trustee, of and occasioned by the application to the court, of the sale and attendance threat, and of any costs arising from the taking of accounts, and making of enquiries, as directed by the court under Rule 6.197; and
(b) secondly, in payment of the amount found due to any mortgagee, for principal, interest and costs;
and the balance (if any) shall be retained by or paid to the trustee.
(2) Where the proceeds of the sale are insufficient to pay in full the amount found due to any mortgagee, he is entitled to prove as a creditor for any deficiency, and to receive dividends rateably with other creditors, but not so as to disturb any dividend already declared.

Question 33

6.197

Answer 33

Claim by mortgagee of land
(1) Any person claiming to be the legal or equitable mortgagee of land belonging to the bankrupt may apply to the court for an order directing that the land be sold.
“Land”includes any interest in, or right over, land.
(2) The court, if satisfied as to the applicant’s title, may direct accounts to be taken and enquiries made to ascertain—
(a) the principal, interest and costs due under the mortgage, and
(b) where the mortgagee has been in possession of the land or any part of it, the rents and profits, dividends, interest, or other proceeds received by him or on his behalf.
Directions may be given by the court under this paragraph with respect to any mortgage (whether prior or subsequent) on the same property, other than that of the applicant.
(3) For the purpose of those accounts and enquiries, and of making title to the purchaser, any of the parties may be examined by the court, and shall produce on oath before the court all such documents in their custody or under their control relating to the estate of the bankrupt as the court may direct.
[The court may under this paragraph order any of the parties to clarify any matter which is in dispute in the proceedings or give additional information in relation to any such matter and CPR Part 18 (further information) shall apply to any such order.] 1
(4) In any proceedings between a mortgagor and mortgagee, or the trustee of either of them, the court may order accounts to be taken and enquiries made in like manner as in the Chancery Division of the High Court.

Question 34

6.206

Answer 34

Application for annulment
(1) An application to the court under section 282(1) for the annulment of a bankruptcy order shall specify whether it is made—
(a) under subsection (1)(a) of the section (claim that the order ought not to have been made), or
(b) under subsection (1)(b) (debts and expenses of the bankruptcy all paid or secured).
(2) The application shall, in either case, be supported by [a witness statement] 1 stating the grounds on which it is made; and, where it is made under section 282(1)(b) , there shall be set out in [the witness statement] 2 all the facts by reference to which the court is, under the Act and the Rules, required to be satisfied before annulling the bankruptcy order.
(3) A copy of the application and [the witness statement in support must be filed with the court] 3 ; and the court shall give to the applicant notice of the venue fixed for the hearing.
(4) The applicant shall […] 4 give to the official receiver and (if other) the trustee notice of the venue, accompanied by copies of the application and the [witness statement] 5 under paragraph (2) […] 6
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(a) where the application is made under section 282(1)(a), in sufficient time to enable them to be present at the hearing, and
(b) where the application is made under section 282(1)(b), not less than 28 days before the hearing.
] 6
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(5) Where the application is made under section 282(1)(a), paragraph (4) shall additionally be complied with in relation to the person on whose petition the bankruptcy order was made.
] 7
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(6) In this Chapter, where the applicant is not the bankrupt all notices, documents and [evidence] 9 required to be given, sent or delivered to another party by the applicant shall also be given, sent or delivered to the bankrupt.