Changes to insolvency law: Receiver or official receiver

As well as insolvency practitioners in private practice, a number of the new rules also affect the role of the official receiver and the number of insolvency cases they are involved with. We’ll explain more below...

Interim receivers


It’s often the case that only the official receiver will be appointed as interim receiver between the presentation of a bankruptcy petition and the making of a bankruptcy order, rather than an Insolvency Practitioner in most cases.


This has changed under the new rules allowing the option of either the official receiver or an insolvency practitioner as designated by the applicant. 


Whether there’s a large uptake in creditors seeking to appoint insolvency practitioners into this role will remain to be seen, but the option now exists.

Appointment as trustee


Under the current legislation, rather than being appointed as trustee in bankruptcy, the official receiver is appointed as receiver and manager of the debtor’s estate. 


The idea of this change was that the case shall be passed to an insolvency practitioner when there are sufficient assets and the official receiver shall only deal with low asset cases.


The new legislation gives the official receiver the full powers as trustee in bankruptcy from the date the bankruptcy order is made. 


This will apply to all orders after 6 April 2017 and where a trustee has now been appointed, the official receiver will be appointed as trustee in bankruptcy from 6 April 2018 on all other matters where a trustee is not appointed. 


This will only not be the case where an insolvency practitioner is appointed as trustee at the bankruptcy hearing.

Requirement to hold creditors’ meetings


Under the current legislation the official receiver is required to either hold a meeting of creditors at the start of each case or account to creditors with the reasons they will not be holding such a meeting.


The new rules remove this requirement and leave it to either the discretion of the official receiver or the court to hold a meeting or if 25% of creditors in value require a meeting to be called to remove the official receiver as trustee.


The desired effect of both of these changes appears to be that the official receiver will be encouraged to retain a greater number of cases. 


In accordance with this, the official receiver will be entitled to charge 15% of all realisations in relation to the cases they administer.


The true impact of this may go either way. The desired scenario appears to be that more cases will be retained and dealt with on a loss-cost basis, with only more complex matters being referred to insolvency practitioners. 


With the staffing reductions in the Insolvency Service however, the opposite may become true. 


With more work to be carried out on each case, the number of cases referred to insolvency practitioners due to a lack of capacity to deal with the increased volume of work per case might very well increase.


Only time will tell.