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The Insolvency (England and Wales) Rules 2016

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Changes over time for: PART 14

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Version Superseded: 08/12/2017

Status:

Point in time view as at 06/04/2017.

Changes to legislation:

There are currently no known outstanding effects for the The Insolvency (England and Wales) Rules 2016, PART 14. Help about Changes to Legislation

PART 14E+WCLAIMS BY AND DISTRIBUTIONS TO CREDITORS IN ADMINISTRATION, WINDING UP AND BANKRUPTCY

CHAPTER 1E+WApplication and interpretation

Application of Part 14 and interpretationE+W

[Note: “bankruptcy debt” and related expressions are defined in relation to bankruptcy in section 382.]

14.1.—(1) This Part applies to administration, winding up and bankruptcy proceedings.

(2) The definitions in this rule apply to administration, winding up and bankruptcy proceedings except as otherwise stated.

(3) “Debt”, in relation to winding up and administration, means (subject to the next paragraph) any of the following—

(a)any debt or liability to which the company is subject at the relevant date;

(b)any debt or liability to which the company may become subject after the relevant date by reason of any obligation incurred before that date;

(c)any interest provable as mentioned in rule 14.23;

small debt” means a debt (being the total amount owed to a creditor) which does not exceed £1,000 (which amount is prescribed for the purposes of paragraph 13A of Schedule 8 to the Act and paragraph 18A of Schedule 9 to the Act M1);

dividend”, in relation to a members' voluntary winding up, includes a distribution;

provable debt” has the meaning given in rule 14.2; and

relevant date” means—

(a)

in the case of an administration which was not immediately preceded by a winding up, the date on which the company entered administration,

(b)

in the case of an administration which was immediately preceded by a winding up, the date on which the company went into liquidation,

(c)

in the case of a winding up which was not immediately preceded by an administration, the date on which the company went into liquidation,

(d)

in the case of a winding up which was immediately preceded by an administration, the date on which the company entered administration, and

(e)

in the case of a bankruptcy, the date of the bankruptcy order.

(4) For the purposes of any provision of the Act or these Rules about winding up or administration, any liability in tort is a debt provable in the winding up or administration, if either—

(a)the cause of action has accrued at the relevant date; or

(b)all the elements necessary to establish the cause of action exist at that date except for actionable damage.

(5) For the purposes of references in any provision of the Act or these Rules about winding up or administration to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent, or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in any such provision to owing a debt are to be read accordingly.

(6) In any provision of the Act or these Rules about winding up or administration, except in so far as the context otherwise requires, “liability” means (subject to paragraph (4)) a liability to pay money or money's worth, including any liability under an enactment, a liability for breach of trust, any liability in contract, tort or bailment, and any liability arising out of an obligation to make restitution.

Marginal Citations

M1Paragraph 13A was inserted into Schedule 8 by section 131 of the Small Business, Enterprise and Employment Act 2015 (c.26) and paragraph 18A was inserted into Schedule 9 by section 132 of that Act.

CHAPTER 2E+WCreditors' claims in administration, winding up and bankruptcy

[Note: a document required by the Act or these Rules must also contain the standard contents set out in Part 1.]

Provable debtsE+W

14.2.—(1) All claims by creditors except as provided in this rule, are provable as debts against the company or bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages.

(2) The following are not provable—

(a)an obligation arising under a confiscation order made under—

(i)section 1 of the Drug Trafficking Offences Act 1986 M2,

(ii)section 1 of the Criminal Justice (Scotland) Act 1987 M3,

(iii)section 71 of the Criminal Justice Act 1988 M4, or

(iv)Parts 2, 3 or 4 of the Proceeds of Crime Act 2002 M5;

(b)an obligation arising from a payment out of the social fund under section 138(1)(b) of the Social Security Contributions and Benefits Act 1992 M6 by way of crisis loan or budgeting loan.

(c)in bankruptcy—

(i)a fine imposed for an offence,

(ii)an obligation (other than an obligation to pay a lump sum or to pay costs) arising under an order made in family proceedings, or

(iii)an obligation arising under a maintenance assessment made under the Child Support Act 1991 M7.

(3) In paragraph (2)(c), “fine” and “family proceedings” have the meanings given by section 281(8) (which applies the Magistrates Courts Act 1980 M8 and the Matrimonial and Family Proceedings Act 1984 M9).

(4) The following claims are not provable until after all other claims of creditors have been paid in full with interest under sections 189(2) (winding up), section 328(4) (bankruptcy) and rule 14.23 (payment of interest)—

(a)a claim arising by virtue of section 382(1)(a) of the Financial Services and Markets Act 2000 (restitution orders) M10, unless it is also a claim arising by virtue of sub-paragraph (b) of that section (a person who has suffered loss etc.); or

(b)in administration and winding up, a claim which by virtue of the Act or any other enactment is a claim the payment of which in a bankruptcy, an administration or a winding up is to be postponed.

(5) Nothing in this rule prejudices any enactment or rule of law under which a particular kind of debt is not provable, whether on grounds of public policy or otherwise.

Marginal Citations

M21986 c.32; repealed by Schedule 3 to the Drug Trafficking Act 1994 (c.37).

M41988 c.33; repealed by Schedule 12 to the Proceeds of Crime Act 2002 (c.29) with savings in articles 10 and 13 of S.I. 2003/333.

M52002 c.29; relevant amendments are made by paragraph 75(1) and (2) of Part 2 of Schedule 3 to the Criminal Justice Act 2003 (c.44); Part 1 of Schedule 8 and paragraphs 1 and 2 of Schedule 14 to the Serious Crime Act 2007 (c.27); and paragraphs 11 and 12 of the Schedule to the Prevention of Social Housing Fraud Act 2013 (c.3).

M61992 c.4; section 138(1)(b) is repealed by section 71 of the Welfare Reform Act 2012 c.5.

M102000 c.8; section 382 has been amended by paragraph 21 of Schedule 9 to the Financial Services Act 2012 (c.21).

Proving a debtE+W

14.3.—(1) A creditor wishing to recover a debt must submit a proof to the office-holder unless—

(a)this rule or an order of the court provides otherwise; or

(b)it is a members' voluntary winding up in which case the creditor is not required to submit a proof unless the liquidator requires one to be submitted.

(2) A creditor is deemed to have proved—

(a)in a winding up immediately preceded by an administration, where the creditor has already proved in the administration; or

(b)in an administration immediately preceded by a winding up, where the creditor has already proved in the winding up.

(3) A creditor is deemed to have proved for the purposes of determination and payment of a dividend but not otherwise where—

(a)the debt is a small debt;

(b)a notice has been delivered to the creditor of intention to declare a dividend or make a distribution under rule 14.29 which complies with rule 14.31 (further contents of notice to creditors owed small debts); and

(c)the creditor has not advised the office-holder that the debt is incorrect or not owed in response to the notice.

Requirements for proofE+W

14.4.—(1) A proof must—

(a)be made out by, or under the direction of, the creditor and authenticated by the creditor or a person authorised on the creditor's behalf;

(b)state the creditor's name and address;

(c)if the creditor is a company, identify the company;

(d)state the total amount of the creditor's claim (including any value added tax) as at the relevant date, less any payments made after that date in relation to the claim, any deduction under rule 14.20 and any adjustment by way of set-off in accordance with rules 14.24 and 14.25;

(e)state whether or not the claim includes any outstanding uncapitalised interest;

(f)contain particulars of how and when the debt was incurred by the company or the bankrupt;

(g)contain particulars of any security held, the date on which it was given and the value which the creditor puts on it;

(h)provide details of any reservation of title in relation to goods to which the debt relates;

(i)provide details of any document by reference to which the debt can be substantiated;

(j)be dated and authenticated; and

(k)state the name, postal address and authority of the person authenticating the proof (if someone other than the creditor).

(2) Where sub-paragraph (i) applies the document need not be delivered with the proof unless the office-holder has requested it.

(3) The office-holder may call for the creditor to produce any document or other evidence which the office-holder considers is necessary to substantiate the whole or any part of a claim.

Costs of provingE+W

14.5.  Unless the court orders otherwise—

(a)each creditor bears the cost of proving for that creditor's own debt, including costs incurred in providing documents or evidence under rule 14.4 (3);

(b)in an administration or winding up, costs incurred by the office-holder in estimating the value of a debt under rule 14.14 are payable out of the assets as an expense of the administration or winding up; and

(c)in a bankruptcy, costs incurred by the office-holder in estimating the value of a debt under section 322(3) fall on the bankrupt's estate as an expense of the bankruptcy.

Allowing inspection of proofsE+W

14.6.  The office-holder must, so long as proofs delivered to the office-holder are in the possession of the office-holder, allow them to be inspected, at all reasonable times on any business day, by the following—

(a)a creditor who has delivered a proof (unless the proof has been wholly rejected for purposes of dividend or otherwise, or withdrawn);

(b)a member or contributory of the company or, in the case of a bankruptcy, the bankrupt; and

(c)a person acting on behalf of any of the above.

Admission and rejection of proofs for dividendE+W

14.7.—(1) The office-holder may admit or reject a proof for dividend (in whole or in part).

(2) If the office-holder rejects a proof in whole or in part, the office-holder must deliver to the creditor a statement of the office-holder's reasons for doing so, as soon as reasonably practicable.

Appeal against decision on proofE+W

14.8.—(1) If a creditor is dissatisfied with the office-holder's decision under rule 14.7 in relation to the creditor's own proof (including a decision whether the debt is preferential), the creditor may apply to the court for the decision to be reversed or varied.

(2) The application must be made within 21 days of the creditor receiving the statement delivered under rule 14.7(2).

(3) A member, a contributory, any other creditor or, in a bankruptcy, the bankrupt, if dissatisfied with the office-holder's decision admitting, or rejecting the whole or any part of, a proof or agreeing to revalue a creditor's security under rule 14.15, may make such an application within 21 days of becoming aware of the office-holder's decision.

(4) The court must fix a venue for the application to be heard.

(5) The applicant must deliver notice of the venue to the creditor who delivered the proof in question (unless it is the applicant's own proof) and the office-holder.

(6) The office-holder must, on receipt of the notice, file the relevant proof with the court, together (if appropriate) with a copy of the statement sent under rule 14.7(2).

(7) After the application has been heard and determined, a proof which was submitted by the creditor in hard copy form must be returned by the court to the office-holder.

Office-holder not liable for costs under rule 14.8E+W

14.9.—(1) The official receiver is not personally liable for costs incurred by any person in respect of an application under rule 14.8.

(2) An office-holder other than the official receiver is not personally liable for costs incurred by any person in respect of an application under rule 14.8 unless the court orders otherwise.

Withdrawal or variation of proofE+W

14.10.—(1) A creditor may withdraw a proof at any time by delivering a written notice to the office-holder.

(2) The amount claimed by a creditor's proof may be varied at any time by agreement between the creditor and the office-holder.

Exclusion of proof by the courtE+W

14.11.—(1) The court may exclude a proof or reduce the amount claimed—

(a)on the office-holder's application, where the office-holder thinks that the proof has been improperly admitted, or ought to be reduced; or

(b)on the application of a creditor, a member, a contributory or a bankrupt, if the office-holder declines to interfere in the matter.

(2) Where application is made under paragraph (1), the court must fix a venue for the application to be heard.

(3) The applicant must deliver notice of the venue—

(a)in the case of an application by the office-holder, to the creditor who submitted the proof; and

(b)in the case of an application by a creditor, a member, a contributory or a bankrupt, to the office-holder and to the creditor who made the proof (if not the applicant).

Administration and winding up by the court: debts of insolvent company to rank equallyE+W

[Note: for the equivalent rule for voluntary liquidation see section 107 of the Act and for bankruptcy section 328 of the Act.]

14.12.—(1) This rule applies in an administration and a winding up by the court.

(2) Debts other than preferential debts rank equally between themselves and, after the preferential debts, must be paid in full unless the assets are insufficient for meeting them, in which case they abate in equal proportions between themselves.

Administration and winding up: division of unsold assetsE+W

[Note: in respect of bankruptcy see section 326 (distribution of property in specie).]

14.13.—(1) This rule applies in an administration or in a winding up of a company (other than a members' voluntary winding up) to any property which from its peculiar nature or other special circumstances cannot be readily or advantageously sold.

(2) The office-holder may with the required permission divide the property in its existing form among the company's creditors according to its estimated value.

(3) The required permission is—

(a)the permission of the creditors' committee in an administration or, if there is no creditors' committee, the creditors; and

(b)the permission of the liquidation committee in a winding up, or, if there is no liquidation committee, the creditors (without prejudice to provisions of the Act about disclaimer).

Administration and winding up: estimate of value of debtE+W

14.14.—(1) In an administration or in a winding up, the office-holder must estimate the value of a debt that does not have a certain value because it is subject to a contingency or for any other reason.

(2) The office-holder may revise such an estimate by reference to a change of circumstances or to information becoming available to the office-holder.

(3) The office-holder must inform the creditor of the office-holder's estimate and any revision.

(4) Where the value of a debt is estimated under this rule or by the court under section 168(3) or (5), the amount provable in the case of that debt is that of the estimate for the time being.

Secured creditor: value of securityE+W

14.15.—(1) A secured creditor may, with the agreement of the office-holder or the permission of the court, at any time alter the value which that creditor has put upon a security in a proof.

(2) Paragraph (3) applies where a secured creditor—

(a)being the applicant for the administration order or the appointer of the administrator, has in the application or the notice of appointment put a value on the security;

(b)being the petitioner in winding-up or bankruptcy proceedings, has put a value on the security in the petition; or

(c)has voted in respect of the unsecured balance of the debt.

(3) Where this paragraph applies—

(a)the secured creditor may re-value the security only with the agreement of the office-holder or the permission of the court; and

(b)where the revaluation was by agreement, the office-holder must deliver a notice of the revaluation to the creditors within five business days after the office-holder's agreement.

Secured creditor: surrender for non-disclosureE+W

14.16.—(1) If a secured creditor fails to disclose a security in a proof, the secured creditor must surrender that security for the general benefit of creditors, unless the court, on application by the secured creditor, relieves the secured creditor from the effect of this rule on the grounds that the omission was inadvertent or the result of honest mistake.

(2) If the court grants that relief, it may require or allow the creditor's proof to be amended, on such terms as may be just.

(3) Nothing in this rule or in rules 14.17 or 14.18 affects the rights in rem of creditors or third parties protected under Article 5 of the EC Regulation.

Secured creditor: redemption by office-holderE+W

14.17.—(1) The office-holder may at any time deliver a notice to a creditor whose debt is secured that the office-holder proposes, at the expiration of 28 days from the date of the notice, to redeem the security at the value put upon it in the creditor's proof.

(2) The creditor then has 21 days (or such longer period as the office-holder may allow) in which to alter the value of the security in accordance with rule 14.15.

(3) If the creditor alters the value of the security with the permission of the office-holder or the court then the office-holder may only redeem at the new value.

(4) If the office-holder redeems the security the cost of transferring it is payable as an expense out of the insolvent estate.

(5) A creditor whose debt is secured may at any time deliver a notice to the office-holder requiring the office-holder to elect whether or not to redeem the security at the value then placed on it.

(6) The office-holder then has three months in which to redeem the security or elect not to redeem the security.

Secured creditor: test of security's valueE+W

14.18.—(1) If the office-holder is dissatisfied with the value which a secured creditor puts on a security in the creditor's proof the office-holder may require any property comprised in the security to be offered for sale.

(2) The terms of sale will be as agreed between the office-holder and the secured creditor, or as the court may direct.

(3) If the sale is by auction, the office-holder on behalf of the company or the insolvent estate and the creditor may bid.

(4) This rule does not apply if the value of the security has been altered with the court's permission.

Realisation or surrender of security by creditorE+W

14.19.—(1) If a creditor who has valued a security subsequently realises the security (whether or not at the instance of the office-holder)—

(a)the net amount realised must be treated in all respects (including in relation to any valuation in a proof) as an amended valuation made by the creditor; and

(b)the creditor may prove for the balance of the creditor's debt.

(2) A creditor who voluntarily surrenders a security may prove for the whole of the creditor's debt as if it were unsecured.

DiscountsE+W

14.20.  All trade and other discounts (except a discount for immediate or early settlement) which would have been available to the company or the debtor but for the insolvency proceedings must be deducted from the claim.

Debts in foreign currencyE+W

14.21.—(1) A proof for a debt incurred or payable in a foreign currency must state the amount of the debt in that currency.

(2) The office-holder must convert all such debts into sterling at a single rate for each currency determined by the office-holder by reference to the exchange rates prevailing on the relevant date.

(3) On the next occasion when the office-holder communicates with the creditors the office-holder must advise them of any rate so determined.

(4) A creditor who considers that the rate determined by the office-holder is unreasonable may apply to the court.

(5) If on hearing the application the court finds that the rate is unreasonable it may itself determine the rate.

(6) This rule does not apply to the conversion of foreign currency debts in an application for a debt relief order.

Payments of a periodical natureE+W

14.22.—(1) In the case of rent and other payments of a periodical nature, the creditor may prove for any amounts due and unpaid up to the relevant date.

(2) Where at that date any payment was accruing due, the creditor may prove for so much as would have been due at that date, if accruing from day to day.

InterestE+W

[Note: provision for the payment of interest out of a surplus remaining after payment of the debts is made by section 189(2) in respect of winding up and section 328(4) in respect of bankruptcy.]

14.23.—(1) Where a debt proved in insolvency proceedings bears interest, that interest is provable as part of the debt except in so far as it is payable in respect of any period after the relevant date.

(2) In the circumstances set out below the creditor's claim may include interest on the debt for periods before the relevant date although not previously reserved or agreed.

(3) If the debt is due by virtue of a written instrument and payable at a certain time, interest may be claimed for the period from that time to the relevant date.

(4) If the debt is due otherwise, interest may only be claimed if demand for payment of the debt was made in writing by or on behalf of the creditor, and notice was delivered that interest would be payable from the date of the demand to the date of the payment, before—

(a)the relevant date, in respect of administration or winding up; or

(b)the presentation of the bankruptcy petition or the bankruptcy application.

(5) Interest under paragraph (4) may only be claimed for the period from the date of the demand to the relevant date and, for the purposes of the Act and these Rules, must be charged at a rate not exceeding that mentioned in paragraph (6).

(6) The rate of interest to be claimed under paragraphs (3) and (4) is the rate specified in section 17 of the Judgments Act 1838 M11 on the relevant date.

(7) In an administration—

(a)any surplus remaining after payment of the debts proved must, before being applied for any other purpose, be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the relevant date;

(b)all interest payable under sub-paragraph (a) ranks equally whether or not the debts on which it is payable rank equally; and

(c)the rate of interest payable under sub-paragraph (a) is whichever is the greater of the rate specified under paragraph (6) and the rate applicable to the debt apart from the administration.

Administration: mutual dealings and set-offE+W

14.24.—(1) This rule applies in an administration where the administrator intends to make a distribution and has delivered a notice under rule 14.29.

(2) An account must be taken as at the date of the notice of what is due from the company and a creditor to each other in respect of their mutual dealings and the sums due from the one must be set off against the sums due from the other.

(3) If there is a balance owed to the creditor then only that balance is provable in the administration.

(4) If there is a balance owed to the company that must be paid to the administrator as part of the assets.

(5) However if all or part of the balance owed to the company results from a contingent or prospective debt owed by the creditor then the balance (or that part of it which results from the contingent or prospective debt) must be paid in full (without being discounted under rule 14.44) if and when that debt becomes due and payable.

(6) In this rule—

obligation” means an obligation however arising, whether by virtue of an agreement, rule of law or otherwise; and

mutual dealings” means mutual credits, mutual debts or other mutual dealings between the company and a creditor proving or claiming to prove for a debt in the administration but does not include any of the following—

(a)

a debt arising out of an obligation incurred after the company entered administration;

(b)

a debt arising out of an obligation incurred at a time when the creditor had notice that—

(i)

an application for an administration order was pending, or

(ii)

any person had delivered notice of intention to appoint an administrator;

(c)

a debt arising out of an obligation where—

(i)

the administration was immediately preceded by a winding up, and

(ii)

at the time when the obligation was incurred the creditor had notice that a decision had been sought from creditors under section 100 M12 on the nomination of a liquidator or that a winding-up petition was pending;

(d)

a debt arising out of an obligation incurred during a winding up which immediately preceded the administration; or

(e)

a debt which has been acquired by a creditor by assignment or otherwise, under an agreement between the creditor and another party where that agreement was entered into—

(i)

after the company entered administration,

(ii)

at a time when the creditor had notice that an application for an administration order was pending,

(iii)

at a time when the creditor had notice that any person had given notice of intention to appoint an administrator,

(iv)

where the administration was immediately preceded by a winding up, at a time when the creditor had notice that a decision had been sought from creditors under section 100 on the nomination of a liquidator or that a winding-up petition was pending, or

(v)

during a winding up which immediately preceded the administration.

(7) A sum must be treated as being due to or from the company for the purposes of paragraph (2) whether—

(a)it is payable at present or in the future;

(b)the obligation by virtue of which it is payable is certain or contingent; or

(c)its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion.

(8) For the purposes of this rule—

(a)rule 14.14 applies to an obligation which, by reason of its being subject to a contingency or for any other reason, does not bear a certain value;

(b)rules 14.21 to 14.23 apply to sums due to the company which—

(i)are payable in a currency other than sterling,

(ii)are of a periodical nature, or

(iii)bear interest; and

(c)rule 14.44 applies to a sum due to or from the company which is payable in the future.

Marginal Citations

M12Section 100 is amended by paragraph 24 of Schedule 9 to the Small Business, Enterprise and Employment Act 2015 (c.26) which inserts new subsections (1), (1A) and (1B).

Winding up: mutual dealings and set-offE+W

14.25.—(1) This rule applies in a winding up where, before the company goes into liquidation, there have been mutual dealings between the company and a creditor of the company proving or claiming to prove for a debt in the liquidation.

(2) An account must be taken of what is due from the company and the creditor to each other in respect of their mutual dealings and the sums due from the one must be set off against the sums due from the other.

(3) If there is a balance owed to the creditor then only that balance is provable in the winding up.

(4) If there is a balance owed to the company then that must be paid to the liquidator as part of the assets.

(5) However if all or part of the balance owed to the company results from a contingent or prospective debt owed by the creditor then the balance (or that part of it which results from the contingent or prospective debt) must be paid in full (without being discounted under rule 14.44) if and when that debt becomes due and payable.

(6) In this rule—

obligation” means an obligation however arising, whether by virtue of an agreement, rule of law or otherwise; and

mutual dealings” means mutual credits, mutual debts or other mutual dealings between the company and a creditor proving or claiming to prove for a debt in the winding up but does not include any of the following—

(a)

a debt arising out of an obligation incurred at a time when the creditor had notice that—

(i)

a decision had been sought from creditors on the nomination of a liquidator under section 100, or

(ii)

a petition for the winding up of the company was pending;

(b)

a debt arising out of an obligation where—

(i)

the liquidation was immediately preceded by an administration, and

(ii)

at the time the obligation was incurred the creditor had notice that an application for an administration order was pending or a person had delivered notice of intention to appoint an administrator; and

(c)

a debt arising out of an obligation incurred during an administration which immediately preceded the liquidation;

(d)

a debt which has been acquired by a creditor by assignment or otherwise, under an agreement between the creditor and another party where that agreement was entered into—

(i)

after the company went into liquidation,

(ii)

at a time when the creditor had notice that a decision had been sought from creditors under section 100 on the nomination of a liquidator,

(iii)

at a time when the creditor had notice that a winding-up petition was pending,

(iv)

where the winding up was immediately preceded by an administration at a time when the creditor had notice that an application for an administration order was pending or a person had delivered notice of intention to appoint an administrator, or

(v)

during an administration which immediately preceded the winding up.

(7) A sum must be treated as being due to or from the company for the purposes of paragraph (2) whether—

(a)it is payable at present or in the future;

(b)the obligation by virtue of which it is payable is certain or contingent; or

(c)its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion.

(8) For the purposes of this rule—

(a)rule 14.14 applies to an obligation which, by reason of its being subject to a contingency or for any other reason, does not bear a certain value;

(b)rules 14.21 to 14.23 apply to sums due to the company which—

(i)are payable in a currency other than sterling,

(ii)are of a periodical nature, or

(iii)bear interest; and

(c)rule 14.44 applies to a sum due to or from the company which is payable in the future.

CHAPTER 3E+WDistribution to creditors in administration, winding up and bankruptcy

[Note: a document required by the Act or these Rules must also contain the standard contents set out in Part 1.]

Application of Chapter to a particular class of creditors and to distributionsE+W

14.26.—(1) This Chapter applies where the office-holder makes, or proposes to make, a distribution to any class of creditors other than secured creditors.

(2) Where the distribution is to a particular class of creditors in an administration, a reference in this Chapter to creditors is a reference to that class of creditors only.

Declaration and distribution of dividends in a winding upE+W

[Note: section 324 makes provision in respect of such a declaration and distribution in a bankruptcy.]

14.27.  Whenever a liquidator in a creditors' voluntary winding up or a winding up by the court has sufficient funds in hand for the purpose the liquidator must, while retaining such sums as may be necessary for the expenses of the winding up, declare and distribute dividends among the creditors in respect of the debts which they have proved.

Gazette notice of intended first dividend or distributionE+W

14.28.—(1) Subject to paragraphs (2) and (4) where the office-holder intends to declare a first dividend or distribution the office-holder must gazette a notice containing—

(a)a statement that the office-holder intends to declare a first dividend or distribution;

(b)the date by which and place to which proofs must be delivered; and

(c)in the case of a members' voluntary winding up, where the dividend or distribution is to be a sole or final distribution, a statement that the distribution may be made without regard to the claim of any person in respect of a debt not proved.

(2) Where the intended dividend is only to preferential creditors the office-holder need only gazette a notice if the office-holder thinks fit.

(3) The office-holder may in addition advertise such a notice in such other manner (if any) as the office-holder thinks fit.

(4) Paragraph (1) does not apply where the office-holder has previously, by a notice which has been gazetted, invited creditors to prove their debts.

Individual notices to creditors etc. of intended dividend or distributionE+W

14.29.—(1) The office-holder must deliver a notice of the intention to make a distribution to creditors or declare a dividend—

(a)to the creditors in an administration; and

(b)to all creditors in a winding up or a bankruptcy who have not proved (including any creditors who are owed small debts and are not deemed under rule 14.3(3) to have proved as a result of a previous notice under rule 14.29).

(2) Where the intended dividend is only for preferential creditors, the office-holder is only required to deliver such a notice to the preferential creditors.

(3) Where the office-holder intends to declare a dividend to unsecured creditors in an administration or winding-up the notice must also state the value of the prescribed part unless there is no prescribed part or the court has made an order under section 176A(5).

Contents of notice of intention to declare a dividend or make a distributionE+W

14.30.  A notice under rule 14.29 must contain the following—

(a)a statement that the office-holder intends to make a distribution to creditors or declare a dividend (as the case may be) within the period of two months from the last date for proving;

(b)a statement whether the proposed distribution or dividend is interim or final;

(c)the last date by which proofs may be delivered which must be—

(i)the same date for all creditors who prove, and

(ii)not less than 21 days from the date of notice;

(d)a statement of the place to which proofs must be delivered;

(e)the additional information required by rule 14.31 where the office-holder intends to treat a small debt as proved for the purposes of paying a dividend; and

(f)in the case of a members' voluntary winding up, where the distribution is to be a sole or final distribution, a statement that the distribution may be made without regard to the claim of any person in respect of a debt not proved.

Further contents of notice to creditors owed small debts etc.E+W

14.31.—(1) The office-holder may treat a debt, which is a small debt according to the accounting records or the statement of affairs of the company or bankrupt, as if it were proved for the purpose of paying a dividend.

(2) Where the office-holder intends to treat such a debt as if it were proved the notice delivered under rule 14.29 must—

(a)state the amount of the debt which the office-holder believes to be owed to the creditor according to the accounting records or statement of affairs of the company or the bankrupt (as the case may be);

(b)state that the office-holder will treat the debt which is stated in notice, being for £1,000 or less, as proved for the purposes of paying a dividend unless the creditor advises the office-holder that the amount of the debt is incorrect or that no debt is owed;

(c)require the creditor to notify the office-holder by the last date for proving if the amount of the debt is incorrect or if no debt is owed; and

(d)inform the creditor that where the creditor advises the office-holder that the amount of the debt is incorrect the creditor must also submit a proof in order to receive a dividend.

(3) The information required by paragraph (2)(a) may take the form of a list of small debts which the office-holder intends to treat as proved which includes that owed to the particular creditor to whom the notice is being delivered.

Admission or rejection of proofs following last date for provingE+W

14.32.—(1) Unless the office-holder has already dealt with them, the office-holder must within 14 days of the last date for proving set out in the notice under rule 14.29—

(a)admit or reject (in whole or in part) proofs delivered to the office-holder; or

(b)make such provision in relation to them as the office-holder thinks fit.

(2) The office-holder is not obliged to deal with a proof delivered after the last date for proving, but the office-holder may do so if the office-holder thinks fit.

(3) In the declaration of a dividend a payment must not be made more than once in respect of the same debt.

(4) Subject to rule 14.43 (assignment of right to dividend), payment must only be made to the creditor in a case where both the creditor and a member State liquidator have proved in relation to the same debt.

Postponement or cancellation of dividendE+W

14.33.—(1) The office-holder may postpone or cancel the dividend in the period of two months from the last date for proving if an application is made to the court for the office-holder's decision on a proof to be reversed or varied, or for a proof to be excluded, or for a reduction of the amount claimed.

(2) The office-holder may postpone a dividend if the office-holder considers that due to the nature of the affairs of the person to whom the proceedings relate there is real complexity in admitting or rejecting proofs of claims submitted.

(3) Where the dividend is postponed or cancelled a new notice under rule 14.29 will be required if the dividend is paid subsequently.

Declaration of dividendE+W

14.34.—(1) The office-holder must declare the dividend in the two month period referred to in rule 14.30(a) in accordance with the notice of intention to declare a dividend unless the office-holder has had cause to postpone or cancel the dividend.

(2) The office-holder must not declare a dividend so long as there is pending an application to the court to reverse or vary a decision of the office-holder on a proof, or to exclude a proof or to reduce the amount claimed unless the court gives permission.

(3) If the court gives such permission, the office-holder must make such provision in relation to the proof as the court directs.

Notice of declaration of a dividendE+W

14.35.—(1) Where the office-holder declares a dividend the office-holder must deliver notice of that fact to all creditors who have proved for their debts (subject to paragraph (5)).

(2) The notice declaring a dividend may be delivered at the same time as the dividend is distributed.

(3) The notice must include the following in relation to the insolvency proceedings—

(a)the amounts raised from the sale of assets, indicating (so far as practicable) amounts raised by the sale of particular assets;

(b)the payments made by the office-holder in carrying out the office-holder's functions;

(c)the provision (if any) made for unsettled claims, and funds (if any) retained for particular purposes;

(d)the total amount to be distributed and the rate of dividend; and

(e)whether, and if so when, any further dividend is expected to be declared.

(4) In an administration, a creditors' voluntary winding-up or a winding up by the court, where the administrator or liquidator intends to make a distribution to unsecured creditors, the notice must also state the value of the prescribed part unless there is no prescribed part or the court has made an order under section 176A(5).

(5) Where the office-holder declares a dividend for preferential creditors only, the notice under paragraph (1) need only be delivered to those preferential creditors who have proved for their debts.

Last notice about dividend in a winding upE+W

[Note: section 330 contains the requirement to deliver such a notice in a bankruptcy.]

14.36.—(1) When the liquidator in a winding up has realised all the company's assets or so much of them as can, in the liquidator's opinion, be realised without needlessly prolonging the winding up, the liquidator must deliver a notice as provided for in this Chapter, either—

(a)of intention to declare a final dividend; or

(b)that no dividend, or further dividend, will be declared.

(2) The notice must contain the particulars required by rule 14.30, 14.31, 14.37 or 14.38 as the case may be and must require claims against the assets to be established by a date set out in the notice.

Contents of last notice about dividend (administration, winding up and bankruptcy)E+W

14.37.—(1) This rule applies in an administration, winding up or bankruptcy.

(2) If the office-holder delivers notice to creditors that the office-holder is unable to declare any dividend or (as the case may be) any further dividend, the notice must contain a statement to the effect either—

(a)that no funds have been realised; or

(b)that the funds realised have already been distributed or used or allocated for paying the expenses of the insolvency proceedings.

(3) The information required by paragraph (2) may be included in a progress report.

Sole or final dividendE+W

[Note: see section 330 in respect of a dividend in a bankruptcy.]

14.38.—(1) Where, in an administration or winding up, it is intended that the distribution is to be a sole or final dividend, after the date specified as the last date for proving in the notice under rule 14.29, the office-holder—

(a)in a winding up, must pay any outstanding expenses of the winding up out of the assets;

(b)in an administration, must—

(i)pay any outstanding expenses of a winding up (including any of the items mentioned in rule 6.42 or 7.108 (as appropriate)) or provisional winding up that immediately preceded the administration,

(ii)pay any items payable in accordance with the provisions of paragraph 99 of Schedule B1,

(iii)pay any amount outstanding (including debts or liabilities and the administrator's own remuneration and expenses) which would, if the administrator were to cease to be the administrator of the company, be payable out of the property of which he had custody or control in accordance with the provisions of paragraph 99, and

(iv)declare and distribute that dividend without regard to the claim of any person in respect of a debt not already proved; or

(c)in a members' voluntary winding up may, and in every other case must, declare and distribute that dividend without regard to the claim of any person in respect of a debt not already proved.

(2) The reference in paragraph (1)(b)(iv) and (c) to debts that have not been proved does not include small debts treated as proved by the office-holder.

(3) The court may, on the application of any person, postpone the date specified in the notice.

Administration and winding up: provisions as to dividendsE+W

[Note: see section 324(4) in respect of such provisions in bankruptcy.]

14.39.  In an administration or winding up, in the calculation and distribution of a dividend the office-holder must make provision for—

(a)any debts which are the subject of claims which have not yet been determined; and

(b)disputed proofs and claims.

Supplementary provisions as to dividends and distributionsE+W

14.40.—(1) A creditor is not entitled to disturb the payment of any dividend or making of any distribution because—

(a)the amount claimed in the creditor's proof is increased after payment of the dividend;

(b)in an administration, a creditors' voluntary winding up or a winding up by the court the creditor did not prove for a debt before the declaration of the dividend; or

(c)in a members' voluntary winding up, the creditor did not prove for a debt before the last date for proving or increases the claim in proof after that date.

(2) However the creditor is entitled to be paid a dividend or receive a distribution which the creditor has failed to receive out of any money for the time being available for the payment of a further dividend or making a further distribution.

(3) Such a dividend must be paid or distribution made before that money is applied to the payment of any further dividend or making of any further distribution.

(4) If, after a creditor's proof has been admitted, the proof is withdrawn or excluded, or the amount of it is reduced, the creditor is liable to repay to the office-holder, for the credit of the insolvency proceedings, any amount overpaid by way of dividend.

Secured creditorsE+W

14.41.—(1) The following applies where a creditor alters the value of a security after a dividend has been declared.

(2) If the alteration reduces the creditor's unsecured claim ranking for dividend, the creditor must as soon as reasonably practicable repay to the office-holder, for the credit of the administration or of the insolvent estate, any amount received by the creditor as dividend in excess of that to which the creditor would be entitled, having regard to the alteration of the value of the security.

(3) If the alteration increases the creditor's unsecured claim, the creditor is entitled to receive from the office-holder, out of any money for the time being available for the payment of a further dividend, before any such further dividend is paid, any dividend or dividends which the creditor has failed to receive, having regard to the alteration of the value of the security.

(4) The creditor is not entitled to disturb any dividend declared (whether or not distributed) before the date of the alteration.

Disqualification from dividendE+W

14.42.  If a creditor contravenes any provision of the Act or these Rules relating to the valuation of securities, the court may, on the application of the office-holder, order that the creditor be wholly or partly disqualified from participation in any dividend.

Assignment of right to dividendE+W

14.43.—(1) If a person entitled to a dividend (“the entitled person”) delivers notice to the office-holder that the entitled person wishes the dividend to be paid to another person, or that the entitled person has assigned the entitlement to another person, the office-holder must pay the dividend to that other person accordingly.

(2) A notice delivered under this rule must specify the name and address of the person to whom payment is to be made.

Debt payable at future timeE+W

14.44.—(1) Where a creditor has proved for a debt of which payment is not due at the date of the declaration of a dividend, the creditor is entitled to the dividend equally with other creditors, but subject as follows.

(2) For the purpose of dividend (and no other purpose) the amount of the creditor's admitted proof must be discounted by applying the following formula—

where—

a

X” is the value of the admitted proof; and

b

n” is the period beginning with the relevant date and ending with the date on which the payment of the creditor's debt would otherwise be due, expressed in years (part of a year being expressed as a decimal fraction of a year).

Administration and winding up: non-payment of dividendE+W

[Note: see section 325(2) for equivalent provisions in respect of bankruptcy.]

14.45.—(1) No action lies against the office-holder in an administration or winding up for payment of a dividend.

(2) However, if the office-holder refuses to pay a dividend the court may, if it thinks just, order the office-holder to pay it and also to pay, out of the office-holder's own money—

(a)interest on the dividend, at the rate for the time being specified in section 17 of the Judgments Act 1838 M13, from the time when it was withheld; and

(b)the costs of the proceedings in which the order to pay is made.

Marginal Citations

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