The Insolvent Companies (Reports on Conduct of Directors) (Scotland) Rules 1996

Explanatory Note

(This note is not part of the Rules)

These Rules revoke and replace the Insolvent Companies (Reports on Conduct of Directors) (No. 2) (Scotland) Rules 1986 (S.I. 1986/1916) (“the 1986 Rules”) subject to transitional and saving provisions.

The Rules make provision in relation to Scotland for the manner in which a liquidator, administrative receiver or administrator of a company (“the office-holder”) is to make a report to the Secretary of State, under section 7(3) of the Company Directors Disqualification Act 1986 (“the Act”) in relation to any person who has been a director or shadow director of an insolvent company and whose conduct appears to the office-holder to be such that he is unfit to be concerned in the management of a company. The Rules also provide for returns to be made to the Secretary of State by office-holders, in respect of directors or shadow directors of an insolvent company, where a report has not already been made in respect of such persons under section 7(3) of the Act.

Rules 3 and 4 apply in respect of reports and returns to be made where the relevant insolvency proceedings have commenced (that is, when one of the following events has occurred: the court has ordered the company to be wound up; the company has passed a resolution for it to be voluntarily wound up; an administrative receiver has been appointed; or, an administration order has been made) on or after 30th September 1996.

Rule 3, taken with rule 5, provides that reports under section 7(3) of the Act should be made in Form D1 (Scot) set out in the Schedule or in a substantially similar form, with any necessary variations.

Rule 4, taken with rule 5, provides for a return to be made in Form D2 (Scot) set out in the Schedule or in a substantially similar form, with any necessary variations, in relation to every person who has been a director or shadow director of an insolvent company on, or within the three years prior to, the commencement of the relevant insolvency proceedings. The return is required to be made by the office-holder in office one week before the end of six months after the commencement of those insolvency proceedings, and by any office-holder who vacates office during that period, except where he has made a report under rule 3 covering every such person.

Rule 6 enables the Secretary of State to apply to the court to enforce compliance by the office-holder with a requirement under section 7(4) of the Act to furnish information and books, papers and other records relevant to the conduct of a person as a director.

Rule 7 contains transitional and saving provisions under which rules 2 and 3 of the 1986 Rules (which made provision for purposes similar to those for which rules 3 and 4 of these Rules provide) remain in force, with modifications relating to the forms to be used, for cases where the relevant insolvency proceedings commenced on or after 29th December 1986 and before 30th September 1996.

By virtue of the operation of sections 22A and 22B respectively of the Act, the Act applies to building societies within the meaning of the Building Societies Act 1986 (c. 53) and to incorporated friendly societies within the meaning of the Friendly Societies Act 1992 (c. 40) as it applies to companies and these Rules apply similarly.

Important changes made by these Rules are that:

(a) only one form is now prescribed for a section 7(3) report and one for a return to be made under the Rules;

(b) every office-holder is now required by rule 4(5) to make a return to the Secretary of State in accordance with rule 4 (except where he has made a report as described under rule 4(6)).

A Compliance Cost Assessment is available copies of which have been placed in the libraries of both Houses of Parliament. Copies are also available from The Insolvency Service of the Department of Trade and Industry, P.O. Box 203, Room 5.1, 21 Bloomsbury Street, London WC1B 3QW.