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Regulation 12

SCHEDULE 2E+W+SREQUIREMENTS FOR SECURITY OR CAUTION AND RELATED MATTERS

This schedule has no associated Explanatory Memorandum

PART 1 E+W+SInterpretation

InterpretationE+W+S

1.  In this Schedule—

“cover schedule” means the schedule referred to in paragraph 3(2)(c);

“the insolvent” means the individual or company in relation to which an insolvency practitioner is acting;

“general penalty sum” shall be construed in accordance with paragraph 3(2)(b);

“insolvent's assets” means all assets comprised in the insolvent's estate together with any monies provided by a third party for the payment of the insolvent's debts or the costs and expenses of administering the insolvent's estate;

[F1“professional liability insurance” means insurance taken out by the insolvency practitioner in respect of potential liabilities to the insolvent and third parties arising out of acting as an insolvency practitioner;]

[F2“relevant losses” means the losses referred to in paragraph 3(1)(b);]

“specific penalty sum” shall be construed in accordance with paragraph 3(2)(a);

[F2“SPS indemnity period” has the meaning given in paragraph 3(3)(c)].

Textual Amendments

PART 2E+W+SRequirements relating to security and caution

Requirements in respect of security or cautionE+W+S

2.  The requirements in respect of security or caution for the proper performance of the duties of insolvency practitioners prescribed for the purposes of section 390(3)(b) shall be as set out in this Part.

[F3Requirement for bond F4...E+W+S

2A.  Where an insolvency practitioner is appointed to act in respect of an insolvent there must be in force—

(a)a bond in a form approved by the Secretary of State which complies with paragraph 3; F5...

F5(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Textual Amendments

[F6Terms of the bond]E+W+S

3.—[F7(1) The bond must—

(a)be in writing or in electronic form;

(b)contain provision whereby a surety or cautioner undertakes to be jointly and severally liable for losses in relation to the insolvent caused by—

(i)the fraud or dishonesty of the insolvency practitioner whether acting alone or in collusion with one or more persons; or

(ii)the fraud or dishonesty of any person committed with the connivance of the insolvency practitioner; and

(c)otherwise conform to the requirements of this paragraph and [F8paragraphs 4 to 8ZD].]

(2) The terms of the bond shall provide—

[F9(a)that claims in respect of relevant losses will be paid up to an aggregate maximum sum for each case where the insolvency practitioner acts (“the specific penalty sum”), together with interest on relevant losses calculated at a rate above the Sterling Overnight Index Average;]

[F10(b)that claims in respect of relevant losses, together with interest, will be paid out of a further sum of £750,000 (“the general penalty sum”) if—

(i)a specific penalty sum is not in force in relation to a case, or

(ii)any amounts payable under a specific penalty sum are insufficient to meet all claims arising out of a case;]

(c)for a schedule containing the name of the insolvent and the value of the insolvent's assets to be submitted to the surety or cautioner within such period as may be specified in the bond;

(d)that where at any time before the insolvency practitioner obtains his release or discharge in respect of his acting in relation to an insolvent, he forms the opinion that the value of that insolvent's assets is greater than the current specific penalty sum, a revised specific penalty sum shall be applicable on the submission within such time as may be specified in the bond of a cover schedule containing a revised value of the insolvent's assets;

(e)for the payment of [F11relevant losses], whether they arise during the period in which the insolvency practitioner holds office in the capacity in which he was initially appointed or a subsequent period where he holds office in a subsequent capacity;

[F12(f)for the payment of the following costs and expenses reasonably incurred or charged by the successor insolvency practitioner—

(i)the costs and expenses of investigating the suspected fraud or dishonesty;

(ii)the costs and expenses of making a claim under the bond, including costs incurred in providing documents or evidence or responding to requests for further information;

(iii)the costs and expenses of obtaining expert advice (including legal advice) in relation to a claim or potential claim under the bond;

(iv)the costs and expenses of administering the insolvent estate, which duplicate costs incurred or charged by an insolvency practitioner before the successor insolvency practitioner’s appointment to act in the relevant case.]

(3) The terms of the bond may provide—

(a)that total claims in respect of the acts of the insolvency practitioner under all bonds relating to him are to be limited to a maximum aggregate sum (which shall not be less than than £25,000,000); F13...

(b)for a time limit within which claims must be made [F14, provided the time limit satisfies the requirements of paragraph 8ZA (minimum run-off period); and]

[F15(c)for a limit on the surety or cautioner’s liability under the specific penalty sum by reference to a specified period of time (“the SPS indemnity period”) during which the relevant losses may arise following the insolvency practitioner’s appointment to act in a case, subject to paragraphs 8ZC (minimum SPS indemnity period) and 8ZD (notification of expiry).]

Textual Amendments

4.  Subject to paragraphs 5, 6 and 7, the amount of the specific penalty in respect of a case in which the insolvency practitioner acts, shall equal at least the value of the insolvent's assets as estimated by the insolvency practitioner as at the date of his appointment but ignoring the value of any assets—

(a)charged to a third party to the extent of any amount which would be payable to that third party; or

(b)held on trust by the insolvent to the extent that any beneficial interest in those assets does not belong to the insolvent.

5.  In a case where an insolvency practitioner acts as a nominee or supervisor of a voluntary arrangement under Part I or Part VIII of the Act, the amount of the specific penalty shall be equal to at least the value of those assets subject to the terms of the arrangement (whether or not those assets are in his possession) including, where under the terms of the arrangement the debtor or a third party is to make payments, the aggregate of any payments to be made.

6.  Where the value of the insolvent's assets is less than £5,000, the specific penalty sum shall be £5,000.

7.  Where the value of the insolvent's assets is more than £5,000,000 the specific penalty sum shall be £5,000,000.

8.  In estimating the value of an insolvent's assets, unless he has reason to doubt their accuracy, the insolvency practitioner may rely upon—

(a)any statement of affairs produced in relation to that insolvent pursuant to any provision of the Act; and

(b)in the case of a sequestration—

(i)the debtor's list of assets and liabilities under section 19 of the Bankruptcy (Scotland) Act 1985 M1;

(ii)the preliminary statement under that Act; or

(iii)the final statement of the debtor's affairs by the interim trustee under section 23 of the Bankruptcy (Scotland) Act 1985.

Marginal Citations

[F16Minimum run-off periodE+W+S

8ZA.—(1) The terms of the bond must provide a minimum period of two years during which a claim may be made in respect of relevant losses in a case.

(2) This period must begin with the date on which the insolvency practitioner is released or discharged in that case.

(3) The reference to “released or discharged in that case” includes the insolvency practitioner being released or discharged from office in a subsequent capacity in that case.

(4) Where the insolvency practitioner holds office in a subsequent capacity in that case, the period must begin with the date of release or discharge from that office.

Textual Amendments

Interest periodE+W+S

8ZB.  The interest referred to in paragraph 3(2)(a) is calculated from the date of the relevant loss to the date of payment of the claim for that loss.

Textual Amendments

Minimum SPS indemnity periodE+W+S

8ZC.—(1) The length of any SPS indemnity period must be no less than 6 years beginning with the date of the insolvency practitioner’s appointment to act in a case, provided the SPS indemnity period can be extended for further periods with the consent of the surety or cautioner.

(2) Where the surety or cautioner is asked to give its consent, such consent must not be unreasonably withheld, but may be given subject to reasonable conditions, including payment of an additional premium.

Textual Amendments

Notification of expiryE+W+S

8ZD.—(1) The surety or cautioner must deliver a notice to the insolvency practitioner and their authorising body no less than 60 days before the date on which any security or caution under a specific penalty sum is due to expire or otherwise cease to have effect for a reason other than the insolvency practitioner’s release or discharge in a case.

(2) The notice must be in writing or in electronic form and contain the following information:

(a)the date the specific penalty sum is due to expire or otherwise cease to have effect;

(b)whether the surety or cautioner is willing to agree to an extension or renewal of the specific penalty sum; and

(c)details of any conditions attached to the extension or renewal, such as the payment of an additional premium.

(3) The specific penalty sum will continue in force until such date as the surety or cautioner has complied with this paragraph, unless otherwise agreed by the parties to the bond.]

Textual Amendments

Compliance of professional liability insurance cover in another EEA stateE+W+S

F178A.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Procedure for determining compliance of professional liability insurance or guaranteeE+W+S

F178B.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Procedure for determining compliance of supplementary guaranteeE+W+S

F178C.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Time for notification of determinationsE+W+S

F178D.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Notification of determination out of timeE+W+S

F178E.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

PART 3 E+W+SRecords relating to bonding and connected matters

Record of specific penalty sums to be maintained by insolvency practitionerE+W+S

9.—(1) An insolvency practitioner shall maintain a record of all specific penalty sums that are applicable in relation to any case where he is acting and such record shall contain the name of each person to whom the specific penalty sum relates and the amount of each penalty sum that is in force.

(2) Any record maintained by an insolvency practitioner pursuant to this paragraph shall, on the giving of reasonable notice, be made available for inspection by—

(a)any professional body recognised under section 391 of the Act of which he is or was a member and the rules of membership of which entitle or entitled him to act as an insolvency practitioner;

F18(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c)the Secretary of State.

F19(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F19(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Retention of bond by recognised professional body or competent authorityE+W+S

10.—[F20(1)] [F21[F22The bond referred to in paragraph 3] or a copy must] be sent by the insolvency practitioner to—

(a)any professional body recognised under section 391 of the Act of which he is a member and the rules of membership of which entitle him to act as an insolvency practitioner; or

F23(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F24[F25(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) [F26The bond referred to in paragraph 3] or a copy of it may be sent electronically.]

Textual Amendments

F20Sch. 2 para. 10 renumbered as Sch. 2 para. 10(1) (28.12.2009) by virtue of The Provision of Services (Insolvency Practitioners) Regulations 2009 (S.I. 2009/3081), reg. 1, Sch. para. 8(7)(a) (with reg. 5)

Inspection and retention requirements relating to cover schedule – England and WalesE+W+S

11.—(1) This regulation applies to an insolvency practitioner appointed in insolvency proceedings under the Act to act—

(a)in relation to a company which the courts in England and Wales have jurisdiction to wind up; or

(b)in respect of an individual.

(2) The insolvency practitioner shall retain a copy of the cover schedule submitted by him in respect of his acting in relation to the company or, as the case may be, individual until the second anniversary of the date on which he is granted his release or discharge in relation to that company or, as the case may be, that individual.

(3) The copy of a schedule kept by an insolvency practitioner in pursuance of sub-paragraph (2) shall be produced by him on demand for inspection by—

(a)any creditor of the person to whom the schedule relates;

(b)where the schedule relates to an insolvent who is an individual, that individual;

(c)where the schedule relates to an insolvent which is a company, any contributory or director or other officer of the company; and

(d)the Secretary of State.

F27(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F27(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Inspection and retention requirements relating to the cover schedule– ScotlandE+W+S

12.—[F28(1) Where an insolvency practitioner is appointed to act in relation to a company which is in administration, or for which there is a proposal for a company voluntary arrangement, the practitioner shall retain in the sederunt book kept under rule 1.54 of the Insolvency (Scotland) (Company Voluntary Arrangements and Administration) Rules 2018 (sederunt book), the principal copy of any cover schedule containing entries in relation to the insolvency practitioner so acting.

(1A) Where an insolvency practitioner is appointed to act in relation to a company which is subject to proceedings for winding up, the practitioner shall retain in the sederunt book kept under rule 1.54 of the Insolvency (Scotland) (Receivership and Winding Up) Rules 2018 (sederunt book) the principal copy of any cover schedule containing entries in relation to the insolvency practitioner so acting.]

(2) Where an insolvency practitioner is appointed to act as interim trustee or permanent trustee or as a trustee under a trust deed for creditors, he shall retain in the sederunt book kept for those proceedings, the principal copy of any cover schedule containing entries in relation to his so acting.

Textual Amendments

Requirements to submit cover schedule to authorising bodyE+W+S

13.—(1) Every insolvency practitioner shall submit to his authorising body not later than 20 days after the end of each month during which he holds office in a case—

(a)the information submitted to a surety or cautioner in any cover schedule related to that month;

(b)where no cover schedule is submitted in relation to the month, a statement either that there are no relevant particulars to be supplied or, as the case may be, that it is not practicable to supply particulars in relation to any appointments taken in that month; and

(c)a statement identifying any case in respect of which he has been granted his release or discharge.

(2) In this regulation “authorising body” means in relation to an insolvency practitioner—

(a)any professional body recognised under section 391 of the Act of which he is a member and the rules of membership of which entitle him to act as an insolvency practitioner; or

F29(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

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