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The Insolvency Practitioners Regulations 2005

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Version Superseded: 31/12/2020

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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.

[F1Requirement for bond or professional liability insuranceE+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; or

(b)where the insolvency practitioner is already established in another EEA state and is already covered in that state by professional liability insurance or a guarantee, professional liability insurance or a guarantee which complies with paragraph 8A.]

[F2Terms of the bond]E+W+S

3.[F3(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 paragraphs 4 to 8.]

(2) The terms of the bond shall provide—

(a)for the payment, in respect of each case where the insolvency practitioner acts, of claims in respect of liabilities for losses of the kind mentioned in sub-paragraph (1) up to an aggregate maximum sum in respect of that case (“the specific penalty sum”) calculated in accordance with the provisions of this Schedule;

(b)in the event that any amounts payable under (a) are insufficient to meet all claims arising out of any case, for a further sum of £250,000 (“the general penalty sum”) out of which any such claims are to be met;

(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 losses of the kind mentioned in sub-paragraph (1), 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;

(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); and

(b)for a time limit within which claims must be made.

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

[F4Compliance of professional liability insurance cover in another EEA stateE+W+S

8A.  Where paragraph 2A(b) applies to an insolvency practitioner, the professional liability insurance or guarantee complies with this paragraph if the Secretary of State determines that it is equivalent or essentially comparable to the bond referred to in paragraph 3 as regards—

(a)its purpose, and

(b)the cover it provides in terms of—

(i)the risk covered,

(ii)the amount covered, and

(iii)exclusions from the cover.]

[F4Procedure for determining compliance of professional liability insurance or guaranteeE+W+S

8B.(1) Where an insolvency practitioner seeks a determination under paragraph 8A, the insolvency practitioner must send to the Secretary of State—

(a)a copy of the document providing the professional liability insurance or guarantee cover in the EEA state in which the insolvency practitioner is established;

(b)where the document in sub-paragraph (a) is not in English, a translation of it into English; and

(c)a notice—

(i)where the insolvency practitioner intends to act in respect of an insolvent, specifying—

(aa)the name of the insolvent; and

(bb)the time and date when the insolvency practitioner intends to consent to be appointed to act; or

(ii)that the insolvency practitioner seeks a determination without reference to a specific appointment.

(2) Where there is a notice sent under sub-paragraph (1)(c)(i), the documents sent under sub-paragraph (1) must be sent to the Secretary of State such that the Secretary of State receives them no later than 5 business days before the date in the notice.

(3) Where the Secretary of State receives the documents sent under sub-paragraph (1), the Secretary of State must—

(a)as soon as is reasonably practicable, notify the insolvency practitioner whether they were received in accordance with sub-paragraph (2);

(b)consider them; and

(c)determine whether the document sent under sub-paragraph (1)(a) complies with paragraph 8A.

(4) Where the Secretary of State determines that the document sent under sub-paragraph (1)(a) complies with paragraph 8A, the Secretary of State must—

(a)notify the insolvency practitioner that it complies with paragraph 8A; and

(b)determine whether it contains a term equivalent or essentially comparable to a requirement to provide—

(i)a specific penalty sum; or

(ii)a cover schedule.

(5) Where the Secretary of State determines under sub-paragraph (4)(b) that the document sent under sub-paragraph (1)(a)—

(a)contains a term equivalent or essentially comparable to a requirement to provide a specific penalty sum or a cover schedule, the notice sent under paragraph (4)(a) must specify—

(i)the term equivalent or essentially comparable to a requirement to provide a specific penalty sum or a cover schedule; and

(ii)the thing in the term in sub-paragraph (i) which is equivalent or essentially comparable to a specific penalty sum or a cover schedule; or

(b)does not contain a term equivalent or essentially comparable to a requirement to provide a specific penalty sum or a cover schedule, the notice sent under paragraph (4)(a) must state that determination.

(6) Where the Secretary of State determines that the document sent under sub-paragraph (1)(a) does not comply with paragraph 8A, the Secretary of State must notify the insolvency practitioner and—

(a)give reasons for the determination; and

(b)specify any terms which, if included in a supplementary guarantee, will cause the Secretary of State to make a determination in accordance with paragraph 8A.

(7) In this paragraph a “business day” means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday in England and Wales under or by virtue of the Banking and Financial Dealings Act 1971.

(8) Any documents in this paragraph or paragraph 8C or 8D may be sent electronically.]

[F4Procedure for determining compliance of supplementary guaranteeE+W+S

8C.(1) Where the Secretary of State has made a determination under paragraph 8B(6), the insolvency practitioner may send to the Secretary of State—

(a)a supplementary guarantee purporting to provide for the matters specified in paragraph 8B(6)(b); and

(b)where the supplementary guarantee is not in English, a translation of it into English.

(2) Where the Secretary of State receives the documents sent under sub-paragraph (1), the Secretary of State must—

(a)as soon as is reasonably practicable, notify the insolvency practitioner of the date and time of their receipt;

(b)consider them; and

(c)determine whether the document sent under sub-paragraph (1)(a) provides for the matters specified in paragraph 8B(6)(b).

(3) Where the Secretary of State determines that the document sent under sub-paragraph (1)(a)—

(a)provides for the matters in specified in paragraph 8B(6)(b); and

(b)together with the document in paragraph 8B(1)(a) complies with paragraph 8A,

the Secretary of State must notify the insolvency practitioner that the documents sent under sub-paragraph (1)(a) and paragraph 8B(1)(a) together comply with paragraph 8A.

(4) Where the Secretary of State determines in accordance with sub-paragraph (3), the Secretary of State must also determine whether the document sent under sub-paragraph (1)(a) or paragraph 8B(1)(a) contains a term equivalent or essentially comparable to a requirement to provide—

(a)a specific penalty sum; or

(b)a cover schedule.

(5) Where the Secretary of State determines under sub-paragraph (4) that the document sent under sub-paragraph (1)(a) or paragraph 8B(1)(a)—

(a)contains a term equivalent or essentially comparable to a requirement to provide a specific penalty sum or a cover schedule, the notice sent under sub-paragraph (3) must specify—

(i)the term equivalent or essentially comparable to a requirement to provide a specific penalty sum or a cover schedule;

(ii)the thing in the term in sub-paragraph (i) which is equivalent or essentially comparable to a requirement to a specific penalty sum or a cover schedule; and

(iii)the document in which the term in sub-paragraph (i) and the thing in sub-paragraph (ii) are to be found; or

(b)does not contain a term equivalent or essentially comparable to a requirement to provide a specific penalty sum or a cover schedule, the notice sent under sub-paragraph (3) must state that determination.

(6) Where the Secretary of State determines that the document sent under sub-paragraph (1)(a)—

(a)does not provide for the matters specified in paragraph 8B(6)(b), or

(b)together with the document sent under paragraph 8B(1)(a) does not comply with paragraph 8A,

the Secretary of State must notify the insolvency practitioner that the documents sent under sub-paragraphs (1)(a) and paragraph 8B(1)(a) together do not comply with paragraph 8A.]

[F4Time for notification of determinationsE+W+S

8D.(1) The Secretary of State must notify the insolvency practitioner of the determinations under paragraph 8B or 8C in the periods set out in this paragraph.

(2) The Secretary of State must notify the insolvency practitioner—

(a)where a notice under paragraph 8B(1)(c)(i) is received by the Secretary of State in accordance with paragraph 8B(2) and the determination is under—

(i)paragraph 8B(4), (5) or (6), such that the insolvency practitioner receives the notice sent under paragraph 8B(4) or (6) or before the time and date in the notice sent under paragraph 8B(1)(c)(i); or

(ii)paragraph 8C(4), (5) or (6), as soon as is reasonably practicable after receipt of the documents sent under paragraph 8C(1);

(b)where a notice sent under paragraph 8B(1)(c)(i) is received by the Secretary of State but not in accordance with paragraph 8B(2), and the determination is under—

(i)paragraph 8B(4), (5) or (6), as soon as is reasonably practicable after receipt of the documents sent under paragraph 8B(1); or

(ii)paragraph 8C(3), (5) or (6), as soon as is reasonably practicable after receipt of the documents sent under paragraph 8C(1); or

(c)where the notice is sent under paragraph 8B(1)(c)(ii), and the determination is under—

(i)paragraph 8B(4), (5) or (6), within 28 days of receipt of the documents sent under paragraph 8B(1); or

(ii)paragraph 8C(3), (5) or (6), within 14 days of receipt of the documents sent under paragraph 8C(1).]

[F4Notification of determination out of timeE+W+S

8E.(1) This paragraph applies where the insolvency practitioner—

(a)sends a notice under paragraph 8B(1)(c)(i);

(b)receives notification sent under paragraph 8B(3)(a) that the Secretary of State received the documents in paragraph 8B(1) in accordance with paragraph 8B(2); and

(c)does not receive the notifications in the time in paragraph 8D(2)(a)(i).

(2) The insolvency practitioner is qualified to act as an insolvency practitioner in respect of the insolvent specified in the notice under paragraph 8B(1)(c)(i) until the Secretary of State notifies the insolvency practitioner of the determination under paragraph 8B or 8C.

(3) Subject to sub-paragraph (4), where the Secretary of State notifies the insolvency practitioner of the determination under paragraph 8B or 8C—

(a)the determination applies; and

(b)the insolvency practitioner ceases to be qualified to act as an insolvency practitioner under sub-paragraph (2).

(4) Where—

(a)the Secretary of State gives notice under paragraph 8B(6); and

(b)the insolvency practitioner sends the documents in paragraph 8C(1),

the insolvency practitioner is qualified to act as an insolvency practitioner under sub-paragraph (2) until the Secretary of State determines in accordance with paragraph 8C(4) or (6).]

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