Are you a creditor looking to replace the Official Receiver?

If you are a creditor of an insolvent company or a bankruptcy, Oliver Elliot can help you if you wish to replace the Official Receiver with an Insolvency Practitioner or address your claim and concerns arising from the insolvency.

Find out how

Change Insolvency Practitioners

Replace the Official Receiver with an Insolvency Practitioner is usually an appointment that can be undertaken by agreement with the Official Receiver if sufficient creditors express such a desire.

Want to Replace The Official Receiver With An Insolvency Practitioner?

Who Is The Official Receiver?

Replace The Official Receiver With An Insolvency Practitioner is the subject of this article. The Official Receiver is the individual that has responsibility for the initial management of a Compulsory Liquidation when a Winding Up Order has been made. Alternatively, the Official Receiver will likewise be responsible for the initial management of a bankruptcy estate when an individual goes bankrupt.

The Official Receiver works for the Insolvency Service which is an agency within the Department for Business, Energy and Industrial Strategy.

What Is An Insolvency Practitioner?

An Insolvency Practitioner is a Licensed practitioner who acts instead of the Directors when liquidating a Limited Company or who acts as Trustee In Bankruptcy for a bankruptcy estate. In both cases an Insolvency Practitioner can replace the Official Receiver taking over either as the Liquidator of a company or as Trustee of a bankruptcy estate.

Sometimes creditors might have interests that they consider are not being furthered by the Official Receiver. In such circumstances, they might seek to remove or replace a Liquidator as the Trustee in Bankruptcy.

How To Replace The Official Receiver With An Insolvency Practitioner might not always be a simple procedure. There are certain rules that need to be followed. However, if creditors are unhappy with the Official Receiver (or any other office-holder) or want to replace him or her with an Insolvency Practitioner, it is open to them to remove him or her from office.

Are you a dissatisfied creditor in a Liquidation or some other insolvency process, seeking to consider how to replace the Official Receiver with an Insolvency Practitioner to have someone else take over for the creditors?

The Insolvency Act 1986 sets out the typical requirements to replace the Official Receiver early on in a Compulsory Liquidation in Section 136 of the Insolvency Act 1986.

How To Replace The Official Receiver With An Insolvency Practitioner

Replace The Official Receiver With An Insolvency Practitioner can be effected in the following ways:

It is the duty of an office-holder, including but not limited to the Official Receiver to be efficient, vigorous and unbiased and if he or she does not live up to this standard, then the court is likely to act without hesitation to remove him or her accordingly.

How To Apply To Court

This would be a somewhat unusual application but it can and has happened. Normally much of the case law on court applications is where one Insolvency Practitioner is replaced as either Liquidator, Administrator or Trustee in Bankruptcy with another Insolvency Practitioner.

It is rare for a Court application to arise whereby the Official Receiver is removed from office and replaced by an Insolvency Practitioner.

Application to Court requires what is referred to as ‘just cause’ to remove any Liquidator or Trustee in Bankruptcy, including the Official Receiver. This is not intended to be a procedure capable of being deployed by creditors if they just fancy a changing of the guard or they have fallen out with the Official Receiver for reasons unrelated to the conduct in the administration of the insolvency estate (Liquidation, Administration, Bankruptcy etc).

More common than court removal is the route to replace the Official Receiver with an Insolvency Practitioner at the instigation of creditors via a Decision Procedure requisitioned. Far more common still is when the Official Receiver invites creditors to appoint an Insolvency Practitioner.

Consequently, if creditors want to replace the Official Receiver as the Liquidator or Trustee In Bankruptcy by way of a Court application they have to have a good reason. But what is a good reason?

What Is A Good Reason To Remove A Liquidator?

Good reason or just cause will depend upon the facts of the case to remove the Official Receiver. The burden will be on the creditor applicant to show why the Official Receiver (or other Office-Holder) ought to be removed.

In general terms, the Court will expect that the Official Receiver to have been efficient, vigorous and unbiased; if not the Court may exercise its discretion to grant removal. However, an effective and honest Liquidator or Trustee in Bankruptcy will usually not be removed. Misconduct itself is not a prerequisite for an application for removal to succeed.

An example of how the Court viewed “vigour” in a particular case, can be seen in the matter of Re Keypak Homecare Ltd [1987] BCLC 409 where Millett J said:

“If the liquidation had been conducted with any vigour at all, long before now the liquidator would be in a position either to allay the suspicions of the creditors or to lay papers before solicitors with a view to starting proceedings. Such proceedings might well include an application for the appointment of a receiver of Northern Brass Ltd. It need hardly be said that any such proceedings have to be conducted with great speed. Stock which has disappeared from one company is very likely to disappear from another under the same control.

“There is nothing that can be said against Mr Edgar so far as his personal integrity is concerned. There is no evidence of any misconduct or wrongdoing on his part, or of his intimacy or friendship with the directors of the company at all. He is a professional, independent, and experienced liquidator. But I am not impressed by his performance in the conduct of this liquidation. I take the view that his experience, gained in times when liquidators were accustomed to directors simply removing the stock before liquidation and then paying for them afterwards at forced sale values, has stood him in ill stead. As a result, he has adopted a relaxed and complacent attitude to such conduct, and in my judgment the creditors, who were outraged by what they believed had happened, were perfectly reasonable in the view that Mr Edgar was not likely to pursue the directors with anything like sufficient vigour. If that was the view they adopted at the meeting, then it has been amply confirmed by all that has taken place since. I, too, take the view that Mr Edgar is unlikely to pursue the directors with anything like sufficient vigour.”

“In circumstances such as the present, the creditors are entitled to expect either the suspicious matters to be cleared up very shortly after the creditors’ meeting, or proceedings to be commenced against the former directors with speed and pursued with vigour. A liquidator who can see from the statement of affairs that there are likely to be insufficient assets to enable him to discharge his duties ought to make the position clear at the meeting of creditors and insist on being authorised by those present at the meeting to take such steps as may be necessary. But simply to stand back and do nothing and then claim that that is justified by the lack of finance is not, in my judgment, good enough.”

How To Requisition A Decision

Requisitioning a Decision Procedure can be undertaken from compliance with Rule 15.18 of the Insolvency (England and Wales) Rules 2016. The key threshold to overcome is having 25% of creditors by value supporting your proposed resolution of creditors to replace the Official Receiver with an Insolvency Practitioner who has consented to act.

This procedure may well involve the need to pay a deposit as security for the costs of convening the procedure by virtue of Rule 15.19 of the Insolvency (England and Wales) Rules 2016. To require a deposit the Official Receiver (and indeed any such office-holder) will need to set out (within 14 days of the request to requisition the procedure), details of how the sum requested for the deposit is broken down.

So to Replace The Official Receiver With An Insolvency Practitioner by creditors could be a phone call away or it could be a long way away; it could be unmerited and simply not happen at all. If you are a dissatisfied creditor do not suffer in silence if you have real and merited concerns, get in touch and Our CEO Elliot Green will consider the matter for you and give you the benefit of his view.

If you would like to explore your options in a case relevant to you then you can contact Our CEO Elliot Green by emailing him at elliot.green@oliverelliot.co.uk or call us to speak to him on 020 3925 3613.

He will give you the time of day but this does not mean the Official Receiver should or indeed will be removed. The facts of each case need to be very carefully considered and there is no presumption one way or the other.

Someone’s concerns and suspicions can sometimes takeover and objectivity can on occasion be lost. An Insolvency Practitioner is in effect a servant of the creditors, not their ‘hired gun‘ as a court has been known to promulgate as Mr Justice Lightman did in Ng v Ng (1998) 2 2 FLR 386, (1997) BCC 507:

“A trustee in bankruptcy is not vested with the powers and privileges of his office so as to able him to accept engagement as a hired gun.”

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Disclaimer

This post: Replace The Official Receiver With An Insolvency Practitioner is not legal advice and should not be relied upon as such. Replace The Official Receiver With An Insolvency Practitioner is provided for information purposes only. You can Contact Us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.