Chapter 5Non-corporate organisations – sole traders and partnershipscriminal offence if he acts as a company director or takes
part in the management of a company unless the court
gives permission.
Before the enactment of the Enterprise Act 2002
undischarged bankrupts were automatically disqualified
from sitting in Parliament or as a magistrate and from
any elective office in local government. To minimise the
stigma of such disqualifications, they are now applied
under ss 265 to 267 of the Insolvency Act 1986 (as
amended) only to those bankrupts who are subject to
a bankruptcy restrictions order(BRO). These are made
by the court and are intended for ‘culpable’ bankrupts,
such as those who have not kept proper accounting
and other business records. The restrictions also apply
to those culpable bankrupts who have not waited for
the court to make an order against them but have
instead offered a bankruptcy restrictions undertaking
(BRU) to the Secretary of State, who has accepted the
undertaking.
Pensions
The Welfare Reform and Pensions Act 1999 provides
that where a bankruptcy order is made against any per-
son, any rights that he or she has in a Revenue-approved
pension scheme are to be excluded from the estate for
the purposes of bankruptcy proceedings. The Act covers
occupational schemes, personal pensions and the gov-
ernment’s stakeholder pensions.
Committee of creditors
1 If someone other than the Official Receiver is
appointed as Fred’s trustee, the creditors may at a gen-
eral meeting set up a committee of creditors of at least
three and not more than five creditors to keep an eye on
the way in which the trustee deals with the assets. The
trustee must take into account any directions given to
him by the committee or of a general meeting of creditors.
If there is a difference of view between the committee
and the general meeting, the general meeting decision is
followed.
2 The trustee is not bound to set up a committee of
creditors unless a majority in value of creditors present
and voting in person or by proxy resolve to do so. How-
ever, it can be helpful to the trustee because the creditors,
or some of them, may well have experience in Fred’s
area of trade. Thus, if Fred’s debts are £50,000, a creditor,
or more likely creditors, owed at least £25,001 must
want a committee of creditors.The public examination
1 Once a bankruptcy order has been made against Fred,
the Official Receiver (even if he is not the trustee) or the
trustee may apply to the court for the public examina-
tion of Fred. One-half in value of Fred’s creditors may
require the Official Receiver to make the application to
the court for a public examination. This is not a major-
ity but literally one-half, i.e. in the example given above,
£25,000.
2 At the public examination Fred can be questioned
by the Official Receiver or the trustee (where this is a
different person from the Official Receiver), or by any
creditor on the subject of his business affairs and deal-
ings in property and the causes of business failure.
3 The main purpose of the public examination is to
help the Official Receiver to find out why Fred’s business
failed and whether he has been guilty of some miscon-
duct which could lead to his prosecution for a criminal
offence, e.g. fraud.The family home
1 The family home is likely to be Fred’s most valuable
asset. If it is in Fred’s name only, it vests in (is owned in
law by) the trustee on his appointment. If it is in the
joint names of Fred and another, e.g. his wife, then only
Fred’s half vests in the trustee.
2 In any event the trustee will be keen to sell the prop-
erty so that Fred’s creditors can have the benefit of what
Fred owns in the property, usually after repayment of a
mortgage.
3 However, the trustee must honour rights of occupa-
tion of the home. Fred will have rights of occupation
only if persons under 18 (e.g. his children) reside with
him at the commencement of his bankruptcy. His wife
will have rights of occupation in her own right whether
she is a joint owner or not. These rights arise under the105