The Bill for this Act of the Scottish Parliament was passed by the Parliament on 30th November 2006 and received Royal Assent on 15th January 2007
An Act of the Scottish Parliament to amend the law of sequestration and personal insolvency; to amend the law about floating charges; to establish a Scottish Civil Enforcement Commission and replace officers of court with judicial officers; to amend the law of diligence; and for connected purposes.
Section 54 of the Bankruptcy (Scotland) Act 1985 (c. 66) (in this Act, the “1985 Act”) (automatic discharge of debtor) is amended as follows.
(2)
In subsection (1), for the words “3 years” substitute “1 year”.
(3)
In subsection (3), the words “2 years and” are repealed.
(4)
The heading to that section becomes “Automatic discharge of debtor”.
Bankruptcy restrictions orders and undertakings
2-
Bankruptcy restrictions orders and undertakings
(1)
After section 56 of the 1985 Act, insert—
“Bankruptcy restrictions orders and undertakings
56A
Bankruptcy restrictions order
(1)
Where sequestration of a living debtor’s estate is awarded, an order (known as a “bankruptcy restrictions order”) in respect of the debtor may be made by the sheriff.
(2)
An order may be made only on the application of the Accountant in Bankruptcy.
56B
Grounds for making order
(1)
The sheriff shall grant an application for a bankruptcy restrictions order if he thinks it appropriate having regard to the conduct of the debtor (whether before or after the date of sequestration).
(2)
The sheriff shall, in particular, take into account any of the following kinds of behaviour on the part of the debtor—
(a)
failing to keep records which account for a loss of property by the debtor, or by a business carried on by him, where the loss occurred in the period beginning 2 years before the date of presentation of the petition for sequestration or, as the case may be, the date the debtor application was made and ending with the date of the application for a bankruptcy restrictions order;
(b)
failing to produce records of that kind on demand by—
(i)
the Accountant in Bankruptcy;
(ii)
the interim trustee; or
(iii)
the trustee;
(c)
making a gratuitous alienation or any other alienation for no consideration or for no adequate consideration which a creditor has, under any rule of law, right to challenge;
(d)
creating an unfair preference or any other preference which a creditor has, under any rule of law, right to challenge;
(e)
making an excessive pension contribution;
(f)
failing to supply goods or services which were wholly or partly paid for which gave rise to a claim submitted by a creditor under section 22 or 48 of this Act;
(g)
trading at a time before the date of sequestration when the debtor knew or ought to have known that he was to be unable to meet his debts;
(h)
incurring, before the date of sequestration, a debt which the debtor had no reasonable expectation of being able to pay;
(j)
failing to account satisfactorily to—
(i)
the sheriff;
(ii)
the Accountant in Bankruptcy;
(iii)
the interim trustee; or
(iv)
the trustee,
for a loss of property or for an insufficiency of property to meet his debts;
(k)
carrying on any gambling, speculation or extravagance which may have materially contributed to or increased the extent of his debts or which took place between the date of presentation of the petition for sequestration or, as the case may be, the date the debtor application was made and the date on which sequestration is awarded;
(l)
neglect of business affairs of a kind which may have materially contributed to or increased the extent of his debts;
(m)
fraud or breach of trust;
(n)
failing to co-operate with—
(i)
the Accountant in Bankruptcy;
(ii)
the interim trustee; or
(iii)
the trustee.
(3)
The sheriff shall also, in particular, consider whether the debtor—
(a)
has previously been sequestrated; and
(b)
remained undischarged from that sequestration at any time during the period of 5 years ending with the date of the sequestration to which the application relates.
(4)
For the purposes of subsection (2) above—
“excessive pension contribution” shall be construed in accordance with section 36A of this Act; and
“gratuitous alienation” means an alienation challengeable under section 34(1) of this Act.
56C
Application of section 67(9)
(1)
Where the sheriff thinks it appropriate, the sheriff may specify in the bankruptcy restrictions order that subsection (9) of section 67 of this Act shall apply to the debtor during the period he is subject to the order as if he were a debtor within the meaning of subsection (10)(a) of that section.
(2)
For the purposes of subsection (1) above, section 67(10) of this Act shall have effect as if, for paragraph (c) of that subsection, there were substituted—
"(c)
the relevant information about the status of the debtor is the information that—
(i)
he is subject to a bankruptcy restrictions order; or
(ii)
where his estate has been sequestrated and he has not been discharged, that fact.”.
56D
Timing of application for order
(1)
An application for a bankruptcy restrictions order must be made, subject to subsection (2) below, within the period beginning with the date of sequestration and ending with the date on which the debtor’s discharge becomes effective.
(2)
An application may be made after the end of the period referred to in subsection (1) above only with the permission of the sheriff.
56E
Duration of order and application for annulment
(1)
A bankruptcy restrictions order—
(a)
shall come into force when it is made; and
(b)
shall cease to have effect at the end of the date specified in the order.
(2)
The date specified in a bankruptcy restrictions order under subsection (1)(b) above must not be—
(a)
before the end of the period of 2 years beginning with the date on which the order is made; or
(b)
after the end of the period of 15 years beginning with that date.
(3)
On an application by the debtor the sheriff may—
(a)
annul a bankruptcy restrictions order; or
(b)
vary such an order, including providing for such an order to cease to have effect at the end of a date earlier than the date specified in the order under subsection (1)(b) above.
56F
Interim bankruptcy restrictions order
(1)
This section applies at any time between—
(a)
the making of an application for a bankruptcy restrictions order; and
(b)
the determination of the application.
(2)
The sheriff may make an interim bankruptcy restrictions order if he thinks that—
(a)
there are prima facie grounds to suggest that the application for the bankruptcy restrictions order will be successful; and
(b)
it is in the public interest to make an interim order.
(3)
An interim order may be made only on the application of the Accountant in Bankruptcy.
(4)
An interim order—
(a)
shall have the same effect as a bankruptcy restrictions order; and
(b)
shall come into force when it is made.
(5)
An interim order shall cease to have effect—
(a)
on the determination of the application for the bankruptcy restrictions order;
(b)
on the acceptance of a bankruptcy restrictions undertaking made by the debtor; or
(c)
if the sheriff discharges the interim order on the application of the Accountant in Bankruptcy or of the debtor.
(6)
Where a bankruptcy restrictions order is made in respect of a debtor who is subject to an interim order, section 56E(2) of this Act shall have effect in relation to the bankruptcy restrictions order as if the reference to the date on which the order is made were a reference to the date on which the interim order was made.
56G
Bankruptcy restrictions undertaking
(1)
A living debtor who is not subject to a bankruptcy restrictions order may offer an undertaking (known as a “bankruptcy restrictions undertaking”) to the Accountant in Bankruptcy.
(2)
In determining whether to accept a bankruptcy restrictions undertaking, the Accountant in Bankruptcy shall have regard to the matters specified in section 56B(2) and (3) of this Act.
(3)
A bankruptcy restrictions undertaking—
(a)
shall take effect on being accepted by the Accountant in Bankruptcy; and
(b)
shall cease to have effect at the end of the date specified in the undertaking.
(4)
The date specified under subsection (3)(b) above must not be—
(a)
before the end of the period of 2 years beginning with the date on which the undertaking is accepted; or
(b)
after the end of the period of 15 years beginning with that date.
(5)
On an application by the debtor the sheriff may—
(a)
annul a bankruptcy restrictions undertaking; or
(b)
vary such an undertaking, including providing for a bankruptcy restrictions undertaking to cease to have effect at the end of a date earlier than the date specified in the undertaking under subsection (3)(b) above.
56H
Bankruptcy restrictions undertakings: application of section 67(9)
(1)
A debtor may, with the agreement of the Accountant in Bankruptcy, specify in a bankruptcy restrictions undertaking that subsection (9) of section 67 of this Act shall apply to the debtor during the period the undertaking has effect as if he were a debtor within the meaning of subsection (10)(a) of that section.
(2)
For the purposes of subsection (1) above, section 67(10) of this Act shall have effect as if, for paragraph (c) of that subsection, there were substituted—
"(c)
the relevant information about the status of the debtor is the information that—
(i)
he is subject to a bankruptcy restrictions undertaking; or
(ii)
where his estate has been sequestrated and he has not been discharged, that fact.”.
56J
Effect of recall of sequestration
(1)
Where an award of sequestration of a debtor’s estate is recalled under section 17(1) of this Act—
(a)
the sheriff may annul any bankruptcy restrictions order, interim bankruptcy restrictions order or bankruptcy restrictions undertaking which is in force in respect of the debtor;
(b)
no new bankruptcy restrictions order or interim order may be made in respect of the debtor; and
(c)
no new bankruptcy restrictions undertaking by the debtor may be accepted.
(2)
Where the sheriff refuses to annul a bankruptcy restrictions order, interim bankruptcy restrictions order or bankruptcy restrictions undertaking under subsection (1)(a) above the debtor may, no later than 28 days after the date on which the award of sequestration is recalled, appeal to the sheriff principal against such a refusal.
(3)
The decision of the sheriff principal on an appeal under subsection (2) above is final.
56K
Effect of discharge on approval of offer of composition
(1)
This section applies where a certificate of discharge is granted under paragraph 11(1) of Schedule 4 to this Act discharging a debtor.
(2)
Subject to sections 56E(3)(a), 56F(5)(c) and 56G(5)(a) of this Act, the debtor shall remain subject to any bankruptcy restrictions order, interim bankruptcy restrictions order or bankruptcy restrictions undertaking which is in force in respect of him.
(3)
The sheriff may make a bankruptcy restrictions order in relation to the debtor on an application made before the discharge.
(4)
The Accountant in Bankruptcy may accept a bankruptcy restrictions undertaking offered before the discharge.
(5)
No application for a bankruptcy restrictions order or interim order may be made in respect of the debtor.”.
(2)
In section 1A(1)(b) of that Act (duty of the Accountant in Bankruptcy to maintain register of insolvencies), after sub-paragraph (ii) insert—
Effect of bankruptcy restrictions orders and undertakings
3-
Disqualification from being appointed as receiver
(1)
Section 51 of the Insolvency Act 1986 (c. 45) (appointment of receiver) is amended as follows.
(2)
In subsection (3), after paragraph (b), insert—
“(ba)
a person subject to a bankruptcy restrictions order;”.
(3)
In subsection (5), after “bankrupt” insert “or a person subject to a bankruptcy restrictions order”.
(4)
In subsection (6), after “receivers” insert “; and
“bankruptcy restrictions order” means—
(a)
a bankruptcy restrictions order made under section 56A of the Bankruptcy (Scotland) Act 1985 (c. 66);
(b)
a bankruptcy restrictions undertaking entered into under section 56G of that Act;
(c)
a bankruptcy restrictions order made under paragraph 1 of Schedule 4A to this Act; or
(d)
a bankruptcy restrictions undertaking entered into under paragraph 7 of that Schedule.”.
4-
Disqualification for nomination, election and holding office as member of local authority
In section 31 of the Local Government (Scotland) Act 1973 (c. 65) (disqualifications for nomination, election and holding office as member of local authority)—
(a)
after subsection (1)(b), insert—
“(ba)
he is subject to a bankruptcy restrictions order;”; and
(b)
after subsection (3A), insert—
"(3B)
In subsection (1)(ba) above, “bankruptcy restrictions order” means—
(a)
a bankruptcy restrictions order made under section 56A of the Bankruptcy (Scotland) Act 1985;
(b)
a bankruptcy restrictions undertaking entered into under section 56G of that Act;
(c)
a bankruptcy restrictions order made under paragraph 1 of Schedule 4A to the Insolvency Act 1986 (c. 45); or
(d)
a bankruptcy restrictions undertaking entered into under paragraph 7 of that Schedule.”.
5-
Orders relating to disqualification
After section 71A of the 1985 Act, insert—
“71B
Disqualification provisions: power to make orders
(1)
The Scottish Ministers may make an order under this section in relation to a disqualification provision.
(2)
A “disqualification provision” is a provision made by or under any enactment which disqualifies (whether permanently or temporarily and whether absolutely or conditionally) a relevant debtor or a class of relevant debtors from—
(a)
being elected or appointed to an office or position;
(b)
holding an office or position; or
(c)
becoming or remaining a member of a body or group.
(3)
In subsection (2) above, the reference to a provision which disqualifies a person conditionally includes a reference to a provision which enables him to be dismissed.
(4)
An order under subsection (1) above may repeal or revoke the disqualification provision.
(5)
An order under subsection (1) above may amend, or modify the effect of, the disqualification provision—
(a)
so as to reduce the class of relevant debtors to whom the disqualification provision applies;
(b)
so as to extend the disqualification provision to some or all individuals who are subject to a bankruptcy restrictions order;
(c)
so that the disqualification provision applies only to some or all individuals who are subject to a bankruptcy restrictions order;
(d)
so as to make the application of the disqualification provision wholly or partly subject to the discretion of a specified person, body or group.
(6)
An order by virtue of subsection (5)(d) above may provide for a discretion to be subject to—
(a)
the approval of a specified person or body;
(b)
appeal to a specified person, body, court or tribunal.
(7)
The Scottish Ministers may be specified for the purposes of subsection (5)(d) or (6)(a) or (b) above.
(8)
In this section—
“bankruptcy restrictions order” includes—
(a)
a bankruptcy restrictions undertaking;
(b)
a bankruptcy restrictions order made under paragraph 1 of Schedule 4A to the Insolvency Act 1986 (c. 45); and
(c)
a bankruptcy restrictions undertaking entered into under paragraph 7 of that Schedule;
“relevant debtor” means a debtor—
(a)
whose estate has been sequestrated;
(b)
who has granted (or on whose behalf there has been granted) a trust deed;
(c)
who has been adjudged bankrupt by a court in England and Wales or in Northern Ireland; or
(d)
who, in England and Wales or in Northern Ireland, has made an agreement with his creditors for a composition in satisfaction of his debts or a scheme of arrangement of his affairs or for some other kind of settlement or arrangement.
(9)
An order under this section—
(a)
may make provision generally or for a specified purpose only;
(b)
may make different provision for different purposes; and
(c)
may make transitional, consequential or incidental provision.
(10)
An order under this section—
(a)
shall be made by statutory instrument; and
(b)
shall not be made unless a draft has been laid before and approved by a resolution of the Scottish Parliament.”.
The trustee in the sequestration
6-
Amalgamation of offices of interim trustee and permanent trustee
(1)
In section 2 of the 1985 Act (appointment and functions of interim trustee)—
(a)
after subsection (2), insert—
"(2A)
Where the sheriff awards sequestration of the debtor’s estate and an interim trustee has been appointed in pursuance of subsection (5) below, the sheriff may appoint—
(a)
the interim trustee; or
(b)
subject to subsection (2B) below, such other person as may be nominated by the petitioner,
to be the trustee in the sequestration.
(2B)
A person nominated under subsection (2A)(b) above may be appointed to be the trustee in the sequestration only if—
(a)
it appears to the sheriff that the person satisfies the conditions mentioned in subsection (3) below; and
(b)
a copy of the undertaking mentioned in subsection (3)(c) below has been lodged with the sheriff.
(2C)
Where the sheriff does not appoint a person to be trustee in pursuance of subsection (2A) above, the sheriff shall appoint the Accountant in Bankruptcy to be the trustee in the sequestration.”;
(b)
after subsection (6), insert—
"(6A)
The interim trustee’s general function shall be to safeguard the debtor’s estate pending the determination of the petition for sequestration.
(6B)
Whether or not the interim trustee is still acting in the sequestration, the interim trustee shall supply the Accountant in Bankruptcy with such information as the Accountant in Bankruptcy considers necessary to enable him to discharge his functions under this Act.”; and
(c)
the heading to that section becomes “Appointment and functions of the trustee in the sequestration”.
(2)
The heading to section 3 of that Act becomes “Functions of the trustee”.
(3)
Unless the context otherwise requires, any reference in any enactment to—
(a)
an “interim trustee”; or
(b)
a “permanent trustee”,
is to be construed as a reference to a trustee in the sequestration.
7-
Repeal of trustee’s residence requirement
(1)
In section 2(3) of the 1985 Act (conditions to be met by interim trustee), paragraph (a) is repealed.
(2)
In section 24(2) of that Act (eligibility for election as permanent trustee), paragraph (d) is repealed.
8-
Duties of trustee
(1)
In section 3 of the 1985 Act (functions of permanent trustee)—
(a)
after subsection (3), insert—
"(3A)
If the trustee has reasonable grounds to believe that any behaviour on the part of the debtor is of a kind that would result in a sheriff granting, under section 56B(1) of this Act, an application for a bankruptcy restrictions order, he shall report the matter to the Accountant in Bankruptcy.”;
(b)
in subsection (4), after “(3)” insert “or (3A)”;
(c)
in subsection (5), for “subsection (3)” substitute “subsections (3) and (3A)”; and
(d)
after subsection (7), insert—
"(8)
The trustee shall comply with the requirements of subsections (1)(a) to (d) and (2) above only in so far as, in his view, it would be of financial benefit to the estate of the debtor and in the interests of the creditors to do so.”.
(2)
In section 39 of that Act (management and realisation of estate), after subsection (8), insert—
"(9)
The trustee—
(a)
shall comply with the requirements of subsection (4) of this section; and
(b)
may do anything permitted by this section,
only in so far as, in his view, it would be of financial benefit to the estate of the debtor and in the interests of the creditors to do so.”.
(3)
In section 49 of that Act (adjudication of claims), after subsection (2), insert—
"(2A)
On accepting or rejecting, under subsection (2) above, every claim submitted or deemed to have been re-submitted, the trustee shall, as soon as is reasonably practicable, send a list of every claim so accepted or rejected (including the amount of each claim and whether he has accepted or rejected it) to—
(a)
the debtor; and
(b)
every creditor known to the trustee.”.
9-
Grounds for resignation or removal of trustee
(1)
In section 13 of the 1985 Act (resignation, removal etc. of interim trustee)—
(a)
in subsection (2)(a)—
(i)
for “(whether” substitute “for any reason mentioned in subsection (2A) below or”;
(ii)
for “a” substitute “any other”; and
(iii)
the words “or from any other cause whatsoever)” are repealed; and
(b)
after subsection (2), insert—
"(2A)
The reasons referred to in subsection (2)(a) above are that the interim trustee—
(a)
is incapable within the meaning of section 1(6) of the Adults with Incapacity (Scotland) Act 2000 (asp 4); or
(b)
has some other incapacity by virtue of which he is unable to act as interim trustee.”.
(2)
In section 28 of that Act (resignation and death of permanent trustee), in subsection (1), for the words from “either” to “he” substitute “the trustee—
(a)
is unable to act (whether by, under or by virtue of a provision of this Act or from any other cause whatsoever); or
(b)
has so conducted himself that he should no longer continue to act,
the Accountant in Bankruptcy”.
10-
Termination of interim trustee’s functions
After section 13 of the 1985 Act, insert—
“13A
Termination of interim trustee’s functions where not appointed as trustee
(1)
This section applies where an interim trustee (not being the Accountant in Bankruptcy) is appointed under section 2(5) of this Act and the sheriff—
(a)
awards sequestration and appoints another person as trustee under subsection (2A) or (2C) of section 2 of this Act; or
(b)
refuses to award sequestration.
(2)
Where the sheriff awards sequestration and appoints another person as trustee, the interim trustee shall hand over to the trustee everything in his possession which relates to the sequestration and shall thereupon cease to act in the sequestration.
(3)
The sheriff may make such order in relation to liability for the outlays and remuneration of the interim trustee as may be appropriate.
(4)
Within 3 months of the sheriff awarding or, as the case may be, refusing to award sequestration, the interim trustee shall—
(a)
submit to the Accountant in Bankruptcy—
(i)
his accounts of his intromissions (if any) with the debtor’s estate; and
(ii)
a claim for outlays reasonably incurred, and for remuneration for work reasonably undertaken, by him; and
(b)
send a copy of his accounts and the claim to—
(i)
the debtor;
(ii)
the petitioner; and
(iii)
in a case where sequestration is awarded, the trustee and all creditors known to the interim trustee.
(5)
On a submission being made to him under subsection (4)(a) above, the Accountant in Bankruptcy shall—
(a)
audit the accounts;
(b)
issue a determination fixing the amount of the outlays and remuneration payable to the interim trustee;
(c)
send a copy of the determination to—
(i)
the interim trustee; and
(ii)
the persons mentioned in subsection (4)(b) above; and
(d)
where a trustee (not being the Accountant in Bankruptcy) has been appointed in the sequestration, send a copy of the audited accounts and of the determination to the trustee, who shall insert them in the sederunt book.
