Business ownership after bankruptcy


Structure: Issues, Legal regulations and application

Legal Issues:

  1. Whether or non Matthew is allowed to run a concern, if so under what fortunes
  2. Whether or non he has any claims to ownership to the caprine animals, 23 childs which were born since the start of 2006 and concern assets
  3. The stairss ( if any ) which Sajad should see in taking in regard of the above.


The Enterprise Act 2002 has a important impact on how fiscal failure of a concern and person is dealt with in the UK. The Insolvency Act 1986 ( “The Act” ) provides that the map of the legal guardian is to roll up, realise and administer the Bankrupt’s assets in conformity with the commissariats. [ 1 ] The Bankruptcy Order was made on 6ThursdaySeptember 2005 on creditor’s request at Entwistle County Court. Under the new commissariats, Mr. Bailey would be released from his bankruptcy automatically after 12 months that is on 5ThursdaySeptember 2006, nevertheless if he co-operates to the full with the Trustee to gain and administer his assets it may be possible that he could be released from his bankruptcy within six months. Failure to co-operate with the Trustee may ensue in a Bankruptcy Restriction Order ( “BRO” ) or Bankruptcy Undertakings for a period between 2 to 15 old ages [ 2 ] and breach of which could ensue in prosecution.

Section 306 of The Act provides that the bankrupt’s estate shall enthrone in the legal guardian instantly on his assignment [ 3 ] . InPollard V Ashurst and Singh v Official Receiver[ 4 ]itwas held that it is non necessary that the belongings of the insolvent should be located within the legal power in order to enthrone in the Trustee.

InLondon City Corp v Bown[ 5 ] the Court of Appeal held that a non-assignable secure periodic occupancy within the significance of the Housing Act 1985 confers merely personal rights and therefore could non be regarded as “property” for this ground. On the other manus inCork V Rawlins[ 6 ] movable licences of value may organize portion of the Bankrupt’s belongings. Despite the broad definition in subdivision 436 of the Act there are certain causes of action which are personal to the Bankrupt do non enthrone in the Trustee such as amendss for personal hurt. Therefore, Mr. Bailey’s belongings will enthrone in you as his Trustee in Bankruptcy. However if you think that the value of the belongings which was originally exempted under subdivision 283 ( 2 ) of the Act exceeds its replacing cost, so by virtuousness of subdivision 308 of the Act you may claim the belongings in the estate. However, you will hold to give 42 yearss notice in composing to Mr. Bailey of your purpose to make so. Mr. Bailey being a ego employed husbandman, is entitled to maintain his farm machinery, assorted sludge spreaders, feeding troughs and tools and dairy equipment as tools of his trade [ 7 ] nevertheless it may be argued that he does non necessitate a tractor or 4×4 for his trade and hence signifiers portion of his estate.

Powers of Trustee in Bankruptcy:The Act confers certain powers by virtuousness of subdivision 314. This includes the power to sell belongings comprised in the bankrupt’s estate, to give grosss for money and to prosecute debts comprised in the estate. The insolvent has a responsibility to co-operate with the Trustee. InVincent Sydney Judd v 1. Richard Brown and Josephine Margaret Brown: Vincent S Judd V Peter J Brown and Linda S Brown and steven brown[ 8 ]it was held that the Trustee in Bankruptcy had non acted beyond his powers when he made an application to the Court for ownership and sale of belongingss belonging to two belly-up brothers. The legal guardian in bankruptcy was held to be the best individual who can measure the fortunes of the instance and every bit strike a balance between the creditor’s involvement and any other consideration he needed to take into history such as bankrupt’s aged female parent in this instance. Besides inPike V Cork Gully[ 9 ] the legal guardian in bankruptcy seized a house box which the insolvent used to gain around ?1,000 a month. The Equus caballus box had been sold for ?9,987.50. It was held that the Equus caballus box was an exempt plus and therefore the legal guardian must pay back the net proceed of the sale of the Equus caballus box or the cost of a sensible replacing. Similarly, inRe Rayatta auto was held as necessary for the usage in the bankrupt’s concern. Therefore, Mr Bailey could claim his 4×4 as an exempt points nevertheless you, as his Trustee demand to set up whether that 4 x 4 can be replaced moderately or is it excessively expensive for the type of concern he is in.

ALSO READ  Should Fathers Get Paternity Leave

New Business:There is nil to halt Mr. Bailey from traveling into a similar concern on a self employment footing nevertheless there are certain limitations placed on him. It will be a condemnable offense for him to obtain a recognition of more than ?500 without unwraping his bankruptcy or carry on his concern in a different name or be involved in the running of a limited company whilst he is an un-discharged insolvent [ 10 ] . InR V Scott[ 11 ] it was held that obtaining recognition over the statutory bound is a rigorous liability offense and defense mechanism of guiltless purpose does non use unless he can turn out that he had no purpose to hide his personal businesss. [ 12 ]

Great View Farm:although Mr Bailey does non hold any good involvement in the farm or farmhouse belongings, he is married and populating at that place with his married woman and two kids. The Farm belongings is in the name of his married woman and her sister. This indicates that his married woman has 50 % involvement in the belongings and being married and populating in the same belongings, by rules of Equitable Accounting, Mr Bailey has 50 % involvement in the 50 % portion of his wife’s good involvement in the belongings.

Ownership of Goats and Kids – After Acquired Property:Mr Bailey is a self employed husbandman who specialises in caprine animals and goat’s milk merchandises and therefore caprine animals, farm machinery, dairy equipment, feeding troughs and tools will be considered as tools of his trade which are indispensable for him to run his concern and therefore will be exempt assets. He can maintain the caprine animals and carry on his concern but any excess money he makes from his concern after what is required for his endurance and running of the concern must be handed over to you for the bankruptcy estate which so can be used to pay off his creditors. InRe Raytt[ 13 ] the insolvent successfully argued that the cost educating his kids in private was within his sensible domestic demands and the tribunal ought to see what was ‘necessary for run intoing the sensible domestic demands of the insolvent and his family’ , [ 14 ] and non what was ‘necessary to enable the insolvent to live’ . The outgo which is a sensible domestic demand is allowed by the tribunal. Therefore, Mr Bailey and his family’s demands must be taken into history by you.

ALSO READ  Is international law a process or can it be regarded as ‘rules’

However, the Bankruptcy Order was made on 06 September 2005 and the 23 childs were born since the start of 2006. This means that the 23 childs will be construed as “After Acquired Property” by virtuousness of subdivision 307 of the Act. The Act provides that “the legal guardian may by notice in composing claim for the bankrupt’s estate any belongings which has been acquired by, or has devolved upon, the insolvent since the beginning of the bankruptcy” .[ 15 ] You as his Trustee in Bankruptcy must take the enterprise and claim the belongings, which in this instance are the childs. In add-on to this, Mr Bailey as a Bankrupt has a responsibility to advise you within 21 yearss of the acquisition, the birth of the childs, as required by the Insolvency Rules 1986 [ 16 ] . InRe Mathew[ 17 ] the Trustee successfully made a claim to a bequest where the insolvent had non kept the legal guardian to the full informed. InIan Allister Rowe V Michael Saunders[ 18 ] the instance was concerned about the right of a insolvent who was discharged from his bankruptcy, to have payments from his rente policy. This rente policy was in being at the day of the month of his Bankruptcy Order and hence was claimed as belongings vested in the legal guardian in bankruptcy organizing portion of bankruptcy estate by virtuousness of subdivision 306 of The Act even when there was a proviso in the policy which prevented any assignment of the policy. It was claimed that vesting of this policy in Trustee occurred by “operation of jurisprudence and non by an assignment” . It was held that the Bankrupt’s right to have rente payments, and the payments themselves, had been vested in the Trustee by operation of s.436. The plus became vested in the Trustee due to statutory commissariats and non by manner of an assignment. This meant that the clause forbiding assignment of the policy was unsuitable. Therefore the application by the Bankrupt was dismissed.

InAnthony Peter Supperstone V Lloyds Names Associations’ Working Party, Christopher Derek Stockwell and Bradgalde[ 19 ] it was held that the payments received by the 2nd respondent, Derek Stockwell, after his bankruptcy were bankruptcy income and non after acquired belongings and hence did non enthrone in the Trustee in Bankruptcy. InGerard Rooney ( Trustee in Bankruptcy ) v 1. Robert Cardona, 2. Black Horse Life Assurance Co Ltd, 3.Black Horse Financial Services Group Ltd and Lloyds Bank Plc[ 20 ] it was held that the returns paid out of joint life insurance policy to ruin hubby was non “after acquired policy” .

ALSO READ  The template reflects the steps

Action which should be taken by Sajad Khan, as a Trustee in Bankruptcy:

As Mr Bailey’s Trustee you need to inform all his creditors and other interested parties of your assignment and what you are seeking to accomplish and whether there will be any dividend payment for the creditors. You need to see the farm to guarantee that the childs are looked after decently and that any other farm assets are non disposed off without your consent or without advising you. During your visit to the farm, you should set up if there are any points which are excluded by virtuousness of subdivision 282 ( 2 ) , such as tools of the trade. If some of these assets are of extra value so either those assets or portion of it can be claimed for the benefit of the bankruptcy estate if it appears to you that the cost of replacing would be in inordinate.

You need to do an application to the Court in order to claim the ownership of the 23 childs which were born after the Bankruptcy Order was made and hence you must claim these for the benefit of the Bankruptcy estate.

As Mr Bailey’s Trustee you may use to the tribunal for Income Payment Order in order to do a part towards the bankruptcy debts [ 21 ] . The Enterprise Act 2002 had amended the old proviso to guarantee that such an order would non last for more than the period of bankruptcy. This period can non be longer than three old ages from the day of the month of the Bankruptcy Order.


Mathew Bailey is entitled to transport on his self employment concern even after the bankruptcy Order but he would non be allowed to take portion in running or advancing the concern as a Limited Company. As a ego employed husbandman he is besides entitled to maintain the tools of his trade which are necessary to run the concern such as his caprine animals, farm machinery, feeding equipments and dairy equipment. It is possible that he could claim the 4×4 and tractor every bit necessary as good but depending on what he is utilizing the tractor for, may be to round up the caprine animals, so he may be entitled to these as good. However, the childs born after the bankruptcy order will enthrone in you which you so could gain for the benefit of the estate.

Word Count: 2250.



1. Department of Trade and Industry web site,

  1. Insolvency Law 1986
  2. Annotated usher to the Insolvency Legislation second revised 7th edition by Len Sealy and David Milman published by Thomson, Sweet & A ; Maxwell

4. Enterprise Act 2000

5. The Association of Business Recovery Professionals, R3

6. Free on Murderers by Mike Griffith published by Sweet & A ; Maxwell

7. Cardinal Law Training

8. Corporate and Personal Insolvency Law by Fiona Tolmie 2neodymiumedition. Published by Cavendish