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ANNEX B
Draft regulations
SCOTTISH STATUTORY INSTRUMENTS
2006 No.
BANKRUPTCY
The Protected Trust Deeds (Scotland) Regulations 2006
Made - - - - 2006
Laid before the Scottish Parliament 2006
Coming into force - - 2006
The Scottish Ministers, in exercise of the powers conferred by paragraph 5 of Schedule 5 to the Bankruptcy (Scotland) Act 1985 and of all other powers enabling them in that behalf, hereby make the following Regulations:
Citation and commencement
1. These Regulations may be cited as the Protected Trust Deeds (Scotland) Regulations 2006 and shall come into force on 2006.
Interpretation
2. In these Regulations-
"the Accountant" means the Accountant in Bankruptcy;
"the Act" means the Bankruptcy (Scotland) Act 1985;
"the relevant period" means the period of 5 weeks beginning with the date of publication of the notice referred to in regulation 8;
"remuneration" means fees and outlays.
Student loans
3. -(1) Where a person is a creditor in respect of a student loan, then as regards that loan that person shall not be treated as a creditor for the purpose of any provision of these Regulations and accordingly the right of a person to recover any debt arising from such a loan is not affected by regulation 13(a).
(2) In paragraph (1), "student loan" means a loan made under the Education (Student Loans) Act 1990 or by virtue of regulations made under paragraph (f) of section 73 of the Education (Scotland) Act 1980.
Applications to the Accountant
4. -(1) The trustee under a trust deed may make application to the Accountant for the trust deed to become a protected trust deed.
(2) Where the Accountant is satisfied-
(a) that the conditions in regulations 5 to 11 and 12(1) have been fulfilled; or
(b) that those conditions have substantially been fulfilled and that it is reasonable to excuse any failure to fulfill a condition of a procedural nature,
that office-holder shall grant the application under paragraph (1) and enter particulars of the trust deed in the register of insolvencies.
(3) Where an application under paragraph (1) is granted, the trust deed becomes a protected trust deed from the date on which particulars are entered in the register of insolvencies under paragraph (2).
Qualifications of trustee
5. The trustee under the trust deed must be-
(a) the Accountant; or
(b) a person who would not be disqualified under section 24(2) of the Act from acting as the replacement trustee if the debtor's estate were being sequestrated.
Statement by trustee and debtor
6. The trustee and the debtor must sign a statement to the effect that, prior to the debtor granting the trust deed-
(a) the trustee has advised the debtor that granting the deed may result in-
(i) the estate of the debtor being sequestrated;
(ii) the debtor being refused credit, whether before or after the date of the debtor being discharged;
(iii) the debtor not being able to remain in the debtor's current place of residence;
(iv) the debtor being required to relinquish property which the debtor owns;
(v) the debtor requiring to make contributions from income for the benefit of creditors;
(vi) damage to the debtor's business interests and employment prospects;
(vii) the fact that the debtor has granted a trust deed becoming public;
(b) the trustee and the debtor have, following the provision of advice by the trustee to the debtor, agreed that the granting of the trust deed by the debtor is a more appropriate course of action than either of the following-
(i) the debtor participating in a debt payment programme within the meaning of subsection (1) of section 2 of the Debt Arrangement and Attachment (Scotland) Act 2002 (whether or not a programme which would be likely to be approved by Scottish Ministers under subsection (2) of that section);
(ii) the sequestration of the debtor's estate;
(c) the trustee has provided the debtor with advice regarding-
(i) the debtor's rights under regulation 15(1);
(ii) the duty of the debtor to co-operate with the trustee;
(iii) the duties of the trustee towards the creditors;
(d) the trustee has provided the debtor with-
(i) a statement of the remuneration to be payable to the trustee in respect of work to be done prior to the Accountant making a decision on an application under regulation 4(1);
(ii) an estimate of the remuneration to be payable to the trustee in respect of work to be done after that decision has been made.
Details in trust deed
7. The trust deed must specify a date (no later than 3 years after the date on which the deed was granted) by which the debtor will be discharged if that person complies with any obligation imposed under the trust deed.
Notice in Edinburgh Gazette
8. After the trust deed has been delivered to the trustee, that person must publish in the Edinburgh Gazette a notice in the form set out in Schedule 1 (or substantially in that form).
Documents to be sent to creditors
9. Not later than one week after the date of publication of the notice referred to in regulation 8, the trustee must send to every creditor known to the trustee-
(a) a copy of the trust deed;
(b) a copy of that notice;
(c) a statement of the debtor's affairs, prepared by the trustee, containing-
(i) a list of the debtor's assets and liabilities; and
(ii) a list of the income and expenditure as at the date when the trust deed was granted;
(d) a statement as to any contribution from income which the debtor is expected to make;
(e) a statement whether, in the opinion of the trustee-
(i) the EC Regulation applies to the trust deed; and
(ii) if so, whether the proceedings are main proceedings, secondary proceedings or territorial proceedings;
(f) a statement by the trustee that, on the basis of the information then available, that person believes that the creditors will be paid a dividend of at least the amount specified in the statement (expressed as an amount of pence in the pound of debt);
(g) a copy of-
(i) any valuation held by the trustee which has been made by a third party and which relates to an asset of the debtor;
(ii) any statement showing the amount due by the debtor under a security;
(iii) any document showing the present income of the debtor; and
(iv) the statement and estimate referred to in regulation 6(d);
(h) a statement explaining-
(i) the conditions which require to be fulfilled before the trust deed will become a protected trust deed; and
(ii) the consequences of the deed becoming a protected trust deed; and
(i) a form for the creditor to indicate to the trustee whether the creditor wishes to object to the trust deed, together with an envelope for return of the form to the trustee on which the postage has been prepaid.
Documents to be submitted with application
10. The trustee must make any application under regulation 4(1) on the expiry of the relevant period and must with that application submit to the Accountant-
(a) a copy of the trust deed with endorsed on it a certificate by the trustee that it is a true copy;
(b) a statement by the trustee that those creditors who have objected to the trust deed during the relevant period do not constitute-
(i) a majority in numbers of the creditors; or
(ii) one third or more in value of the creditors;
(c) a copy of the signed statement referred to in regulation 6;
(d) a copy of all the documents sent to creditors in terms of paragraphs (b) to (i) of regulation 9.
Minimum dividend
11. The Accountant must be satisfied that the implementation of the trust deed is likely to result in creditors receiving a dividend of at least 30p in the £.
Test of reasonableness
12. -(1) The Accountant must be satisfied that in all the circumstances it is reasonable that the trust deed should become a protected trust deed.
(2) In deciding whether the condition in paragraph (1) is fulfilled, the Accountant shall consider in particular-
(a) whether-
(i) the debtor would have been able to pay all debts in full without granting a trust deed;
(ii) it is likely that the court would grant an application for a bankruptcy restrictions order if the debtor's estate were to be sequestrated; and
(iii) the dividend payable to creditors under the trust deed is likely to be higher than would be the case if the debtor's estate were to be sequestrated; and
(b) the extent to which the proposed dividend to creditors will be funded by contributions from the debtor's income.
Effect of protected status
13. Where a trust deed has become a protected trust deed, then-
(a) subject to regulation 14, a creditor who has-
(i) not been sent a copy of the notice as mentioned in regulation 9(b); or
(ii) notified the trustee of objection to the trust deed within the relevant period,
shall have no higher right to recover the debt than a creditor who has acceded to the trust deed;
(b) a petition for sequestration of the debtor's estate may not be brought by the debtor while the trust deed subsists;
(c) any creditor who has been sent a copy of the notice referred to in regulation 9(b) and who has not given notification of objection to the trustee within the relevant period shall be treated for all purposes as if that person had acceded to the trust deed; and any reference in the Act to a creditor who has acceded to a trust deed shall include a reference to a creditor who is treated for all purposes as if that person had so acceded.
Petition by qualified creditor
14. -(1) A qualified creditor who has not been sent a copy of the notice as mentioned in regulation 9(b) or who has notified the trustee of objection to the trust deed within the relevant period may present a petition for sequestration of the debtor's estate-
(a) not later than 6 weeks after the date of publication of the notice under regulation 8; or
(b) subject to section 8(1)(b) of the Act, at any time if the creditor avers that the provision for distribution of the estate is or is likely to be unduly prejudicial to a creditor or class of creditors.
(2) The court may award sequestration in pursuance of paragraph (1)(a) if it considers that to do so would be in the best interests of the creditors.
(3) The court shall award sequestration in pursuance of paragraph (1)(b) if, but only if, it is satisfied that the creditor's said averment is correct.
Refusal of application for protected status
15. -(1) Where the trustee has made application to the Accountant under regulation 4(1) and the Accountant has issued a notice of refusal in respect of the application, the debtor may, by notice to the trustee within 6 weeks of the date of issue of the notice of refusal, bring the operation of the trust deed to an end.
(2) During the period of 6 weeks referred to in paragraph (1), the trustee shall not be entitled to petition for the sequestration of the debtor's estate.
(3) Where a notice of refusal has been issued by the Accountant, the trustee shall without delay notify-
(a) the debtor; and
(b) all creditors known to the trustee,
of this and of the right conferred on the debtor by paragraph (1).
(4) Where the trustee receives from the debtor a notice under paragraph (1) bringing the operation of the trust deed to an end, the trustee shall without delay-
(a) publish in the Edinburgh Gazette a notice intimating this termination; and
(b) advise the Accountant of the termination.
(5) On the trustee receiving a notice from the debtor under paragraph (1)-
(a) the estate vested in the trustee shall reinvest in the debtor; and
(b) the debtor shall be liable for any remuneration payable to the trustee in respect of work carried out prior to the operation of the trust deed being brought to an end.
Retention of documents by trustee
16. The trustee under a protected trust deed shall retain until 12 months after the date of the trustee's discharge by the creditors-
(a) the documents specified in Schedule 2 or copies of these; and
(b) any other documents relating to the administration of the trust which are notified to the trustee as being documents which the Accountant considers that the trustee should retain.
Change in remuneration
17. -(1) Where the trustee under a protected trust deed intends to claim remuneration in excess of that specified in the statement and estimate referred to in regulation 6(d), the trustee shall give notice of this to-
(a) the Accountant; and
(b) all creditors known to the trustee.
(2) Within 4 weeks of receiving notice under paragraph (1), any creditor may require the Accountant to exercise the function in section 1A(1)(a)(iia) of the Act by carrying out an examination of the conduct of the trust.
Change in dividend
18. -(1) As soon as it appears to the trustee under a protected trust deed that the dividend payable to creditors is likely to be no higher than 75% of the amount specified in the statement referred to in regulation 9(f), the trustee shall give notice of this to-
(a) the Accountant; and
(b) all creditors known to the trustee.
(2) Within 4 weeks of receiving a notice under paragraph (1), any creditor may require the Accountant to exercise the function in section 1A(1)(a)(iia) of the Act by carrying out an examination of the conduct of the trust.
Directions to trustee
19. -(1) The Accountant may give directions to the trustee under a protected trust deed as to how the trustee should conduct the administration of the trust.
(2) If a trustee fails without reasonable excuse to give effect to a direction under paragraph (1), the Accountant may-
(a) remove the trustee from office and either proceed to act as trustee or appoint another person to act as trustee; or
(b) revoke the protected status of the trust deed.
(3) Within 6 weeks of the debtor being informed by the Accountant that the protected status of the trust deed has been revoked under paragraph (2)(b), the debtor may, by notice to the trustee, bring the operation of the trust deed to an end.
(4) On the trustee receiving a notice from the debtor under paragraph (3)-
(a) the estate vested in the trustee shall reinvest in the debtor; and
(b) the debtor shall be liable for any remuneration payable to the trustee in respect of work carried out prior to the operation of the trust deed being brought to an end.
Action after final distribution
20. Where the trustee under a protected trust deed has made the final distribution of the estate among the creditors, that person shall-
(a) not more than 28 days after the final distribution, send to the Accountant for registration in the register of insolvencies-
(i) a statement in the form set out in Schedule 3 indicating how the estate was realised and distributed; and
(ii) a certificate to the effect that the distribution was in accordance with the trust deed; and
(b) as soon as reasonably practicable after that distribution, seek to obtain a discharge from the creditors who have acceded to the trust deed.
Notice of discharge
21. When the trustee under a protected trust deed has obtained a discharge from the creditors who have acceded to the trust deed, that person shall forthwith give notice of the discharge-
(a) by sending the notice by recorded delivery to every creditor known to the trustee who has not been sent a copy of the notice as mentioned in regulation 9(b) or who has notified the trustee of objection to the trust deed within the relevant period; and
(b) by sending the notice to the Accountant who shall register the fact of the discharge in the register of insolvencies,
and, except where the Accountant makes an order under regulation 23, the sending of such notice to a creditor under paragraph (a) shall be effective to make the discharge binding upon that creditor.
Application to Accountant by creditor
22. A creditor who has not been sent a copy of the notice as mentioned in regulation 9(b) or who has notified the trustee of objection to the trust deed within the relevant period may, not more than 28 days after notice has been sent under regulation 21, apply to the Accountant for an order under regulation 23.
Power of Accountant on application under regulation 22
23. -(1) Where, on an application by a creditor under regulation 22, the Accountant is satisfied (on grounds other than those on which a petition under regulation 14(1)(b) was or could have been presented by that creditor) that the intromissions of the trustee with the estate of the debtor have been so unduly prejudicial to that creditor's claim that the creditor should not be bound by the discharge, the Accountant may order that that person shall not be so bound.
(2) Where the Accountant makes an order under paragraph (1), that office-holder shall-
(a) send a copy of the order to the trustee; and
(b) register a copy of the order in the register of insolvencies.
Remuneration payable to trustee
24. Where the Accountant is determining the level of remuneration payable to the trustee under a protected trust deed, the Accountant shall have regard to the conduct of the trustee and, in particular, whether the trustee has complied with all obligations imposed by these Regulations.
Appeals
25. -(1) Subject to paragraph (2), the trustee under a protected trust deed, the debtor or any creditor may appeal to the sheriff by way of summary application against-
(a) the issuing of a notice of refusal under regulation 15(1);
(b) the removal of the trustee from office under regulation 19(2)(a);
(c) the revocation of the protected status of a trust deed under regulation 19(2)(b);
(d) an order by the Accountant under regulation 23(1); or
(e) any determination by the Accountant fixing the remuneration payable to the trustee.
(2) A creditor may appeal under sub-paragraph (a), (b), (c) or (d) of paragraph (1) and a debtor may appeal under sub-paragraph (e) of that paragraph if, but only if, able to satisfy the sheriff that he or she has, or is likely to have, a pecuniary interest in the outcome of the appeal.
(3) An appeal under paragraph (1) must be lodged no later than 2 weeks after the date on which the Accountant took the action or made the order or determination which is the subject of the appeal.
(4) The decision of the sheriff on an appeal under paragraph (1) shall be final.
Accountant's audit fee
26. -(1) The Accountant may charge such fee as that office-holder considers appropriate in respect of any audit of the accounts of the trustee under a protected trust deed which the Accountant carries out under paragraph 1 or 1A of Schedule 5 to the Act.
(2) If the Accountant so requests, the trustee shall pay any fee under paragraph (1) prior to the audit being carried out.
(3) In the circumstances specified in paragraph (4), any fee under paragraph (1) shall be payable by the trustee personally (rather than out of the debtor's estate) unless the Accountant decides otherwise.
(4) The circumstances specified in this paragraph are that the remuneration fixed by the Accountant as payable for any period is less than the remuneration estimated or claimed (as the case may be) by the trustee for that period.
St. Andrew's House, A member of the Scottish Executive
Edinburgh
2006
SCHEDULE 1 Regulation 8
NOTICE IN EDINBURGH GAZETTE BY TRUSTEE UNDER A TRUST DEED FOR THE BENEFIT OF CREDITORS
Protected Trust Deeds (Scotland) Regulations 2006, regulation 8
The trust deed may become a protected trust deed unless, within the period of 5 weeks of the date of publication in this notice in the Edinburgh Gazette, a majority in number or not less than one third in value of the creditors notify the trustee in writing that they object to the trust deed and do not wish to accede to it. | Briefly, this has the effect of restricting the rights of non-acceding creditors to do diligence (i.e. to enforce court decrees for unpaid debts) against the debtor and confers certain protection upon the trust deed from being superseded by the sequestration of the debtor's estate. |
Notes | Trust deed for creditors by |
(a) Insert name of debtor | (a) ___________________________________ A trust deed has been granted by |
(b) Insert name, designation and address of debtor, and if he/she trades under a different name, state also his/her trading name and address | (b) ___________________________________ ______________________________________ ______________________________________ |
(c) Insert date of granting of trust deed | on (c) _________________________________ conveying (to the extent specified in section 5(4A) of the Bankruptcy (Scotland) Act 1985) his/her estate to me |
(d) Insert name and address of trustee | (d) ___________________________________ ______________________________________ ______________________________________ as trustee for the benefit of his/her creditors generally. If a creditor wishes to object to the trust deed for the purposes of preventing it becoming a protected trust deed (see notes above on the objections required for that purpose) notification of such objection must be delivered in writing to the trustee within 5 weeks of the date of publication of this notice in the Edinburgh Gazette Signature of trustee ________________________________ Date __________________________________ |
SCHEDULE 2 Regulation 16(a)
DOCUMENTS TO BE RETAINED BY TRUSTEE
1. The trust deed.
2. The statement referred to in regulation 6(d)(i).
3. The estimate referred to in regulation 6(d)(ii).
4. The statement (signed by the trustee and the debtor) referred to in regulation 6.
5. The statement of the debtor's affairs referred to in regulation 9(c).
6. The statement referred to in regulation 9(d).
7. The statement referred to in regulation 9(f).
8. The documents referred to in regulation 9(g)(i) to (iii)..
9. The notice referred to in regulation 8.
10. Any circular to creditors advising of the application under regulation 4(1).
11. The form referred to in regulation 9(i).
12. Any notice under regulation 17(1).
13. Any notice under regulation 18(1).
14. Any adjudication on claims by creditors.
15. Any scheme of division amongst creditors.
16. Any circular sent to creditors with accounts.
17. Form of the debtor's discharge from the trust.
18. Any circular sent to creditors requesting the trustee's discharge.
19. Certificates confirming the posting or delivery of any documents relating to the administration of the trust which require to be intimated under any provision of these Regulations or the Act.
SCHEDULE 3 Regulation 20(a)(i)
STATEMENT OF REALISATION AND DISTRIBUTION OF ESTATE UNDER A PROTECTED TRUST DEED
Protected Trust Deeds (Scotland) Regulations 2006, regulation 20(a)(i)
Notes | Protected trust deed of |
(a) Insert name of debtor | (a) ___________________________________ The statement overleaf is a true and accurate account of my realisation and distribution of the estate of |
(b) Insert name and address of debtor | (b) ___________________________________ ______________________________________ ______________________________________ ______________________________________ under the trust deed granted in my favour for the benefit of his/her creditors dated |
(c) Insert date of trust deed | (c) ___________________________________ Signature of trustee ______________________ Name and address _______________________ ______________________________________ ______________________________________ ______________________________________ Date __________________________________ |
STATEMENT
Notes | Receipts |
| Item Book value Sum realised Total sum realised £ _____________________ Other receipts (e.g. Bank interest) Total receipts £ ________________________ Distribution of estate |
(a) Give details of all the expenses connected with the administration of the estate including your outlays and remuneration. | (a) Administrative expenses |
(b) Give details of any payments made to secured creditors | (b) Secured creditors |
(c) Give details of any payments made to preferred creditors | (c) Preferred creditors |
(d) State the rate of dividend paid, the total amount of the claims of ordinary creditors and the total amount paid to them. List in an annex the amounts paid to individual ordinary creditors and their claims. | (d) Ordinary creditors A dividend of p. in the £ on claims lodged of , as per annex. Total sum distributed £ _________________ |
EXPLANATORY NOTE
(This note is not part of the Order)
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