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Bankruptcy and Diligence etc. (Scotland) Act 2007

The trustee in the sequestration
Section 6 – Amalgamation of offices of interim trustee and permanent trustee

25.This section amends sections 2 and 3 of the 1985 Act. It has the effect, when read together with the repeal of section 2(4) of the 1985 Act (see Part 1 of schedule 6 to this Act), that in a sequestration where an interim trustee has been appointed, he or she is no longer required to—

  • ascertain the reasons for and circumstances surrounding the insolvency; or

  • ascertain the state of the debtor’s liabilities and assets.

26.Those functions will instead be carried out by the trustee in sequestration who is appointed when sequestration is awarded and who combines the existing roles of the interim trustee and permanent trustee from the date of the award.

27.The interim trustee now has the sole function of safeguarding the debtor’s estate pending a decision on the award of sequestration. The interim trustee can now be in place only for the limited period between the creditor presenting the petition for sequestration and the award of (or refusal to award) sequestration.

28.The interim trustee is obliged to co-operate with the AiB and supply whatever information the AiB may need to carry out the AiB’s functions (in particular the AiB has a general supervisory function in relation to all interim trustees (see section 1A(1)(a)(i) of the 1985 Act)). The obligation to supply information applies to both interim trustees who are in office and who have left office, either because the case was dismissed or another trustee has replaced them. If an interim trustee’s obligation under this provision was extinguished after they left office, the AiB’s ability to supervise and investigate the way in which a sequestration was managed would be restricted. The AiB would not be able to rely on getting information from an interim trustee unless they remained in office.

29.Subsection (3) provides for all references to interim trustees and permanent trustees in other legislation to be read as references to the new style trustee in sequestration unless it is clear from the context that a reference to the interim trustee should continue to be a reference to the new style of interim trustee.

Section 7 – Repeal of trustee’s residence requirement

30.Section 7 removes the requirements in sections 2(3)(a) and 24(2)(d) of the 1985 Act that all trustees must live within the jurisdiction of the Court of Session.

Section 8 – Duties of trustee

31.Section 8(1) inserts new subsections (3A) and (8) into section 3 of the 1985 Act, which as amended by this Act provides for the functions of the trustee in sequestration.

32.Section 3(3A) of the 1985 Act clarifies that the trustee has a duty to report any behaviour of the debtor to the AiB, if the trustee considers that the behaviour would merit a bankruptcy restrictions order or undertaking. Any such report will be absolutely privileged.

33.Section 3(8) of the 1985 Act qualifies the responsibility of the trustee to adhere to some of the requirements of section 3. In particular, the trustee is now given leeway to depart from functions of:

  • recovering, managing and realising the debtor’s estate;

  • distributing the estate amongst the creditors according to their respective entitlements;

  • ascertaining the reasons for the debtor’s insolvency, and the circumstances surrounding it; and

  • ascertaining the state of the debtor’s liabilities and asset,

if the trustee thinks that doing so is in the best interests of the creditors and would be financially beneficial to the estate.

34.In a similar vein, subsection (2) inserts new subsection (9) into section 39 of the 1985 Act, which provides that the trustee need not do anything permitted by section 39 nor comply with the requirements about realising secured property unless that is in the best interests of the creditors and would be financially beneficial to the estate.

35.Subsection (3), by inserting a new subsection (2A) into section 49 of the 1985 Act, also imposes an obligation on the trustee to circulate details of the creditors’ claims and the amount accepted to the debtor and all known creditors.

Section 9 – Grounds for resignation or removal of trustee

36.This section deals with the reasons for which an interim trustee or a trustee can resign or be removed from office.

37.Subsection (1) makes amendments to section 13 of the 1985 Act removing the interim trustee’s right to resign “for any reason whatsoever”. The interim trustee must now be incapable of acting, as defined by section 1(6) of the Adults with Incapacity (Scotland) Act 2000 (asp 4), or be incapacitated in some other way.

38.Subsection (2) inserts words into section 28(1) of the 1985 Act making it clear that the trustee in sequestration continues to be permitted to resign if he or she is unable for any reason to act as trustee.

Section 10 – Termination of interim trustee’s functions

39.This section inserts new sections 13A and 13B into the 1985 Act.

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Text created by the Scottish Executive department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Acts of the Scottish Parliament except those which result from Budget Bills

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