Modification of the Bankruptcy (Scotland) Act 2016
Section 4 – Process for applying for recall of an award of sequestration
10.The 2016 Act” contains provisions allowing the Accountant in Bankruptcy (“the AiB”) to recall an award of sequestration on the grounds that the debtor has paid, or is about to pay, their debts in full. Sequestration is the term used for bankruptcy in Scotland. It is the formal legal process in Scotland in which a person is declared bankrupt or insolvent by the AiB or a court. As set out in section 38(1) of the 2016 Act, the effect of the recall of an award of sequestration is, so far as practicable, to restore the debtor and any other person affected by the sequestration to the position the debtor, or, as the case may be, the other person, would have been in if the sequestration had not been awarded. The sequestration process is administered by a trustee, which may be a private trustee or the AiB. The process for applying for a recall of an award of sequestration differs depending on who initiates the process and whether or not the trustee is the AiB. Essentially there are three possible scenarios: 1) where the AiB is not the trustee, 2) where the AiB is the trustee and another party makes the application, or 3) where the AiB is the trustee and acts on its own accord. The amendments made by this section seek to clarify the process for each of these scenarios.
11.Subsection (2) amends section 29 of the 2016 Act. A petition for recall of an award of sequestration may be presented to the sheriff by the debtor, any creditor, any other person having an interest, the trustee in the sequestration, or AiB. Subsection (2) amends section 29 so that it is clear that the person presenting the petition only needs to send a copy of the petition to the other persons listed in section 29(4) of the 2016 Act — i.e. they do not need to notify themselves if they are listed.
12.Subsection (3) amends section 31 of the 2016 Act. An application to the AiB may be made under this section by the debtor, a creditor, any other person having an interest, or the trustee (if the trustee is not the AiB). Subsection (3)(a) and (b) amend section 31 so that it is clear that the person making the application only needs to notify the other persons listed in section 31(4) of the 2016 Act—i.e. they do not need to notify themselves if they are listed. The changes also clarify that the applicant does not need to notify AiB where the trustee is AiB, since AiB will be the recipient of the application. Subsection (3)(c) makes it clear that in all cases where an application is made under section 31 of the 2016 Act, the proceedings in the sequestration are to continue until a decision on the application has been made. This amendment highlights that a decision on an application under section 31 of the 2016 Act can be made under either section 34 or 35 of that Act, depending on whether or not the AiB is the trustee (each of those sections setting out how and in what circumstances AiB may recall an award of sequestration (which includes, for example, a requirement that the debtor’s debts have been paid in full)).
13.Subsections (4), (5) and (6)(a) and (d) amend sections 32 (application under section 31: further procedure), 33 (determination where amount of outlays and remuneration not agreed) and 34 (recall of sequestration where Accountant in Bankruptcy is trustee) of the 2016 Act to make it clear that those sections apply only where the AiB is not the trustee.
14.Subsection (6)(b) inserts provision into section 34 which provides that before recalling an award of sequestration AiB must take into account any representations made by an interested person within 21 days beginning with the day on which notice is given. Subsection (6)(c) increases the time limit in section 34(2)(a) in which AiB must make its decision under section 34 of the 2016 Act from 8 to 9 weeks (where no appeal is made under section 37(5)(a)).
15.Subsection (7) amends section 35 of the 2016 Act. The modification made by subsection (7)(a) makes it clear that section 35 is to apply when the AiB is the trustee and where either an application is made under section 31 or where the AiB acts of its own accord. Like a private trustee, the AiB as trustee is able to initiate the process for the recall of an award of sequestration, and the amendments in subsections (7)(b) and (c) align the notification requirements to mirror those required of private trustees.
16.Subsection (7)(d) modifies section 35(5)(a) to reflect that representations may be made by an interested person to AiB under subsection (2A) or section 31(3)(b), depending on whether AiB is acting in response to an application or on its own accord.
17.Subsection (7)(e) imposes a time limit in which the AiB must make its decision under section 35 of the 2016 Act. It applies both to an application received under section 31 of that Act and to when the AiB is acting of its own accord. As mentioned above, subsection (6)(c) increases the time limit in which AiB must make its decision under section 34 of the 2016 Act. The changes made by subsection (7)(e) align the decision-making time period in which the AiB must make a decision under section 35. Subsection (7)(e) also aligns the process in section 35 with that for situations where the AiB is not the trustee by providing that, despite any notice given under subsection (2)(b) the proceedings in the sequestration are to continue until a recall of an award of sequestration is granted.
18.Overall, the modifications remove ambiguities as to what the appropriate processes are for AiB to follow in different cases. The amendments made by this section clarifies the following:
where the AiB is not the trustee: sections 31 to 34 apply and the AiB makes its decision under section 34,
where the AiB is the trustee and another party makes the application for recall: sections 31 and 35 apply and the AiB makes its decision under section 35, and
where the AiB is the trustee and initiates the process for recall: section 35 applies and the AiB makes its decision under that section.
See the glossary in the Policy Memorandum for definition of terms.
