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Bankruptcy Assignment 2
Bankruptcy Assignment 2
Bankruptcy Assignment 2
FACULTY OF LAW
SECURITIES.
“The Role of the Official Receiver and Trustee and how they are held accountable
The office of official receiver was established by the Bankruptcy Act 1883 (46 & 47 Vict c 52) of the
United Kingdom and imported just as it was into Kenya. Therefore the same provisions as in the UK
apply in Kenya.
Generally in the UK, any debtor may, in certain circumstances which are defined in the Act, be
made bankrupt. Any court having jurisdiction in bankruptcy cases in the district in which a
debtor resides or carries on business may make a receiving order against him, either on his own
petition, or on that of creditors whose claim is of a certain amount, and the "acts of bankruptcy"
on which the petition is to be founded are defined in the Bankruptcy Act. As soon as a receiving
order is made, an official receiver is placed in charge of the debtor's property, and the debtor
must submit a statement of his affairs to the official receiver. A meeting of creditors is then
summoned by the official receiver to decide whether the court should be asked to adjudge the
debtor bankrupt. Bankrupt estates are administered by trustees appointed by a majority in value
of the creditors.1
The trustee as according to the Bankruptcy Act cap 52, Laws of Kenya is defined as, ‘the trustee
in bankruptcy of a debtor’s assets. This basically means that the trustee is the one who will
administer the affairs of a bankrupt individual. He or she is to act on behalf of the debtor to
ensure that both the creditor's and debtor's interests are maintained in accordance with the rule of
law.2
1
Long Tail [2008] The History of Bankruptcy [online] http://hubpages.com/hub/history-of-bankruptcy
2
Investors Words, trustee in bankruptcy [online] http://www.investorwords.com/5087/trustee_in_bankruptcy.html
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This paper seeks to analyze the different duties of the Official Receiver and Trustee in
bankruptcy and also look at how they are held accountable for their performance.
OFFICIAL RECEIVER
The duties of the official receiver are defined and set out in the Bankruptcy Act3 as from section
75 – 77 and also in the bankruptcy rules as well as in other sections in the Act. The official
receiver is an officer of the court who is appointed by the court after the making of the receiving
order. As the holder of a statutory office, he has standing to bring proceedings and has a right of
audience before the court to which he or she is attached. He sues and is sued not in his personal
The official receiver takes charge of the bankrupt’s property and handles the bankruptcy. The
bankrupt is in essence required and expected to co-operate with the official receiver or his
deputies in every way possible. After the receiving order or the adjudication order, creditors are
required to deal only through the official receiver. This does help the debtor as it relieves him
from harassment from any of the creditors, therefore the role of the official receiver can be seen
The official receiver's role can be seen as being twofold. Firstly, it is to calculate and assess how
much assets does the debtor have available for distribution among creditors. Secondly, it is to
assist the bankrupt to obtain a discharge. Other duties include investigating bankrupts conduct.4
The Bankruptcy Act categorizes the official receiver’s duties in under two headings which are:
3
Cap 52 Laws of Kenya
4
Judicial, Bankruptcy, [online] http://www.judicial.gov.bn/serv_bankrupt.htm
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• Duties as according to the debtor’s conduct(s.76);
The official receiver is required to investigate the conduct and affairs of the debtor through the
assessment of his statement of affairs; by holding interviews with him/her/ liaising with the
bankruptcy trustee; and by using other investigative means that are necessary and within their
power. The investigation is an important part of the bankruptcy process and is taken extremely
seriously by the official receiver, which is due to the duties and obligations placed upon him by
law.5
The official receiver having been appointed by the court is therefore by implication and also by
“to investigate the conduct of the debtor and to report to the court, stating whether there is
reason to believe that the debtor has committed any act which constitutes an offence under this
Act or which would justify the court in refusing, suspending or qualifying an order for his
discharge;”
This goes to show that the court administers bankruptcy proceedings primarily through the
official receiver; therefore the official receiver is accountable as according to his powers and
5
One Stop money, Who is the Official Receiver? [online]
http://1stopmoney.com/who_is_the_Official_receiver.html
4
In the case of Paul Joesph Ngei v Official Receiver6, it demonstrated the way in which the
courts have control over the actions of the official receiver. In this case the official receiver had
refused to issue a certificate. The court held that the official receiver should prepare the required
During the bankruptcy proceedings, various activities between the creditors and the debtor take
place, for example: the first meeting of creditors, handing in of the statement of affairs,
composition or scheme of arrangements and the public examination. Within these activities, the
In the first meeting of creditors, the official receiver is the one who summons the meeting and
gives notice to the creditors and the debtor. The purpose of the meeting of the creditors is to
whether it is expedient that the debtor shall be adjudged bankrupt, and generally as to the mode
of dealing with the debtor’s property.7 Looking at the purpose of the first meeting it clearly also
expresses the role of the official receiver. Furthermore in such meetings the official receiver shall
be the chairman of the 1st meeting and his work is to ensure that the creditors understand the
implications of the meeting and also the implications of their votes. Acting as chairman the
official receiver can also approve or reject a proof given in by the creditors for the purpose of
voting. Everything that goes on within the meeting must all be in writing in the form of minutes
and submitted to the court; and it is in this manner that the court is able to supervise the work of
the official receiver. Also in the first meeting of creditors it is important to note that even where
the official receiver has rejected a proof from a creditor, this is indeed subject to appeal to the
6
[1992] eKLR, Bankruptcy Cause 14 of 1988
7
Section 14, Bankruptcy Act, Cap 52 Laws of Kenya
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court8; again the court is seen to exercise control over the official receiver by giving the creditors
An important way in which the official receiver’s duties and powers are checked is by way of the
imposition of time limits and deadlines which the official receiver is to meet. For example in the
official receiver before, but not more than three days before, the date of the presentation of the
debtor’s petition.9 Such a provision also affects the official receiver in that he must ensure that he
has received the statement of affairs from the debtor when it is due. Even after the debtor submits
the statement of affairs to the official receiver, the official receiver further submits it to the court.
In the composition of agreements the official receiver takes place by being the one who first
signs the proposal from the debtor to the creditors for a composition of agreements. It is
important to note that the composition of agreements is held upon the request of the debtor and
not the official receiver. This composition must be accepted by the creditors and approved by the
courts. Upon acceptance, approval of the court as according to section 18 (8), the court relies on
the official receiver’s report. Therefore, showing the importance of the official receiver in
bankruptcy proceedings, and also the extent as to which he exercises powers appointed to him by
the law.
It is provided in some situations that the official receiver may act as a trustee in bankruptcy. This
is subject to the fact that the creditors can oppose and appoint someone else to act as the trustee.10
8
First Schedule Bankruptcy Act, Cap 52 Laws of Kenya
9
Section 16 (1) Bankruptcy Act, Cap 52 Laws of Kenya
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Part IV of the Bankruptcy Rules 120
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“The court may, by general or special directions, determine what acts or duties shall be
performed by the receiver in person, and in what cases he may discharge his functions through
the agency of his clerks or other persons in his regular employ or under his official control.”
This has a great impact on the manner in which the official receiver performs his/her duties. It
shows that the official cannot out of his own discretion delegate any of his responsibilities to just
anyone. He is required to act in person unless provided for otherwise as the section above states.
This indeed is a way in which the official receiver is held accountable for his duties.
TRUSTEE
The trustee in bankruptcy proceedings is appointed by either the creditors or the committee of
The main function of the trustee is to realize and distribute the assets of the bankrupts’ estate.
The trustee has a duty to the creditors to dispose of the assets of the estate for the best possible
price. The aim is to enable the creditors to receive as large a share of the assets as possible after
the fees, costs and expenses of the bankruptcy have been paid.
A trustee in bankruptcy could be the official receiver. One who is not the official receiver is
accountable to the official receiver. The bankruptcy trustee has a number of investigative and
administrative powers so that the assets of the debtor and the bankruptcy can be dealt with
effectively.
and facilities for inspecting the bankrupt’s books and documents, and generally shall give him
such aid, as may be requisite for enabling the official receiver to perform his duties under this
Act.”
This shows that the trustee’s functions play a vital and important role in the role of the official
receiver, as the official receiver relies on the reports and information tendered by the trustee.
The trustee is given directions by either the creditors at any general meeting or by the committee
of inspection. In the event that there is conflict between the two, the creditors have the upper
A trustee’s decision can be challenged by the court who can either decide to reverse, confirm or
modify the act. The official receiver may also apply to the court for an examination of the
trustee; therefore, the trustee’s actions are closely watched by not only the official receiver, but
The law keeps a very close check on the trustee especially as he is handling very sensitive issues
in the bankruptcy proceedings, which is the bankrupt’s assets. This is achieved through ensuring
that the trustee gives a statement to the official receiver not less than once every year (s.89 (1)),
“…account for any misfeasance, neglect or omission which may appear on the statements or in
his accounts or otherwise, and may require the trustee to make good any loss which the estate of
A debtor may also challenge the performance and/ or decisions of the trustee in bankruptcy by
13
Section 89 (1) Bankruptcy Act, Cap 52, Laws of Kenya.
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Apart from the Official Receiver and the court holding the trustee accountable for his actions,
there is the committee of inspection which is provided for in section 22(1) which states that:
“ The creditors qualified to vote may, at their first or any subsequent meeting, by resolution,
appoint a committee of inspection for the purpose of superintending the administration of the
The creditors are allowed to closely examine the trustee’s conduct when handling the bankrupt’s
property and this benefits them. This committee also benefits the debtor as it assures him of the
supervision and equal distribution of his property which eventually leads to release from his debt
It is important to note that a committee of inspection appointed to supervise the work of the
trustee will not exist if the official receiver has been appointed as trustee unless he consents to its
appointment. The reason for this is that the official receiver is already held accountable to the
court and through the court also accountable to the creditors; therefore this defeats the purpose
The Official Receiver is responsible for protecting the estate of the debtor and investigating the
A trustee is in on the other hand responsible for taking possession of assets, selling them and
14
One Stop money, Who is the Official Receiver? [online]
http://1stopmoney.com/who_is_the_Official_receiver.html
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QUESTION:
Why is it that the application for approval of the composition or scheme of arrangements
It is important to note that the proposal of the composition of agreements is done by the debtor
and it is done with the aim of trying to get the creditors to agree to some sort of arrangement as
The purpose of the public examination on the other hand is to examine the conduct, dealings and
the property of the debtor. This process is more or like similar to a court trial where the creditors,
the court, trustee, and even the official receiver are allowed to ask the debtor questions as
relating to his dealings with the mission of finding out the truth.
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The composition or scheme of arrangements can be said to be highly dependent on the outcome
of the public examination. If for example it is found out that the debtor had proper conduct and
that he is genuinely unable to pay his debts, then it is more likely for the creditors to accept and
even for the courts to approve such a proposal. On the other hand, if the debtor is seen to be
fraudulent in his ways, then it is unlikely that a proposal to the creditors for a composition will
be accepted.
A composition can be seen as being a favor to the debtor, a way in which the law lends a hand to
the debtor to resolve his debts with the creditors in a fair way. But as much as the law tries to
rehabilitate the debtor, it must also protect the interests of the creditors by ensuring that the
dealings and affairs of the debtor are clear and transparent. This is accomplished by way of
public examination which must conclude before a scheme of arrangements is approved by the
court.
REFERENCES:
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Angela Kagunyi
Reg No.1014711
Sign:__________
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