In his most recent Coffee Break Briefing, Insolvency Guru Malcolm Niekirk discussed a controversial topic…
Transferring cash-at-bank before a liquidation starts – or ‘FAQ 10’ as it has been dubbed
Below we’ve provided a summary of the briefing; detailing how ‘FAQ 10’ came about, what the issues are with it and how IPs can comply with the revised version.
How did FAQ 10 come about?
In a recent R3 seminar, a well-informed panel of speakers looked at ‘bounce back loans’.
The speakers included representatives from
- The Insolvency Service
- The Department for Business, Energy & Industrial Strategy (DBEIS) (Secretary of State)
- The British Business Bank (owned by the SoS for DBEIS)
- UK Finance (which represents the banking and finance industry)
The British Business Bank issued the government guarantees for ‘bounce back loans’. It’s a wholly owned subsidiary of DBEIS.
What is ‘FAQ 10’?
Following the presentation, the speakers issued some written guidance in the form of Frequently Asked Questions (FAQs).
One that caused a lot of interest was FAQ 10, as it seemed to suggest that it would be ‘ethically wrong’ for Insolvency Practitioners (IPs) to advise directors to transfer the cash-at-bank into the IPs own client account pre-liquidation.
But, of course this is long-established custom and practice.
On 9 September 2010 this guidance was withdrawn and replaced.
What is the revised FAQ 10 guidance?
The new guidance includes a statement from the RPBs. In summary:
- Banks have the same right of set off for BBLs as they have for any other debt
- IPs must ‘comply with the Code of Ethics’, ‘use their judgement’ and ‘consider seeking independent advice’
- Note the ‘revised response’.
In the full article, Macolm goes into much more detail; providing diagrams which better explain FAQ 10 and giving his opinion on the FAQ from a legal standpoint.
Click here to read the full article.