NI Blog: Bankruptcy restriction orders
Director Jeanette Donohoe and solicitor Maria McNally of Cleaver Fulton Rankin in Belfast explain bankruptcy restriction orders.
Pursuant to the Insolvency (Northern Ireland) Order 1989, the Official Receiver and the Department of Enterprise, Trade and Investment (DETI) has power to apply to the Court for a Bankruptcy Restrictions Order (“BRO”).
A BRO is usually granted by the Court following an application by the Official Receiver to impose restrictions on a bankrupt, for more than one year, arising from the bankrupt’s behaviour either before or during the bankruptcy period.
Grounds for making order
The Official Receiver can apply to the Court on the following grounds:
- failing to keep records which account for a loss of property by the bankrupt, or by a business carried on by him, where the loss occurred in the period beginning 2 years immediately preceding petition and ending with the date of the application;
- failing to produce records on demand by the official receiver or the trustee;
- entering into a transaction at an undervalue;
- giving a preference;
- making an excessive pension contribution;
- a failure to supply goods or services which were wholly or partly paid for which gave rise to a claim provable in the bankruptcy;
- trading at a time before commencement of the bankruptcy when the bankrupt knew or ought to have known that he was unable to pay his debts;
- incurring, before commencement of the bankruptcy, a debt which the bankrupt had no reasonable expectation of being able to pay;
- failing to account satisfactorily to the Court, the Official Receiver or the Trustee in Bankruptcy for a loss of property or for an insufficiency of property to meet bankruptcy debts;
- carrying on any gambling, rash and hazardous speculation or unreasonable extravagance which may have materially contributed to or increased the extent of the bankruptcy or which took place between presentation of the petition and commencement of the bankruptcy;
- neglect of business affairs of a kind which may have materially contributed to or increased the extent of the bankruptcy;
- fraud or fraudulent breach of trust;
- failing to cooperate with the official receiver or the trustee.
- When considering the Official Receiver’s application, the Court will consider the conduct of the bankrupt both before and during the period of bankruptcy, and if appropriate will grant a BRO.
Timing and Duration of order
An application for a BRO must be made before the expiry of one year from date of bankruptcy. If a bankruptcy restrictions order is granted, it comes into force from the date that the order is made. The order can be granted for a minimum of 2 years up to 15 years from date of the order, depending on individual circumstances.
The restrictions experienced by the bankrupt during the bankruptcy period of one year will apply for the duration of the BRO. These include:
- bankrupt must disclose his status to any credit provider when applying for credit over £500 and those the bankrupt wishes to do business with;
- bankrupt cannot act as a director of a company or take part in its promotion, formation or management unless permission is granted by the Court;
- bankrupt cannot act as an insolvency practitioner, or as a receiver or manager of the property of a company on behalf of debenture holders.
Details of the BRO against the bankrupt will be entered on a public register and will remain there until the order has expired.
The Court will consider each application for a BRO on its merits. For example, the Official Receiver can apply for a specific time period for the BRO to be in force e.g. 5 years. On consideration of the facts, the Court has discretion to grant a restriction period for longer or shorter than is being sought by the Official Receiver. The Court will exercise this discretion where necessary. It is therefore important for anyone who is in bankruptcy or considering entering bankruptcy to think ahead as their actions may have long lasting ramifications.
- Jeanette Donohoe and Maria McNally work at Cleaver Fulton Rankin solicitors in Belfast.