Protected trust deeds: improving the process consultation

Part 2: The current role of the Accountant in Bankruptcy in Trust Deeds

2. Prior to 1 April 2008 the AiB had no statutory supervisory powers in respect of PTDs. The AiB was required to register PTDs on the Register of Insolvencies and the trust deed became protected from the date it was recorded in the Register. The discharge of the trustee was also recorded by the AiB together with details of the distribution of the estate. In terms of Schedule 5 to the Bankruptcy (Scotland) Act 1985, the AiB would carry out an audit of a trustee's accounts only when asked to do so by a debtor, trustee or creditor. The purpose of the audit was to ensure that the fee charged by the insolvency practitioner was reasonable given the amount of time taken to perform their statutory duties, and that the work had been completed by the appropriate person. The AiB had, and continues to have, no power to change fee rates. These are commercial rates set by the Insolvency Practitioner and their firm.

2.1 The BAD Act introduced powers for the AiB to supervise trustees in PTDs. Under her supervisory function the Accountant may now carry out an audit of the trustee's accounts at any time. This is in addition to any request from a debtor, trustee or creditor to have the trustee accounts audited by the AiB. The Act also provided regulation making powers to improve the administration of PTDs and formalise the discharge of debtors.

2.2 The Protected Trust Deed (Scotland) Regulations 2008 were brought into force on 1 April 2008. Prior to this date no specific information was available to the AiB in respect of debts included in PTDs, of expected realisations, of proposed dividends to creditors or of fees charged by trustees.

2.3 The trustee is now required to submit Form 3 to the AiB which details the anticipated contributions from the debtor, expected realisations from assets, the estimated cost of administering the PTD and proposed dividend to ordinary creditors. Collection of this additional information has allowed the collation and analysis of statistical data which assists in informing decisions on the future requirements for PTDs.

2.4 Thereafter, on an annual basis the trustee must submit Form 4 which details the progress of the trust deed. This enables the AiB to monitor the progression of the trust deed; to ensure that the proposals stated on Form 3 are comparable throughout the duration of the trust deed; and where the proposals have changed significantly, provide an explanation for this.

2.5 In accordance with regulation 15 of the 2008 Regulations, the AiB now has the authority to issue direction to the trustee regarding the administration of the trust deed. Any such direction may require the trustee to carry out or to refrain from such action as AiB considers necessary for the proper and accountable administration of a protected trust deed, in the interests of trustees, debtors, creditors or the general public.

2.6 Although AiB cannot set or change the fee rates of trustees, it can fix the remuneration payable. It does this by auditing the trustee's accounts to ensure that the time charged is appropriate to the statutory duties carried out. This is determined by examining the case for evidence of work undertaken and time allocated to this work. It also checks that the work has been completed by the appropriate person. If the AiB believes that the accounts do not reflect the true work that has been completed, it can reduce the fees paid to the trustee (but not the rate that the IP charges at).