INS9751 - Guarantees of costs

Introduction

If there are not enough funds in an insolvency to take legal proceedings to recover assets or for insolvency offences, an IP may ask creditors to finance them (a ‘guarantee of costs’) by

• providing funds
• permitting the IP to use funds in hand from realisations (you must treat these in the same way as a request for providing funds).

Background information is provided at INS1109.

Deciding whether to guarantee costs and monitoring the action for which a guarantee is given are the responsibility of

• Special Compliance Office for cases being investigated by that office
• EIS Worthing or in Scotland EIS Edinburgh in all other cases.

Within EIS Worthing this work is carried out by Insolvency Service (IS) for

• local cases (mainly from assessing and processing offices, Insolvency Compliance Units, recovery offices)
• NIC debts on behalf of NICO which are considered along with tax and other Revenue debts
• EIS Worthing insolvency cases

And by Voluntary Arrangements Service (VAS) for

• VA cases, usually to fund legal action to serve a petition when the Supervisor holds insufficient funds. Such agreements are monitored by IS. (This text has been withheld because of exemptions in the Freedom of Information Act 2000)

Each case is given urgent attention and decided on its particular merits and facts.

The Revenue may be asked to guarantee either part of the costs in proportion with other creditors, or the total amount (particularly when the Revenue’s preferential or total claim is large and other creditors’ claims are for small amounts).

Records are held on the ‘Guarantee of Costs’ database.