UK Government

Insolvency Service (National): Bankrupt Harrogate business man spared jail after hiding assets from creditors

Press Release   •   Feb 16, 2011 09:30 GMT

Harrogate Magistrates Court spared Mr Terence Shane Hutchinson of West End Avenue, Harrogate, jail today when he pleaded guilty to putting his assets beyond the reach of his creditors, contrary to bankruptcy law. The hearing followed investigations by The Insolvency Service and The Department of Business Innovation and Skills.

On 4 January 2010 Mr Hutchinson, a director of Clean-It Contracts of Harrogate, was made bankrupt for debts exceeding £146,000.00 that he could not pay. As with all cases of financial failure the Official Receiver (an officer of The Insolvency Service) investigated the cause of Mr Hutchinson’s bankruptcy and discovered that between his house being sold on 20 October 2009 and him being made bankrupt on a creditors petition on 4 January 2010 Mr Hutchinson, while insolvent, disposed of £58,540.00 to the determent of his creditors.

Agreeing his action was detrimental to his creditors Mr Hutchinson signed a nine year Bankruptcy Restriction Undertaking in August 2010, meaning the restrictions by which he must abide by as a bankrupt have been extended beyond the normal 12 months.

Mr Hutchinson faced criminal charges, brought by the Department of Business Innovation and Skills for his action of fraudulently disposing of his assets (his house) contrary to section 357(1) of the Insolvency Act 1986. The court heard that while he had outstanding judgements against him, and to the determent of his creditors, he spent nearly £22,000 (the proceeds from the sale of his house) on a holiday in London, a school skiing trip for his daughter, shopping on the high street and a BMW X5.

Mr Hutchinson was sentenced to four months imprisonment – suspended for 12 months. In addition he must complete 240 hours of unpaid work as part of a 12 month Community Order and must pay a contribution to prosecution costs of £750.

1 The Department for Business, Innovation and Skills prosecutes a range of criminal insolvency cases in magistrates and Crown courts across the country. Most of the cases are referred by The Insolvency Service.

2 What is the role of the Official Receiver? When a court has made an insolvency order (a personal bankruptcy against an individual or a winding-up order against a company) the Official Receiver, a civil servant of The Insolvency Service with wide ranging statutory powers to obtain information, is responsible for collecting and protecting any assets for the benefit of creditors. When the Official Receiver thinks there is cause to do so they can also investigate, in the public interest, the conduct and financial affairs of the bankrupt for the period leading up to the insolvency order being made.

3 What are Bankruptcy Restrictions? These are restrictions set out in insolvency law that the bankrupt is subject to until they are discharged from bankruptcy – normally 12 months and include that bankrupts:-

must disclose their status to a credit provider if they wish to get credit of more than £500;

who carry on business in a different name from the name in which they were made bankrupt, they must disclose to those they wish to do business with the name (or trading style) under which they were made bankrupt;

may not act as the director of a company nor take part in its promotion, formation or management unless they have a court’s permission to do so;

may not act as an insolvency practitioner, or as the receiver or manager of the property of a company on behalf of debenture holders;

may not be a Member of Parliament in England or Wales.

4 What are Bankruptcy Restrictions Orders and Bankruptcy Restrictions Undertakings? If the Official Receiver considers that the conduct of a bankrupt has been dishonest or blameworthy in some other way, he (or she) will report the facts to court and ask for a Bankruptcy Restrictions Order (BRO) to be made. The court will consider this report and any other evidence put before it, and will decide whether it should make a BRO. If it does, the bankrupt will be subject to certain restrictions for the period stated in the order. This can be from 2 to 15 years.

The bankrupt may instead agree to a Bankruptcy Restrictions Undertaking (BRU) which has the same effect as an order, but will mean that the matter does not go to court.

5 The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk

Contacts

NDS Enquiries 
Phone: For enquiries please contact the issuing dept 
ndsenquiries@coi.gsi.gov.uk