Bankruptcy Restrictions Orders and Bankruptcy Restrictions Undertakings (BRO and BRU)
What is a Bankruptcy Restrictions Order (BRO) or Bankruptcy Restrictions Undertaking (BRU)?
What are the restrictions imposed by a BRO/BRU?
What are the other consequences of a BRO/BRU?
What is the process for making a BRO?
What is the process for making a BRU?
What is an interim BRO?
What conduct may lead to a BRO/BRU?
Further enquiries about BROs/BRUs
How to complain about an individual who is breaching the terms of a BRO/BRU
What is a Bankruptcy Restrictions Order (BRO) or Bankruptcy Restrictions Undertaking (BRU)?
If the official receiver considers that a bankrupt has acted dishonestly, or is blameworthy in some other way, they will report the facts to the courts and ask it to make a bankruptcy restrictions order (BRO).
A BRO is a court order imposing certain restrictions on a bankrupt for a set period between 2 and 15 years. A bankruptcy restrictions undertaking (BRU) has the same effect as a BRO but does not involve going to court. They have been introduced to ensure the small minority who are reckless or dishonest are subject to the restrictions for between 2 and 15 years.
A breach of a BRO or BRU is a criminal offence and may lead to a criminal penalty such as imprisonment or a fine.
What are the restrictions imposed by a BRU/BRO?
They are the same as those that apply to an undischarged bankrupt, namely:
- The person must disclose their status to a credit provider if they wish to obtain credit of more than £500.
- The person must not carry on business in a different name from that under which they were made bankrupt without disclosing to everyone they wish to carry on business with the name or trading style they used when they were made bankrupt
- The person must not act as the director of a company or take part in its promotion, formation or management unless they obtain permission from the court to do so.
- The person may not act as an insolvency practitioner or as receiver or manager of the property of a company on behalf of debenture holders.
In addition to the above the person also:
- May not be a Member of Parliament in England and Wales
- May not act as a local councillor
- May not hold the office of school governor
- May not hold other positions as contained in other legislation (The Insolvency Service has no control over the restrictions contained in other people’s legislation or in the rules of associations or governing bodies or professions).
What are the other consequences of a BRO/BRU?
- A new report to creditors is issued giving details of the BRO or BRU
- A press notice is issued which local papers can publish should they choose to do so.
- A notification goes automatically via The Insolvency Service's internal database to the Bankruptcy Restrictions Register, which is part of the Individual Insolvency Register. This is a register that can be searched by the public in the same way as they can search for details of bankruptcy orders. It is available to search on the internet and the public is encouraged to use this method. Bankruptcy Restrictions Register.
For a comprehensive list of statutory consequences imposed by a BRO click here (PDF, 75 Kb) .
What is the process for making a BRO?
A report is submitted by the official receiver to the Insolvency Service’s Investigation and Enforcement Service (IES). If IES accepts the report the official receiver will make application to court for a BRO hearing, this application must be made within 12 months of the date of the bankruptcy order. The court will then fix a hearing date.
The official receiver will send a copy of the report and application to the bankrupt. This will include details of the alleged wrongdoing and any supporting evidence. The bankrupt will be asked to acknowledge receipt of the document within 14 days. If the bankrupt wishes to challenge the allegations they have 28 days to send or hand into the court evidence supporting their claims.
When the hearing takes place the court may make a BRO, dismiss the application or adjourn the hearing. A BRO may be made whether the bankrupt attends or not. The court may ask the OR for a suggested BRO period. If a BRO is made, a copy is sent to the bankrupt and details will go into a public register and will remain there until the BRO ends.
What is the process for making a BRU?
If, after the bankrupt receives a copy of the official receiver's report, they accept the official receiver’s allegations, they may offer to enter into a BRU. A BRU has exactly the same effect as a BRO but does not involve going to court. The BRU must be signed by the individual and will be publicised and entered onto the public register. As the individual has accepted the official receiver’s allegations, the period of the BRU is likely to be shorter than if the court made a BRO.
What is an interim BRO?
Due to delays in investigating a case or because the court may not be able to fix a hearing for some time, there may be cases where the bankrupt will receive their automatic discharge before the BRO application can be heard. In these cases, so that the public continues to be protected, the official receiver will apply for an interim BRO so that the restrictions on the bankrupt’s behaviour will continue until the court makes its decision on the official receiver’s application for a BRO.
What conduct may lead to a BRO/BRU?
When deciding whether to make a BRO/BRU the court and the official receiver may take into account the individual’s conduct before and after the making of the bankruptcy order.
Below are some examples of dishonest or blameworthy conduct that could lead to a BRO/BRU. The list is not exhaustive, so any behaviour that the official receiver considers to be suspect may be the subject of a BRO application and should be investigated.
- Failing to keep or produce records which would explain a loss of money or property.
- Giving away assets or selling them at less than their value.
- Deliberately paying off some creditors in preference to others.
- Failing to supply goods or services which have been paid for (taking deposits).
- Carrying on a business when you knew or ought to have known you could not pay your debts (trading with knowledge of insolvency).
- Incurring debts which you knew you had no reasonable chance of repaying.
- Gambling or making rash speculations or being unreasonably extravagant.
- Causing your debts to increase by neglecting your business affairs.
- Behaving fraudulently, e.g. making a false claim to obtain credit.
- Not co-operating with the official receiver or trustee.
Being bankrupt for a second time in six years is also a matter of conduct to be considered but is not, in itself, sufficient reason to apply for a BRO.
The fact that someone has done one of these things doesn’t mean that they will be subject to a BRO, but it does mean that the official receiver needs to look at the conduct and decide whether the public needs protecting from that person. This will depend on the extent to which creditors have lost out, how aware the bankrupt was of their situation at the time, and the likelihood of them doing it again.
Further enquiries about BROs/BRUs
If you still have unanswered questions about BROs/BRUs, you can contact The Insolvency Enquiry Line on 0845 602 9848 – between 8.00am and 5.00pm Monday – Friday except bank holidays; or email: insolvency.enquiryline@insolvency.gsi.gov.uk
How to complain about an individual who is breaching the terms of a BRO/BRU?
For details of how to complain about an individual who is breaching the terms of a BRO/BRU follow this link.
