05 Sep 2011

Service of Sequestration Petitions

Service of Sequestration Petitions

Rob Aberdein, Partner, discusses the recent legislative changes that will alter how bankruptcy proceedings are served.

Rob Aberdein, Partner, discusses the recent legislative changes that will alter how bankruptcy proceedings are served.

The Act of Sederunt (Sheriff Court Rules) (miscellaneous Amendments) (No 2) 2011 (SSI 2011/289) came into force on 20 July 2011. As a consequence, Petitions for Sequestration (bankruptcy) now need to be served personally in the hands of the borrower, unless an Application is made to court for permission to serve by an alternative method.

The new provisions are intended to address concerns about the potential for a borrower to be unaware of a Sequestration Petition in the absence of personal service. It is thought that the requirement for personal service will reduce the number of avoidable applications for Recall (annulment).

It was previously possible for the Petition to be served by other methods, such as by depositing through the borrower's letterbox. Given that the Sequestration Hearing calls no more than 14 days after the date of citation, it was possible that a borrower would not become aware of the Petition until after Sequestration had been awarded.

The new provisions will be of some concern to lenders and their legal advisers given the increased opportunity for the borrower to ‘avoid' service, potentially leading to increased expenditure and potential delays in the process.

Where appropriate, an Application may be made to obtain a Sheriff's authority to serve the petition “by such other means as the Sheriff thinks fit”. It is likely that the Sheriff would require to be addressed on the Application which, once again, would add to the costs. In cases where the chances of securing personal service seem doubtful, it will be necessary to examine whether an Application is more cost effective than instructing Sheriff Officer's to conduct further investigations into the borrower's whereabouts.

The new service provisions make it all the more important to maintain reliable and current information about a borrower's whereabouts. Lenders will need to be aware of the potential for increased costs and delays in achieving the appointment of an Insolvency Practitioner.

Rob Aberdein, Partner

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