Bankruptcy (Scotland) Act 2016

• (11) The trustee, AiB, any commissioner or any creditor may, within 14 days after a decision of the sheriff on an application under subsection (7)(c), appeal against that decision.

• (12) Subsection (7) is without prejudice to section 200(4).

PART 5 — Vesting etc.

Vesting

Vesting of estate at date of sequestration

78

• (1) The whole estate of the debtor vests for the benefit of the creditors in the trustee in the sequestration, by virtue of the trustee's appointment, as at the date of sequestration.

• (2) But subsection (1) is subject to section 88.

• (3) It is not competent for—

• (a) the trustee, or

• (b) any person deriving title from the trustee,

to complete title, before the expiry of the period mentioned in subsection (4), to any heritable property in Scotland vested in the trustee by virtue of the trustee's appointment.

• (4) The period is 28 days (or such other period as may be prescribed) beginning with the day on which the certified copy of—

• (a) the order of the sheriff granting warrant is recorded under subsection (1)(a) of section 26 in the Register of Inhibitions, or

• (b) the determination of AiB awarding sequestration is recorded under subsection (2) of that section in that register.

• (5) The exercise by the trustee of any power conferred on the trustee by this Act, in respect of any heritable estate vested in the trustee by virtue of that person's appointment, is not challengeable on the ground of a prior inhibition.

• (6) Where the debtor has an uncompleted title to any heritable estate in Scotland, the trustee may complete title to that estate either in the trustee's own name or in the name of the debtor.

• (7) But completion of title in the name of the debtor does not validate by accretion any unperfected right in favour of a person other than the trustee.

• (8) Moveable property in respect of which, but for this subsection—

• (a) delivery or possession, or

• (b) intimation of assignation,

would be required in order to complete title vests in the trustee, by virtue of the trustee's appointment, as if at the date of sequestration (as the case may be) the trustee had taken delivery or possession of the property or had made intimation of its assignation to the trustee.

• (9) Any non-vested contingent interest which the debtor has vests in the trustee as if an assignation of that interest had been executed by the debtor (and intimation of assignation made) at the date of sequestration.

• (10) Any non-vested contingent interest vested in the trustee by virtue of subsection (9) is, where it remains so vested as at the date which is 4 years after the date of sequestration, re-invested in the debtor as if an assignation of that interest had been executed by the trustee (and intimation of assignation made) at that date.

• (11) A person claiming a right to any estate claimed by the trustee may apply to the sheriff for the estate to be excluded from such vesting, a copy of the application being served on the trustee.

• (12) The sheriff must grant the application if satisfied that the estate should not be so vested.

• (13) Where any successor of a deceased debtor whose estate has been sequestrated has made up title to, or is in possession of, any part of that estate, the sheriff may on the application of the trustee order the successor to convey such estate to the trustee.

Provision supplementary to section 78 and interpretation of Part 5

79

• (1) In subsection (1) of section 78, the “whole estate of the debtor” means the debtor's whole estate at the date of sequestration (wherever situated) including—

• (a) any income or estate vesting in the debtor on the date of sequestration,

• (b) any property of the debtor title to which has not been completed by another person deriving right from the debtor, and

• (c) the capacity to exercise and to take proceedings for exercising all such powers in, over or in respect of any property as—

• (i) might have been exercised by the debtor for the debtor's own benefit as at, or on, the date of sequestration, or

• (ii) might be exercised on a relevant date.

• (2) But subsection (1) is subject to subsection (3) ....

• (3) The “whole estate of the debtor” does not include any interest of the debtor as tenant under—

• (a) a tenancy which is an assured tenancy within the meaning of Part 2 of the Housing (Scotland) Act 1988,

• (b) a protected tenancy within the meaning of the Rent (Scotland) Act 1984 in respect of which, by virtue of Part 8 of that Act, no premium can lawfully be required as a condition of assignation, ...

• (c) a Scottish secure tenancy within the meaning of the Housing (Scotland) Act 2001, or

• (d) a private residential tenancy within the meaning of the Private Housing (Tenancies) (Scotland) Act 2016.

• (4) On the date on which the trustee serves notice to that effect on the debtor, the interest of the debtor as tenant under any of the tenancies referred to in subsection (3) forms part of the debtor's estate and vests in the trustee as if it had vested in the trustee under section 86(5).

• (5) In this Part “relevant date” means a date after the date of sequestration and before the date which is 4 years after the date of sequestration.

Property subject to restraint order

80

• (1) Subsection (2) applies where—

• (a) property is excluded from the debtor's estate by virtue of section 420(2)(a) of the Proceeds of Crime Act 2002 (property subject to a restraint order),

• (b) an order under section 50, 67A, 128, 131A, 198 or 215A of that Act has not been made in respect of the property,

• (c) the restraint order is discharged, and

• (d) immediately after the discharge of the restraint order the property is not detained under or by virtue of section 44A, 47J, 122A, 127J, 193A or 195J of that Act.

• (2) The property vests in the trustee in the sequestration as part of the debtor's estate.

• (3) But subsection (2) does not apply to the proceeds of property realised by a management receiver under section 49(2)(d) or 197(2)(d) of that Act (realisation of property to meet receiver's outlays and remuneration).

Property released from detention

81

• (1) Subsection (2) applies where—

• (a) property is excluded from the debtor's estate by virtue of section 420(2)(b) of the Proceeds of Crime Act 2002 (property detained under certain provisions),

• (b) no order is in force in respect of the property under section 41, 50, 120, 128, 190 or 198 of that Act, and

• (c) the property is released.

• (2) The property vests in the trustee in the sequestration as part of the debtor's estate.

Property in respect of which receivership or administration order is made

82

• (1) Subsection (2) applies where—

• (a) property is excluded from the debtor's estate by virtue of section 420(2)(c) of the Proceeds of Crime Act 2002 (property in respect of which an order for the appointment of a receiver or administrator under certain provisions of that Act is in force),

• (b) a confiscation order is made under section 6, 92 or 156 of that Act,

• (c) the amount payable under the confiscation order is fully paid, and

• (d) any of the property remains in the hands of the receiver or administrator (as the case may be).

• (2) The property vests in the trustee in the sequestration as part of the debtor's estate.

Property in respect of which realisation order is made

83

• (1) Subsection (2) applies where—

• (a) property is excluded from the debtor's estate by virtue of section 420(2)(d) of the Proceeds of Crime Act 2002 (property in respect of which an order has been made authorising realisation of the property by an appropriate officer),

• (b) a confiscation order is made under section 6, 92 or 156 of that Act,

• (c) the amount payable under the confiscation order is fully paid, and

• (d) any of the property remains in the hands of the appropriate officer.

• (2) The property vests in the trustee in the sequestration as part of the debtor's estate.

Property subject to certain orders where confiscation order discharged or quashed

84

• (1) Subsection (2) applies where—

• (a) property is excluded from the debtor's estate by virtue of section 420(2)(a), (b), (c) or (d) of the Proceeds of Crime Act 2002 (property excluded from debtor's estate),

• (b) a confiscation order is made under section 6, 92 or 156 of that Act, and

• (c) the confiscation order is discharged under section 30, 114 or 180 of that Act (as the case may be) or quashed under that Act or in pursuance of any enactment relating to appeals against conviction or sentence.

• (2) Any such property vests in the trustee in the sequestration as part of the debtor's estate if it is in the hands of—

• (a) a receiver appointed under Part 2 or 4 of that Act,

• (b) an administrator appointed under Part 3 of that Act, or

• (c) an appropriate officer (within the meaning of section 41A, 120A or 190A of that Act).

• (3) But subsection (2) does not apply to the proceeds of property realised by a management receiver under section 49(2)(d) or 197(2)(d) of that Act (realisation of property to meet receiver's outlays and remuneration).

Vesting of income received by debtor after sequestration

85

• (1) Any income, of whatever nature, received by the debtor on a relevant date, other than income arising from the estate which is vested in the trustee in the sequestration, is to vest in the debtor.

• (2) But subsection (1) is subject to sections 90 to 97.

Further provision as regards vesting of estate

86

• (1) Diligence in respect of a debt or obligation mentioned in subsection (2) is not competent against income vesting in the debtor under section 85.

• (2) The debt or obligation is one in respect of which the debtor, if discharged under section 137, 138 or 140, would be discharged under section 145.

• (3) For the purposes of subsection (1), diligence includes the making of a deduction from earnings order under the Child Support Act 1991.

• (4) Subsection (5) applies where any estate, wherever situated—

• (a) is acquired by the debtor on a relevant date, and

• (b) would have vested in the trustee in the sequestration if it had been part of the debtor's estate on the date of sequestration.

• (5) The estate vests in the trustee for the benefit of the creditors as at the date of acquisition.

• (6) A person who holds estate vesting in the trustee under subsection (5) is, on production to the person of a copy of the order certified by the sheriff clerk, or as the case may be by AiB, appointing the trustee, to convey or deliver the estate to the trustee.

• (7) But such a person incurs no liability to the trustee except to account for any proceeds of the conveyance which are in the person's hands if the person has, in good faith and without knowledge of the sequestration, conveyed the estate—

• (a) to the debtor, or

• (b) to anyone on the instructions of the debtor.

• (8) The trustee is not entitled, by virtue of subsections (4) to (7), to any remedy against an appropriate bank or institution (in this section and in section 87(7) referred to as a “bank”) in respect of a banking transaction entered into before the receipt by the bank of a notice under subsection (9) (whether or not the bank is aware of the sequestration).

• (9) Where the trustee knows, or becomes aware, of any estate vested in the trustee under section 78 or this section which comprises funds held by a bank, the trustee must serve a notice on the bank—

• (a) informing the bank of the sequestration, and

• (b) specifying reasonable detail in order to allow the bank to identify the debtor and the funds held.

• (10) A notice under subsection (9)—

• (a) must be in writing and may be sent—

• (i) by first class post or by using a registered or recorded delivery postal service to the bank, or

• (ii) in some other manner (including by electronic means) which the trustee reasonably considers likely to cause it to be delivered to the bank on the same or next day, and

• (b) is deemed to have been received the day after it is sent.

• (11) Subsections (4) to (8) are without prejudice to—

• (a) section 85, and

• (b) any right acquired in the estate in good faith and for value.

Dealings and circumstances of debtor after sequestration

87

• (1) The debtor must immediately notify the trustee in the sequestration—

• (a) of any assets acquired by the debtor on a relevant date, or

• (b) of any other substantial change in the debtor's financial circumstances.

• (2) A debtor who fails to comply with subsection (1) commits an offence.

• (3) A debtor who commits an offence under subsection (2) is liable on summary conviction—

• (a) to a fine not exceeding level 5 on the standard scale,

• (b) to imprisonment for a term not exceeding 3 months, or

• (c) both to such fine and to such imprisonment.

• (4) Any dealing of, or with, the debtor and relating to the debtor's estate vested in the trustee under section 78 or 86 is of no effect in a question with the trustee.

• (5) But subsection (4) does not apply where the person seeking to uphold the dealing establishes that the trustee—

• (a) has abandoned to the debtor the property to which the dealing relates,

• (b) has expressly or impliedly authorised the dealing, or

• (c) is otherwise personally barred from challenging the dealing.

• (6) Nor does subsection (4) apply where the person seeking to uphold the dealing establishes both—

• (a) that the dealing is—

• (i) the performance of an obligation undertaken before the date of sequestration by a person obliged to the debtor in the obligation,

• (ii) the purchase from the debtor of goods for which the purchaser has given value to the debtor or is willing to give value to the trustee, or

• (iii) one which satisfies the conditions mentioned in subsection (10), and

• (b) that the person dealing with the debtor was, at the time when the dealing occurred, unaware of the sequestration and had at that time no reason to believe that the debtor's estate had been sequestrated or was the subject of sequestration proceedings.

• (7) Nor does subsection (4) apply where the dealing is a banking transaction entered into before the receipt by the bank of a notice under section 86(9) (whether or not the bank is aware of the sequestration).

• (8) Where the trustee has abandoned heritable property to the debtor, notice (in such form as may be prescribed) given to the debtor by the trustee is sufficient evidence that the property is vested in the debtor.

• (9) Where notice is given under subsection (8), the trustee is as soon as reasonably practicable after giving it to record a certified copy of it in the Register of Inhibitions.

• (10) The conditions are that—

• (a) the dealing constitutes—

• (i) the transfer of incorporeal moveable property, or

• (ii) the creation, transfer, variation or extinguishing of a real right in heritable property,

for which the person dealing with the debtor has given adequate consideration to the debtor or is willing to give adequate consideration to the trustee,

• (b) the dealing requires the delivery of a deed, and

• (c) the delivery occurs during the period beginning with the date of sequestration and ending 7 days after the day on which—

• (i) the certified copy of the order of the sheriff granting warrant is recorded in the Register of Inhibitions under section 26(1)(a), or

• (ii) the certified copy of the determination of AiB awarding sequestration is recorded in that register under section 26(2).

Limitation on vesting

Limitation on vesting

88

• (1) The following property of the debtor does not vest in the trustee in the sequestration—

• (a) any property—

• (i) kept outside a dwellinghouse, and

• (ii) in respect of which attachment is, by virtue of section 11(1) of the 2002 Act, incompetent,

• (b) any property—

• (i) kept inside a dwellinghouse, and

• (ii) not a non-essential asset for the purposes of Part 3 of that Act, and

• (c) property held on trust by the debtor for any other person.

• (2) The vesting of the debtor's estate in the trustee in the sequestration does not affect the right of hypothec of a landlord.

• (3) Sections 78, 85 and 86 are without prejudice to the right of any secured creditor which is preferable to the rights of the trustee.

PART 6 — Debtor's contribution

Common financial tool

Assessment of debtor’s contribution

89

• (1) The Scottish Ministers may by regulations specify a method (the “common financial tool”) to be used to assess an appropriate amount of a living debtor's income (the “debtor's contribution”) to be paid to a trustee after the sequestration of the debtor's estate.

• (2) Regulations under subsection (1) may in particular prescribe—

• (a) a method for assessing a debtor's financial circumstances (including the debtor's assets, income, liabilities and expenditure),

• (b) a method for determining a reasonable amount of expenditure for a debtor after the sequestration of the debtor's estate,

• (c) the proportion of a debtor's income that is to constitute the debtor's contribution,

• (d) that a method determined by another person must be used (with or without modification in accordance with regulations made under subsection (1)) as the common financial tool.

• (3) The common financial tool must ensure that the amount of reasonable expenditure for a debtor is not less than the total amount of any income received by the debtor by way of guaranteed minimum pension (within the meaning of the Pension Schemes Act 1993).

• (4) The common financial tool must ensure that an amount is allowed for—

• (a) aliment for the debtor, and

• (b) the debtor's relevant obligations.

• (5) The “debtor's relevant obligations” are any obligation of—

• (a) aliment owed by the debtor (“obligation of aliment” having the meaning given by section 1(2) of the Family Law (Scotland) Act 1985),

• (b) the debtor to make a periodical allowance to a former spouse or former civil partner, and

• (c) the debtor to pay child support maintenance under the Child Support Act 1991.

• (6) The amount allowed for the debtor's relevant obligations referred to in paragraphs (a) and (b) of subsection (5) need not be sufficient for compliance with a subsisting order or agreement as regards the aliment or periodical allowance.

Payments by debtor following sequestration

Debtor contribution order: general

90

• (1) AiB must make an order fixing the debtor's contribution (a “debtor contribution order”)—

• (a) in the case of a debtor application, at the same time as awarding sequestration of the debtor's estate,

• (b) in the case of an award of sequestration following a petition under section 2(1)(b), after considering initial proposals for the debtor's contribution provided by the trustee.

• (2) In a case referred to in subsection (1)(b), the trustee must send initial proposals for the debtor's contribution within 12 weeks beginning with the date of the award of sequestration.

• (3) In making a debtor contribution order, AiB must use the common financial tool to assess the debtor's contribution.

• (4) A debtor contribution order may fix the amount of the debtor's contribution as zero.

• (5) A debtor contribution order may be made irrespective of sections 11 and 12 of the Welfare Reform and Pensions Act 1999.

• (6) A debtor contribution order may provide that a third person must pay to the trustee a specified proportion of money due to the debtor by way of income.

• (7) Where a third person pays a sum of money to the trustee in accordance with subsection (6), the third person is discharged from any liability to the debtor to the extent of the sum so paid.

• (8) AiB must, immediately following the making of a debtor contribution order, give written notice of the order to—

• (a) the debtor,

• (b) the trustee, and

• (c) any third person mentioned in the order.

• (9) A debtor contribution order must not take effect on a date before the expiry of 14 days beginning with the day of notification of the order.

Debtor contribution order: payment period and intervals

91

• (1) A debtor contribution order must contain provision requiring the debtor to pay the debtor's contribution (if not zero)—

• (a) during the payment period, and

• (b) at regular intervals determined by the person making or varying the order.

• (2) In subsection (1)(a), “payment period” means—

• (a) the 48 months beginning with the date of the first payment,

• (b) such shorter period as is determined by the person making or varying the order, or

• (c) such longer period as is—

• (i) determined by the trustee where there is a period during which the debtor did not pay an amount required under the debtor contribution order, or

• (ii) agreed by the debtor and the trustee.

• (3) The person making or varying the order may determine a shorter period under subsection (2)(b) only if, in the opinion of that person, the value of—

• (a) the debtor's contribution during the shorter period, and

• (b) any other estate of the debtor taken possession of by the trustee,

would be sufficient to allow a distribution of the debtor's estate to meet in full all of the debts mentioned in section 129.

• (4) AiB must, when making a debtor contribution order—

• (a) determine the date of the first payment, or

• (b) in a case where the debtor's contribution is fixed as zero, determine the date which is to be deemed the date of the first payment under the order.

Debtor contribution order: review and appeal

92

• (1) The debtor, the trustee or any other interested person may apply to AiB for a review of a debtor contribution order.

• (2) An application under subsection (1) must be made within 14 days beginning with the day on which the order is made.

• (3) If an application under subsection (1) is made, the order is suspended until the determination of that review by AiB.

• (4) If an application under subsection (1) is made, AiB must—

• (a) take into account any representations made by an interested person within 21 days beginning with the day on which the application is made, and

• (b) confirm, amend or revoke the order within 28 days beginning with that day.

• (5) The trustee or the debtor may, within 14 days beginning with the date of any decision of AiB under subsection (4)(b), appeal to the sheriff against that decision.

Effect of debtor contribution order

93

• (1) The debtor must pay to the trustee any debtor's contribution (if not zero)—

• (a) as fixed by AiB in making the debtor contribution order, or

• (b) as varied in accordance with section 95.

• (2) The requirement to pay the debtor's contribution applies irrespective of the debtor's discharge.

• (3) If the value of the debtor's estate and income when taken possession of by the trustee is sufficient to allow a distribution of the debtor's estate to meet in full all of the debts mentioned in section 129, any debtor contribution order ceases to have effect.

Deductions from debtor’s earnings and other income

94

• (1) Subsections (2) to (6) apply where, under a debtor contribution order—

• (a) the debtor is required to pay to the trustee an amount from the debtor's earnings or other income, or

• (b) in accordance with section 90(6), a third person is required to pay to the trustee money otherwise due to the debtor by way of income.

• (2) The debtor must give the person mentioned in subsection (3) an instruction to make—

• (a) deductions of specified amounts from the debtor's earnings or other income, and

• (b) payments to the trustee of the amounts so deducted.

• (3) The person—

• (a) in the case of an amount to be paid from the debtor's earnings from employment, is the person by whom the debtor is employed,

• (b) in the case of an amount to be paid from other earnings or income of the debtor, is a third person who is required to pay the earnings or income to the debtor, and

• (c) in the case mentioned in subsection (1)(b), is the third person who is required to pay the income to the trustee.

• (4) The trustee may give the person mentioned in subsection (3) an instruction of the type mentioned in subsection (2) if the debtor fails—

• (a) to comply with the requirements imposed by that subsection, and

• (b) to pay the debtor's contribution in respect of 2 payment intervals applying by virtue of the debtor contribution order.

• (5) A person mentioned in subsection (3) must comply with an instruction provided in accordance with subsection (2) or (4).

• (6) Where the person by whom the debtor is employed or another third person pays a sum of money to the trustee in accordance with this section, that person is discharged from any liability to the debtor to the extent of the sum so paid.

• (7) The Scottish Ministers may by regulations make provision about instructions to be provided under this section, including in particular—

• (a) the form in which an instruction must be made,

• (b) the manner in which an instruction provided in accordance with subsection (2) or (4) affects the recipient of that instruction, and

• (c) the consequence of any failure of a recipient of an instruction provided in accordance with subsection (2) or (4) to comply with the duty imposed by subsection (5).

Variation and removal of debtor contribution order by trustee

95

• (1) The trustee may vary or quash a debtor contribution order—

• (a) on the application of the debtor, following any change in the debtor's circumstances,

• (b) if the trustee considers it to be appropriate, following any such change, or

• (c) if the trustee considers it to be appropriate when—

• (i) sending a report to AiB under section 137(4), or

• (ii) granting a discharge under section 138(2).

• (2) In deciding whether to vary or quash a debtor contribution order, the trustee must use the common financial tool to assess the debtor's contribution.

• (3) A decision by the trustee under subsection (1)(b) must not take effect before the expiry of 14 days beginning with the day on which the decision is made.

• (4) The trustee must notify in writing the persons mentioned in subsection (5) immediately following—

• (a) any variation or quashing of a debtor contribution order, or

• (b) any refusal of an application as respects such an order.

• (5) The persons are—

• (a) the debtor,

• (b) AiB (if the trustee is not AiB),

• (c) any third person required to make a payment under the debtor contribution order or under section 94(5), and

• (d) any other interested person.

Payment break

96

• (1) The trustee may, on the application of the debtor, extend the payment period of a debtor contribution order by granting a payment break.

• (2) A “payment break” is a period not exceeding 6 months during which payments under the debtor contribution order are deferred.

• (3) A debtor may apply for a payment break if—

• (a) there has been a reduction of at least 50% in the debtor's disposable income (as determined using the common financial tool) as a result of any of the circumstances mentioned in subsection (4) arising in relation to the debtor, and

• (b) the debtor has not previously applied for a payment break in relation to a debtor contribution order applying after the sequestration of the debtor's estate.

• (4) The circumstances are—

• (a) a period of unemployment or a change in employment,

• (b) a period of leave from employment because of—

• (i) the birth or adoption of a child, or

• (ii) the need to care for a dependant,

• (c) a period of illness of the debtor,

• (d) a divorce,

• (e) a dissolution of civil partnership,

• (f) a separation from a person to whom the debtor is married or with whom the debtor is in civil partnership, and

• (g) the death of a person who, along with the debtor, cared for a dependant of the debtor.

• (5) An application for a payment break must specify the period during which the debtor wishes payments to be deferred.

• (6) If, in the opinion of the trustee, a payment break is fair and reasonable, the trustee may grant it on such conditions and for such period as the trustee thinks fit.

• (7) The trustee must notify in writing the grant of a payment break to—

• (a) the debtor,

• (b) AiB (if the trustee is not AiB), and

• (c) any third person required to make a payment under the debtor contribution order.

• (8) If the trustee decides not to grant a payment break, the trustee must notify the debtor of that decision and of the reasons for that decision.

• (9) The payment period in a debtor contribution order is deemed to be varied by the addition to the period of any payment break granted under this section.

Sections 95 and 96: review and appeal

97

• (1) The debtor or any other interested person may apply to AiB for a review of a decision by the trustee under section 95 or 96.

• (2) Any application under subsection (1) must be made within 14 days beginning with the day on which the decision is made.

• (3) If an application under subsection (1) relates to a decision by the trustee under section 95(1)(b), the decision is suspended until the determination of that review by AiB.

• (4) If an application under subsection (1) is made, AiB must—

• (a) take into account any representations made by an interested person within 21 days beginning with the day on which the application is made, and

• (b) confirm, amend or revoke the decision within 28 days beginning with that day.

• (5) The trustee or the debtor may, within 14 days beginning with the date of any decision of AiB under subsection (4)(b), appeal to the sheriff against that decision.

PART 7 — Safeguarding interests of creditors

Gratuitous alienations and unfair preferences

Gratuitous alienations

98

• (1) Subsection (2) applies where—

• (a) by an alienation (whether before or after the coming into force of this Act) by a debtor—

• (i) any of the debtor's property has been transferred, or

• (ii) any claim or right of the debtor has been discharged or renounced,

• (b) any of the following has occurred—

• (i) the debtor's estate has been sequestrated (other than, in the case of an individual, after the debtor has died),

• (ii) the debtor has granted a trust deed which has become a protected trust deed,

• (iii) the debtor has died and within 12 months after the date of death the debtor's estate has been sequestrated, or

• (iv) the debtor has died, the debtor's estate was absolutely insolvent at the date of death and within those 12 months a judicial factor has been appointed under section 11A of the 1889 Act (see section 107) to administer that estate, and

• (c) the alienation took place on a relevant day.

• (2) The alienation is challengeable by—

• (a) any creditor who is a creditor by virtue of a debt incurred on or before (as the case may be) the date of sequestration, the granting of the trust deed or the debtor's death, or

• (b) (as the case may be) the trustee in the sequestration, the trustee acting under the trust deed or the judicial factor.

• (3) For the purposes of paragraph (c) of subsection (1), the day on which an alienation takes place is the day on which the alienation becomes completely effectual.

• (4) In that paragraph, “relevant day” means, if the alienation has the effect of favouring—

• (a) a person who is an associate of the debtor, a day not earlier than 5 years before, or

• (b) any other person, a day not earlier than 2 years before,

(as the case may be) the date of sequestration, the granting of the trust deed or the date of death.

• (5) On a challenge being brought under subsection (2), the court must grant decree—

• (a) of reduction, or

• (b) for such restoration of property to the debtor's estate, or such other redress, as may be appropriate.

• (6) Except that the court is not to grant such decree if the person seeking to uphold the alienation establishes—

• (a) that immediately, or at any other time, after the alienation the debtor's assets were greater than the debtor's liabilities,

• (b) that the alienation was made for adequate consideration, or

• (c) that the alienation was—

• (i) a birthday, Christmas or other conventional gift, or

• (ii) a gift made, for a charitable purpose, to a person who is not an associate of the debtor,

being a gift which, having regard to all the circumstances, it was reasonable for the debtor to make.

• (7) Subsection (5) is without prejudice to any right acquired, in good faith and for value, from or through the transferee in the alienation.

• (8) In subsection (6)(c)(ii), “charitable purpose” means any charitable, benevolent or philanthropic purpose whether or not it is charitable within the meaning of any rule of law.

• (9) For the purposes of subsections (1) to (8), an alienation in implementation of a prior obligation is deemed to be one for which there was no consideration, or no adequate consideration, to the extent that the prior obligation was undertaken for no consideration, or no adequate consideration.

• (10) This section is without prejudice to the operation of section 2 of the Married Women's Policies of Assurance (Scotland) Act 1880 (which provides that a policy of assurance may be effected in trust for spouse, future spouse and children) including the operation of that section as applied by section 132 of the Civil Partnership Act 2004.

• (11) A trustee in a sequestration, a trustee acting under a protected trust deed or a judicial factor appointed under section 11A of the 1889 Act has the same right as a creditor has under any rule of law to challenge an alienation of a debtor made for no consideration or for no adequate consideration.

Unfair preferences

99

• (1) Subsection (5) applies to a transaction entered into (whether before or after the coming into force of this Act) by a debtor which has the effect of creating a preference in favour of a creditor to the prejudice of the general body of creditors, being a preference created not earlier than 6 months before—

• (a) the date of sequestration of the debtor's estate (if, in the case of an individual, a date within the debtor's lifetime),

• (b) the granting by the debtor of a trust deed which has become a protected trust deed,

• (c) the debtor's death where, within 12 months after the date of death—

• (i) the debtor's estate is sequestrated,

• (ii) a judicial factor is appointed under section 11A of the 1889 Act to administer the debtor's estate and that estate was absolutely insolvent at the date of death.

• (2) But subsection (5) does not apply to—

• (a) a transaction in the ordinary course of trade or business,

• (b) a payment in cash for a debt which when it was paid had become payable,

• (c) a transaction by which the parties undertake reciprocal obligations (whether the performance by the parties of their respective obligations is to occur at the same time or at different times),

• (d) the granting of a mandate by a debtor authorising an arrestee to pay over the arrested funds, or part of the arrested funds, to the arrester where—

• (i) there has been a decree for payment or a warrant for summary diligence, and

• (ii) the decree or warrant has been preceded by an arrestment on the dependence of the action or followed by an arrestment in execution.

• (3) Paragraphs (b) and (c) of subsection (2) are to be disregarded if the transaction in question was collusive with the purpose of prejudicing the general body of creditors.

• (4) For the purposes of subsection (1), the day on which a preference is created is the day on which it becomes completely effectual.

• (5) The transaction is challengeable by—

• (a) any creditor who is a creditor by virtue of a debt incurred on or before (as the case may be) the date of sequestration, the granting of the protected trust deed or the debtor's death, or

• (b) (as the case may be) the trustee in the sequestration, the trustee acting under the protected trust deed or the judicial factor.

• (6) On a challenge being brought under subsection (5) the court, if satisfied that the transaction challenged is a transaction to which that subsection applies, must grant decree—

• (a) of reduction, or

• (b) for such restoration of property to the debtor's estate, or such other redress, as may be appropriate.

• (7) Subsection (6) is without prejudice to any right acquired, in good faith and for value, from or through the creditor in whose favour the preference was created.

• (8) A trustee in a sequestration, a trustee acting under a protected trust deed or a judicial factor appointed under section 11A of the 1889 Act has the same right as a creditor has under any rule of law to challenge a preference created by a debtor.

Recall of certain orders

Recall of order for payment of capital sum on divorce or on dissolution of civil partnership

100

• (1) This section applies where—

• (a) a court has, under section 8(2) of the Family Law (Scotland) Act 1985 and whether before or after the coming into force of this Act, made—

• (i) an order for the payment by a debtor of a capital sum,

• (ii) an order for the transfer of property by the debtor, or

• (iii) a pension sharing order,

• (b) on the date of the making of the order the debtor was absolutely insolvent or was rendered so by implementation of the order, and

• (c) within 5 years after the making of the order—

• (i) the debtor's estate has been sequestrated other than on the death of the debtor,

• (ii) the debtor has granted a trust deed which has (whether or not within the 5 years) become a protected trust deed,

• (iii) the debtor has died and, within 12 months after the date of death, the debtor's estate has been sequestrated, or

• (iv) the debtor has died and, within those 12 months, a judicial factor has been appointed under section 11A of the 1889 Act to administer the debtor's estate.

• (2) The court, on the application of (as the case may be) the trustee in the sequestration, the trustee acting under the trust deed or the judicial factor, may make an order for recall of the order in question and—

• (a) for the repayment to the applicant of the whole or part of any sum already paid under the order,

• (b) for the return to the applicant of all or part of any property already transferred under the order, or

• (c) (where such property has been sold) for payment to the applicant of all or part of the proceeds of sale.

• (3) But before making an order under subsection (2), the court must have regard to all the circumstances including, in particular, the financial and other circumstances (in so far as made known to the court) of the person against whom the order would be made.

Excessive contributions

Recovery of excessive pension contributions

101

• (1) Where a debtor's estate has been sequestrated and the debtor—

• (a) has rights under an approved pension arrangement, or

• (b) has excluded rights under an unapproved pension arrangement,

the trustee in the sequestration may apply to the court for an order under this section.

• (2) Subsection (3) applies where the court is satisfied—

• (a) that the rights under the arrangement are to any extent, and whether directly or indirectly, the fruits of relevant contributions, and

• (b) that the making of any of the relevant contributions (“the excessive contributions”) has unfairly prejudiced the debtor's creditors.

• (3) The court may make such order as it thinks fit for restoring the position to what it would have been had the excessive contributions not been made.

• (4) Subsection (5) applies where the court is satisfied that the value of the rights under the arrangement is, as a result of rights of the debtor under—

• (a) the arrangement, or

• (b) any other pension arrangement,

having at any time become subject to a debit under section 29(1)(a) of the 1999 Act (see section 107), less than it would otherwise have been.

• (5) Where this subsection applies—

• (a) any relevant contributions which were represented by the rights which became subject to the debit are, for the purposes of subsection (2), to be taken to be contributions of which the rights under the arrangement are the fruits, and

• (b) where the relevant contributions represented by the rights under the arrangement (including those so represented by virtue of paragraph (a)) are not all excessive contributions, relevant contributions which are represented by the rights under the arrangement otherwise than by virtue of paragraph (a) are to be treated as excessive contributions before any which are so represented by virtue of that paragraph.

• (6) In subsections (2) to (5), “relevant contributions” means contributions to the arrangement or to any other pension arrangement—

• (a) which the debtor has at any time made on the debtor's own behalf, or

• (b) which have at any time been made on the debtor's behalf.

• (7) The court must, in determining whether it is satisfied under subsection (2)(b), consider in particular—

• (a) whether any of the contributions were made for the purpose of putting assets beyond the reach of, or of any of, the debtor's creditors, and

• (b) whether the total amount of any contributions—

• (i) made by or on behalf of the debtor to pension arrangements, and

• (ii) represented (whether directly or indirectly) by rights under approved pension arrangements or excluded rights under unapproved pensions arrangements,

is an amount which is excessive in view of the debtor's circumstances when those contributions were made.

• (8) For the purposes of this section and of sections 102 and 103, rights of a debtor under an unapproved pension arrangement are excluded rights if they are rights which are excluded from the debtor's estate by virtue of regulations under section 12 of the 1999 Act.

• (9) In the recovery provisions (see section 103(7))—

• “approved pension arrangement” has the same meaning as in section 11 of the 1999 Act, and

• “unapproved pension arrangement” has the same meaning as in section 12 of that Act.

Orders under section 101

102

• (1) Without prejudice to the generality of section 101(3), an order under that section may include provision—

• (a) requiring the person responsible for the arrangement to pay an amount to the trustee,

• (b) adjusting the liabilities of the arrangement in respect of the debtor,

• (c) adjusting any liabilities of the arrangement in respect of any other person that derive, directly or indirectly, from rights of the debtor under the arrangement,

• (d) for the recovery by the person responsible for the arrangement (whether by deduction from any amount which that person is ordered to pay or otherwise) of costs incurred by that person in complying in the debtor's case with any requirement under section 103(1) or in giving effect to the order.

• (2) In subsection (1), references to adjusting the liabilities of the arrangement in respect of a person include, in particular, reducing the amount of any benefit or future benefit to which that person is entitled under the arrangement.

• (3) In subsection (1)(c), the reference to liabilities of the arrangement does not include liabilities in respect of a person which result from giving effect to an order or provision falling within section 28(1) of the 1999 Act (pension sharing orders).

• (4) The maximum amount which the person responsible for an arrangement may be required to pay by an order under section 101 is the lesser of—

• (a) the amount of the excessive contributions, and

• (b) the value of the debtor's rights under the arrangement (if the arrangement is an approved pension arrangement) or of the debtor's excluded rights under the arrangement (if the arrangement is an unapproved pension arrangement).

• (5) An order under section 101 which requires the person responsible for an arrangement to pay an amount (“the restoration amount”) to the trustee must provide for the liabilities of the arrangement to be correspondingly reduced.

• (6) For the purposes of subsection (5), liabilities are correspondingly reduced if the difference between—

• (a) the amount of the liabilities immediately before the reduction, and

• (b) their amount immediately after the reduction,

is equal to the restoration amount.

• (7) An order under section 101 in respect of an arrangement—

• (a) is binding on the person responsible for the arrangement, and

• (b) overrides provisions of the arrangement to the extent that they conflict with the provisions of the order.

Orders under section 101: supplementary

103

• (1) The person responsible for—

• (a) an approved pension arrangement under which a debtor has rights,

• (b) an unapproved pension arrangement under which a debtor has excluded rights, or

• (c) a pension arrangement under which a debtor has at any time had rights,

must, on the trustee in the sequestration making a written request, provide the trustee with such information about the arrangement and rights as the trustee may reasonably require for, or in connection with, the making of applications under section 101.

• (2) Nothing in—

• (a) any provision of section 159 of the Pension Schemes Act 1993 or section 91 of the Pensions Act 1995 (which prevent assignation and the making of orders that restrain a person from receiving anything which the person is prevented from assigning),

• (b) any provision of any enactment (whether passed or made before or after the passing of the 1999 Act) corresponding to any of the provisions mentioned in paragraph (a), or

• (c) any provision of the arrangement in question corresponding to any of those provisions,

applies to a court exercising its powers under section 101.

• (3) Where any sum is required by an order under section 101 to be paid to the trustee, that sum is to be comprised in the debtor's estate.

• (4) Regulations made by the Secretary of State may, for the purposes of the recovery provisions, make provision about the calculation and verification of—

• (a) any such value as is mentioned in section 102(4)(b),

• (b) any such amounts as are mentioned in section 102(6)(a) and (b).

• (5) The power conferred by subsection (4) includes power to provide for calculation or verification—

• (a) in such manner as may, in the particular case, be approved by a prescribed person, or

• (b) in accordance with guidance from time to time prepared by a prescribed person.

• (6) References in the recovery provisions to the person responsible for a pension arrangement are to—

• (a) the trustees, managers or provider of the arrangement, or

• (b) the person having, in relation to the arrangement, functions corresponding to those of a trustee, manager or provider.

• (7) In this section and in section 101, “the recovery provisions” means this section and sections 101 and 102.

• (8) Regulations under subsection (4) may contain such incidental, supplemental and transitional provisions as appear to the Secretary of State necessary or expedient.

• (9) In subsection (5), “prescribed” means prescribed by the regulations.

Excessive contributions in pension-sharing cases: general

104

• (1) For the purposes of section 98, a pension-sharing transaction is taken—

• (a) to be a transaction, entered into by the transferor (in this section referred to as “TR”) with the transferee (in this section referred to as “TE”), by which the appropriate amount is transferred by TR to TE, and

• (b) to be capable of being an alienation challengeable under that section only so far as it is a transfer of so much of the appropriate amount as is recoverable.

• (2) For the purposes of section 99, a pension-sharing transaction is taken—

• (a) to be something (namely a transfer of the appropriate amount to TE) done by TR, and

• (b) to be capable of being an unfair preference given to TE only so far as it is a transfer of so much of the appropriate amount as is recoverable.

• (3) For the purposes of section 100, a pension-sharing transaction is taken—

• (a) to be a pension sharing order made by the court under section 8(2) of the Family Law (Scotland) Act 1985, and

• (b) to be an order capable of being recalled under that section only so far as it is a payment or transfer of so much of the appropriate amount as is recoverable.

• (4) Subsection (5) applies where—

• (a) an alienation is challenged under section 98,

• (b) a transaction is challenged under section 99, or

• (c) an application is made under section 100 for the recall of an order made in divorce proceedings.

• (5) If any question arises as to whether, or the extent to which, the appropriate amount in the case of a pension-sharing transaction is recoverable, the question must be determined in accordance with subsections (6) to (10).

• (6) The court is first to determine the extent, if any, to which TR's rights under the shared arrangement at the time of the transaction appear to have been, whether directly or indirectly, the fruits of contributions (“personal contributions”) to the shared arrangement or any other pension arrangement—

• (a) which TR has at any time made on TR's own behalf, or

• (b) which have at any time been made on TR's behalf.

• (7) Where it appears that those rights were to any extent the fruits of personal contributions, the court is then to determine the extent, if any, to which those rights appear to have been the fruits of personal contributions whose making has unfairly prejudiced TR's creditors (“the unfair contributions”).

• (8) If it appears to the court that the extent to which those rights were the fruits of the unfair contributions is such that the transfer of the appropriate amount could have been made out of rights under the shared arrangement which were not the fruits of the unfair contributions, then the appropriate amount is not recoverable.

• (9) If it appears to the court that the transfer could not have been wholly so made, then the appropriate amount is recoverable to the extent to which it appears to the court that the transfer could not have been so made.

• (10) In making the determination mentioned in subsection (7) the court must consider in particular—

• (a) whether any of the personal contributions were made for the purpose of putting assets beyond the reach of TR's creditors or any of them, and

• (b) whether the total amount of any personal contributions represented, at the time the pension sharing arrangement was made, by rights under pension arrangements is an amount which is excessive in view of TR's circumstances when those contributions were made.

• (11) In this section and sections 105 and 106—

• “appropriate amount”, in relation to a pension-sharing transaction, means the appropriate amount in relation to that transaction for the purposes of section 29(1) of the 1999 Act (creation of pension credits and debits),

• “pension-sharing transaction” means an order or provision falling within section 28(1) of that Act (orders and agreements which activate pension-sharing),

• “shared arrangement”, in relation to a pension-sharing transaction, means the pension arrangement to which the transaction relates,

• “transferee” (or “TE”), in relation to a pension-sharing transaction, means the person for whose benefit the transaction is made, and

• “transferor” (or “TR”), in relation to a pension-sharing transaction, means the person to whose rights the transaction relates.

Excessive contributions in pension-sharing cases: recovery orders

105

• (1) In this section and section 106, “recovery order” means, in any proceedings to which section 104 applies—

• (a) a decree granted under section 98(5),

• (b) a decree granted under section 99(6), or

• (c) an order made under section 100(2).

• (2) A recovery order may include provision—

• (a) requiring the person responsible for a pension arrangement in which TE (see section 104(11)) has acquired rights derived directly or indirectly from the pension-sharing transaction (again see that section) to pay an amount to the trustee,

• (b) adjusting the liabilities of the pension arrangement in respect of TE,

• (c) adjusting any liabilities of the pension arrangement in respect of any other person that derive, directly or indirectly, from rights of TE under the arrangement,

• (d) for the recovery by the person responsible for the pension arrangement (whether by deduction from any amount which that person is ordered to pay or otherwise) of costs incurred by that person in complying in the debtor's case with any requirement under section 106(1) or in giving effect to the order.

• (3) Subsection (2) is without prejudice to the generality of section 98(5), 99(6) or 100(2).

• (4) In subsection (2), references to adjusting the liabilities of a pension arrangement in respect of a person include, in particular, reducing the amount of any benefit or future benefit to which that person is entitled under the arrangement.

• (5) The maximum amount which the person responsible for an arrangement may be required to pay by a recovery order is the smallest of—

• (a) so much of the appropriate amount (see section 104(11)) as is recoverable in accordance with section 104,

• (b) so much, if any, of the amount of the unfair contributions (within the meaning given by section 104(7)) as is not recoverable by way of an order under section 101 containing provision such as is mentioned in section 102(1)(a), and

• (c) the value of the debtor's rights under the arrangement acquired by TE as a consequence of the transfer of the appropriate amount.

• (6) A recovery order which requires the person responsible for an arrangement to pay an amount (“the restoration amount”) to the trustee must provide for the liabilities of the arrangement to be correspondingly reduced.

• (7) For the purposes of subsection (6), liabilities are correspondingly reduced if the difference between—

• (a) the amount of the liabilities immediately before the reduction, and

• (b) their amount immediately after the reduction,

is equal to the restoration amount.

• (8) A recovery order in respect of an arrangement—

• (a) is binding on the person responsible for the arrangement, and

• (b) overrides provisions of the arrangement to the extent that they conflict with the provisions of the order.

Recovery orders: supplementary

106

• (1) The person responsible for a pension arrangement under which TE has, at any time, acquired rights by virtue of the transfer of the appropriate amount (see section 104(11)) is, on the trustee making a written request, to provide the trustee with such information about the arrangement and the rights under it of TR and TE as the trustee may reasonably require for, or in connection with, the making of an application for a recovery order.

• (2) Nothing in the provisions mentioned in subsection (3) applies to a court exercising its power to make a recovery order (see section 105(1)).

• (3) The provisions are—

• (a) any provision of section 159 of the Pension Schemes Act 1993 or section 91 of the Pensions Act 1995 (which prevent assignation and the making of orders which restrain a person from receiving anything the person is prevented from assigning),

• (b) any provision of any enactment (whether passed or made before or after the passing of the 1999 Act) corresponding to any of the provisions mentioned in paragraph (a), or

• (c) any provision of the arrangement in question corresponding to any of those provisions.

• (4) Regulations may, for the purposes of the recovery provisions, make provision about the calculation and verification of—

• (a) any such value as is mentioned in section 105(5)(c),

• (b) any such amounts as are mentioned in section 105(7)(a) and (b).

• (5) The power conferred by subsection (4) includes power to provide for calculation or verification—

• (a) in such manner as may, in the particular case, be approved by a prescribed person, or

• (b) in accordance with guidance from time to time prepared by a prescribed person.

• (6) References in the recovery provisions to the person responsible for a pension arrangement are to—

• (a) the trustees, managers or providers of the arrangement, or

• (b) the person having, in relation to the arrangement, functions corresponding to those of a trustee, manager or provider.

• (7) In this section—

• “prescribed” means prescribed by regulations,

• “the recovery provisions” means this section and sections 98, 99, 100 and 105, and

• “regulations” means regulations made by the Secretary of State.

• (8) Regulations under the recovery provisions may contain such incidental, supplemental and transitional provisions as appear to the Secretary of State necessary or expedient.

References in Part 7 to “the 1889 Act” and to “the 1999 Act”

107

In this Part, references—

• to “the 1889 Act” are to the Judicial Factors (Scotland) Act 1889, and

• to “the 1999 Act” are to the Welfare Reform and Pensions Act 1999.

PART 8 — Administration of estate by trustee

General

Taking possession of estate by trustee

108

• (1) The trustee in the sequestration must—

• (a) for the purpose of recovering the estate of the debtor under section 50(1)(a), take possession as soon as may be after the trustee's appointment—

• (i) of the debtor's whole estate so far as vesting in the trustee under sections 78 and 86, and

• (ii) of any document in the debtor's possession or control relating to the debtor's assets or the debtor's business or financial affairs,

• (b) make up and maintain an inventory and valuation of the estate, and

• (c) forthwith thereafter send a copy of the inventory and valuation to AiB.

• (2) Paragraph (a) of subsection (1) is subject to section 113.

• (3) The trustee is entitled to have access to, and to make a copy of, any document relating to the assets or the business or financial affairs of the debtor—

• (a) sent by or on behalf of the debtor to a third party, and

• (b) in the third party's hands.

• (4) If a person obstructs the trustee in the trustee's exercise, or attempted exercise, of a power conferred by subsection (3), the sheriff may, on the trustee's application, order the person to cease obstructing the trustee.

• (5) The trustee may require delivery to the trustee of any title deed or other document of the debtor, even if a right of lien is claimed over it.

• (6) Subsection (5) is without prejudice to any preference of the holder of the lien.

Management and realisation of estate

109

• (1) The trustee in the sequestration, as soon as may be after the trustee's appointment, must consult with AiB concerning the exercise of the trustee's functions under section 50(1)(a).

• (2) The trustee must comply with any general or specific directions given to the trustee (as the case may be)—

• (a) by the creditors,

• (b) on the application under this subsection of the commissioners, by the sheriff, or

• (c) by AiB,

as to the exercise by the trustee of such functions.

• (3) But subsection (2) is subject to subsections (4), (9) and (12).

• (4) Subsections (1) and (2) do not apply where the trustee is AiB.

• (5) The trustee may—

• (a) carry on or close down any business of the debtor,

• (b) bring, defend or continue any legal proceedings relating to the estate of the debtor,

• (c) create a security over any part of the estate,

• (d) where any right, option or other power forms part of the debtor's estate, make payments or incur liabilities with a view to obtaining, for the benefit of the creditors, any property which is the subject of the right, option or power,

• (e) borrow money in so far as it is necessary for the trustee to do so to safeguard the debtor's estate, and

• (f) effect or maintain insurance policies in respect of the business or property of the debtor.

• (6) Any sale of the debtor's estate by the trustee may either be by public sale or by private bargain.

• (7) The following rules apply to the sale of any part of the debtor's heritable estate over which a heritable security is held by a creditor or creditors if the rights of the secured creditor or creditors are preferable to those of the trustee—

• (a) the trustee may sell that part only with the concurrence of every such creditor unless the trustee obtains a sufficiently high price to discharge every such security,

• (b) the following acts are precluded—

• (i) the taking of steps by a creditor to enforce the creditor's security over the part after the trustee has intimated to the creditor that the trustee intends to sell the part,

• (ii) the commencement by the trustee of the procedure for the sale of the part after the creditor has intimated to the trustee that the creditor intends to commence the procedure for its sale,

• (c) except that where the trustee or a creditor has given intimation under paragraph (b) but has unduly delayed in proceeding with the sale then, if authorised by the sheriff in the case of—

• (i) sub-paragraph (i) of that paragraph, any creditor to whom intimation has been given may enforce the creditor's security, or

• (ii) sub-paragraph (ii) of that paragraph, the trustee may sell the part.

• (8) The function of the trustee under section 50(1)(a) to realise the debtor's estate includes the function of selling, with or without recourse against the estate, debts owing to the estate.

• (9) The trustee may sell any perishable goods without complying with any directions given to the trustee under subsection (2)(a) or (c) if the trustee considers that compliance with such directions would adversely affect the sale.

• (10) The validity of the title of any purchaser is not challengeable on the ground that there has been a failure to comply with a requirement of this section.

• (11) It is not competent for the trustee or an associate of the trustee, or for any commissioner, to purchase any of the debtor's estate in pursuance of this section.

• (12) The trustee—

• (a) must comply with the requirements of subsection (7) of this section, and

• (b) may do anything permitted by this section,

only in so far as, in the trustee's view, it would be of financial benefit to the estate of the debtor, and in the interests of the creditors, to do so.

Contractual powers and money received

Contractual powers of trustee

110

• (1) The trustee in the sequestration may, as respects any contract entered into by the debtor before the date of sequestration—

• (a) adopt it (except where adoption is precluded by its express or implied terms) if the trustee considers that its adoption would be beneficial to the administration of the debtor's estate, or

• (b) refuse to adopt it.

• (2) But subsection (1) is subject to subsections (3) and (10).

• (3) The trustee must, within 28 days after the receipt by the trustee of a request in writing from any party to a contract entered into by the debtor, adopt or refuse to adopt the contract.

• (4) The 28 days mentioned in subsection (3) may be extended—

• (a) in a case where AiB is the trustee, by the sheriff on the application of AiB, and

• (b) in any other case, by AiB on the application of the trustee.

• (5) The trustee may, within 14 days beginning with the day of the decision, apply to AiB for a review of a decision of AiB under subsection (4)(b).

• (6) If an application for a review under subsection (5) is made, AiB must—

• (a) take into account any representations made by an interested party within 21 days beginning with the day on which the application is made, and

• (b) confirm, amend or revoke the decision within 28 days beginning with that day.

• (7) The trustee may, within 14 days beginning with the day of the decision, appeal to the sheriff against a decision by AiB under subsection (6)(b).

• (8) AiB may refer a case to the sheriff for a direction before—

• (a) making a decision under subsection (4)(b), or

• (b) undertaking any review under this section.

• (9) An application for a review under subsection (5) may not be made in relation to a matter on which AiB has applied to the sheriff for a direction under subsection (8).

• (10) If, within the 28 days mentioned in subsection (3) or as the case may be within the longer period allowed by virtue of subsection (4), the trustee does not reply in writing to a request under subsection (3), the trustee is deemed to have refused to adopt the contract.

• (11) The trustee may enter into any contract where the trustee considers that to do so would be beneficial for the administration of the debtor's estate.

Money received by trustee

111

• (1) All money received by the trustee in the sequestration in the exercise of the trustee's functions must be deposited by the trustee in the name of the debtor's estate in an interest-bearing account in an appropriate bank or institution.

• (2) But subsection (1) is subject to subsections (3) and (5).

• (3) In any case where the trustee is AiB, all money received by AiB in the exercise of AiB's functions as trustee must be deposited by AiB in an interest-bearing account in an appropriate bank or institution—

• (a) in the name of the debtor's estate, or

• (b) in the name of the Scottish Ministers.

• (4) But subsection (3) is subject to subsection (5).

• (5) The trustee may at any time retain in the trustee's hands a sum not exceeding £200 or such other sum as may be prescribed.

Debtor's home

Debtor’s family home

112

• (1) This section applies where a debtor's sequestrated estate includes any right or interest in the debtor's family home.

• (2) At the end of 3 years beginning with the date of sequestration, the right or interest—

• (a) ceases to form part of the debtor's sequestrated estate, and

• (b) is reinvested in the debtor (without disposition, conveyance, assignation or other transfer).

• (3) Subsection (2) does not apply if—

• (a) during the 3 years mentioned in subsection (2), the trustee in the sequestration—

• (i) disposes of or otherwise realises the right or interest,

• (ii) concludes missives for sale of the right or interest,

• (iii) sends a memorandum to the Keeper of the Register of Inhibitions under section 26(6),

• (iv) completes title in the Land Register of Scotland, or as the case may be in the Register of Sasines, in relation to the right or interest,

• (v) commences proceedings to obtain the authority of the sheriff under section 113(1)(b) to sell or dispose of the right or interest,

• (vi) commences proceedings in an action for division and sale of the family home,

• (vii) commences proceedings in an action for the purpose of obtaining vacant possession of the family home,

• (viii) enters with the debtor into an agreement such as is mentioned in subsection (4), or

• (ix) commences an action under section 98 in respect of the right or interest, or

• (b) the trustee in the sequestration—

• (i) does not, at any time during the 3 years mentioned in subsection (2), know about the facts giving rise to a right of action under section 98, but

• (ii) commences an action under that section reasonably soon after becoming aware of those facts.

• (4) The agreement referred to in subsection (3)(a)(viii) is an agreement that the debtor is to incur a specified liability to the debtor's estate (with or without interest from the date of the agreement) in consideration of which the right or interest is to—

• (a) cease to form part of the debtor's sequestrated estate, and

• (b) be reinvested in the debtor (without disposition, conveyance, assignation or other transfer).

• (5) If the debtor does not inform the trustee or AiB of the right or interest within 3 months beginning with the date of sequestration then the 3 years mentioned in subsection (2) is to be taken—

• (a) not to begin with the date of sequestration, but

• (b) to begin instead with the date on which the trustee becomes aware of the right or interest.

• (6) The sheriff may, on the trustee's application, substitute for the 3 years mentioned in subsection (2) a longer period—

• (a) in prescribed circumstances, and

• (b) in such other circumstances as the sheriff thinks appropriate.

• (7) The Scottish Ministers may, by regulations—

• (a) make provision for this section to have effect with the substitution, in such circumstances as may be specified in the regulations, of a shorter period for the 3 years mentioned in subsection (2),

• (b) prescribe circumstances in which this section does not apply,

• (c) prescribe circumstances in which a sheriff may disapply this section,

• (d) make provision requiring the trustee to give notice that this section applies or does not apply,

• (e) make provision about compensation,

• (f) make such provision as they consider necessary or expedient in consequence of regulations made under paragraphs (a) to (e), or

• (g) modify sub-paragraphs (i) to (viii) of subsection (3)(a) so as to—

• (i) add or remove a matter, or

• (ii) vary a matter,

referred to in that subsection.

• (8) In this section, “family home” has the same meaning as in section 113.

Power of trustee in relation to debtor’s family home

113

• (1) Before the trustee in the sequestration (in this section referred to as “T”), or the trustee acting under the trust deed (in this section referred to as “TU”), sells or disposes of any right or interest in the debtor's family home, T or TU must—

• (a) obtain the relevant consent, or

• (b) where unable to obtain that consent, obtain the authority of the sheriff in accordance with subsection (2) or as the case may be (3).

• (2) Where T or TU requires to obtain the authority of the sheriff in terms of subsection (1)(b), the sheriff, after having regard to all the circumstances of the case including—

• (a) the needs and financial resources of the debtor's spouse or former spouse,

• (b) the needs and financial resources of the debtor's civil partner or former civil partner,

• (c) the needs and financial resources of any child of the family,

• (d) the interests of the creditors, and

• (e) the length of the period during which (whether before or after the relevant date) the family home was used as a residence by any of the persons referred to in paragraphs (a) to (c),

may refuse to grant the application or may postpone the granting of the application for such period (not exceeding 3 years) as the sheriff may consider reasonable in the circumstances or may grant the application subject to such conditions as the sheriff may prescribe.

• (3) Subsection (2) applies to an action brought by T or TU—

• (a) for division and sale of, or

• (b) for the purpose of obtaining vacant possession of,

the debtor's family home as that subsection applies to an application under subsection (1)(b).

• (4) Before commencing proceedings to obtain the authority of the sheriff under subsection (2) or (3), T or TU must give notice of the proceedings to the local authority in whose area the home is situated.