Trustee in bankruptcy (licensed insolvency trustee)

When a bankruptcy order is made or an assignment is filed with an official receiver, the bankrupt ceases to have any capacity to dispose of or otherwise deal with their property. Section 71 of the Bankruptcy and Insolvency Act says it passes to and vests in the trustee, subject to the Act and to the rights of secured creditors. A buyer of a bankrupt business’s assets deals with that trustee.

How a trustee sells

Under section 30(1), a trustee may, with the permission of the inspectors, sell the bankrupt’s property, including the goodwill of the business, by tender, public auction or private contract. Under section 30(3), if no inspectors are appointed, the trustee may do so without that permission. Section 30(4) allows a sale to a person related to the bankrupt only with the court’s authorization, subject to the summary administration rules in section 155. The Office of the Superintendent of Bankruptcy licenses and regulates the insolvency profession.

What to check or ask

• Whether the trustee’s licence is current, by asking the Office.
• Which assets the trustee actually holds, and what secured creditors keep rights over.
• Whether inspectors were appointed and, if so, gave permission for the sale.
• How a trustee differs from a receiver: see buying from a trustee or a receiver and court-appointed receiver.