We are quite often asked whether you can close an administration, a liquidation or a bankruptcy when there are still uncashed dividend cheques? The short answer is yes.
In bankruptcies and compulsory liquidations then the dividend cheques are drawn on the ISA. As a result, once the dividend cheques have been sent to the creditors then that is the end of the IP’s involvement in the process. If the creditor does not cash the cheque then the Insolvency Service will automatically transfer the monies to the unclaimed dividends account 6 months after the date of issue of the cheque.
In contrast though, in administrations and voluntary liquidations then the dividend cheques will be drawn on an estate account so you will need to take some positive action if the cheques are not cashed. Once a dividend has been declared then the monies become impressed with a trust in favour of the creditor to whom the dividend is payable. They are that creditor’s money and will always remain so. The monies do not become available to other creditors or to meet the expenses of the insolvency if a dividend cheque is not cashed. As a result, there is no need to delay closing a case just because dividend cheques have not been cashed. You still have the ability to deal with the uncashed dividend cheques in your capacity as “trustee” of the dividend monies, even after closing the case, and you must do so. You have two real options.
First, you could transfer the funds from the estate account to a separate unclaimed dividends account, which needs to be a clients’ account, and then close the estate account. The mechanics and timing of doing so is something best done in consultation with your bankers bearing in mind that it is common banking practice to reject a cheque presented for payment bearing a date more than six months earlier. You will have to reconcile that unclaimed dividends account on a regular basis in accordance with the rules of your licensing body, and also take steps to try and find the beneficiaries of the dividend cheques and/or persuade them to cash them. Ultimately some of those beneficiaries may be subject to insolvency procedures, in which case you can then send the funds to the office holder, or in the case of companies they may be dissolved, so you can then send the funds to the Bona Vacantia department of Treasury Solicitors.
Secondly, you could leave all the hard work to the Insolvency Service by remitting the unclaimed dividends to the Insolvency Service once the cheques are over 6 months old. Your practice will have to pay the Insolvency Service £25.75 each time you remit funds to the ISA, but consider the costs of operating a clients’ account. Use a CAU103 in MVLs and CVLs and a CAU 104 in Administrations. Again though, take this action in consultation with your bankers so that they are aware of what you are doing in case a dividend cheque is subsequently presented for payment.
