Interim Trustee – Section 50 of the Bankruptcy Act


Why seek to appoint an interim trustee?

The appointment of an interim trustee is similar in concept the appointment of a provisional liquidator. It is a temporary appointment pending the outcome of a creditor’s petition (where a creditor is applying to the court to have someone declared bankrupt).

The appointment is made by the court, and the court must be satisfied that it is in the interests of creditors do so.

Appointments of interim trustees are usually sought when a creditor is seeking to have a person (the debtor) declared bankrupt by way of a creditor’s petition, and the creditor is concerned that the debtor’s assets may be disposed of, or put beyond the reach of creditors, whilst waiting for the final determination of the creditor’s petition by the court.

What is the effect of the appointment of an interim trustee?

The appointment of the interim trustee allows for the trustee to take control of the debtor’s estate.

Unlike a trustee in bankruptcy, it is not the role of the interim trustee to gather in and start realising assets.

The role of the interim trustee is more of a supervisory role, to prevent the debtor’s property being dealt with in a manner that is not in the interests of the body of creditors.

The powers of the interim trustee are determined from the court orders for their appointment, not the general powers as provided for trustees in the Bankruptcy Act.

The court orders will provide a time frame for when the appointment of the interim trustee is to terminate.

In most cases, the appointment will be terminated on the earlier of the court issuing a sequestration order for the debtor to be declared bankrupt, or the creditor’s petition being dismissed.

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