Sequestration and prior inhibitions 6.25 By section 31(2) of the 1985 Act the actings of the trustee in sequestration are not affected by prior inhibitions against the debtor. The trustee in sequestration can therefore sell free of any prior inhibition against the debtor, and the purchaser’s title sheet will not disclose such prior inhibitions as adverse entries. Equally, if the trustee should make up title to the debtor’s property, the title sheet will not disclose prior inhibitions against the debtor. However, where the debtor had taken title subject to an inhibition against a previous proprietor, that inhibition will be disclosed on the title sheet as an adverse entry so long as it remains extant and indemnity will be excluded in respect thereof. Liquidation and prior inhibitions 6.26 In terms of section 185(1)(a) of the Insolvency Act 1986 an inhibition registered within 60 days before the commencement of winding-up proceedings is equalised along with other diligences. The liquidator can sell heritable property belonging to the company free of such inhibitions and they will not be disclosed as adverse entries in the purchaser’s title sheet. The  situation  with  inhibitions  registered  before  the  60  day  period  is  less  clear    (see,  for  example, Gretton: The Law Of Inhibition and Adjudication, chapter 11). Some commentators (see for instance, Palmer’s Company Insolvency In Scotland¹⁵, chapter 4) argue that liquidators can sell free of any prior inhibition  against  the  company,  whilst  others  are  less  certain.  Gretton  for  example  (see  above reference)  discusses  the  possibility  that  a  distinction  can  be  made  between  a  voluntary  and  a compulsory winding-up, arguing that the latter cannot be held to be a voluntary act of the company and so prior inhibitions against the company cannot be effective. Since all such views must remain speculative until the matter is clarified by legislation or settled by the courts, the Keeper is obliged to adopt the prudent line that all prior inhibitions registered against a company before the 60 day period are effective, and so require to be disclosed as adverse entries with attendant exclusion of indemnity. This is the case whether the winding-up is compulsory or voluntary. Administration orders and inhibitions 6.27 Prior inhibitions are effective in the face of an administration order (see Gretton, chapter 12) and will therefore be disclosed as adverse entries with attendant exclusion of indemnity in the purchaser’s title sheet unless the inhibition is discharged or the administrator obtains the consent of the court to sell free of the inhibition. Where a company is already subject to an administration order, a new inhibition against the company is not competent without leave of the court or the consent of the administrator - section 11(3)(d) of the 1986 Act. It follows that inhibitions registered without leave or consent as aforementioned are unenforceable and so will not be treated as adverse entries by the Keeper. It is not always possible, however, for the Keeper to ascertain the status of such an inhibition without obtaining a statement from the administrator as to the efficacy of the inhibition. So, where the administrator is transacting with  the  company’s  property  in  the  face  of  such  an  inhibition,  a  statement  from  the  administrator should accompany the application for registration explaining whether or not leave of the court or the administrator’s consent was obtained in respect of the registration of the inhibition. Only then will the Keeper be able to determine whether or not the inhibition should be classed as an adverse entry.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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