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The Responsibilities, the Object of Supervision and the Field of Action

The Supervision Over the Administering of Bankruptcy Estates. The main duty of the Ombudsman is to supervise that bankruptcy estates are administered according to the law and in accordance with the proper practice of administering the estates. The Ombudsman has to take the necessary action if he finds that there have been some kind of negligence or abuse or other matters that demand correction. The object of this supervision is primarily the administrator of the bankruptcy estate who takes care of the regular business of the estate.

The Developing of Proper Practice of Administering A Bankruptcy Estate. The duty of the Ombudsman is to develop the proper practice of administering the bankruptcy estates. To help him in this duty the Ombudsman has an Advisory Board with a wide base, the Advisory Board for Bankruptcy Affairs. The Board has taken to its primary task to prepare written guidance concerning the proper practice of administering bankruptcy estates.

Issues concerning purely practical matters do not belong to the Ombudsman. However, the line between legal and practical matters is not always completely unambiguous. An action poorly adapted to its purpose may be a breach of duty against the general obligation to act carefully and also against the proper practice of administering the estate. For instance, it is not the Ombudsman's duty to offer an opinion about the question to whom, when or at what price to sell property from the estate. However, the Ombudsman may have to take a stand afterwards about the question if the property has been sold in the estate's best advantage.

Auditing the Accounts and Activities of the Debtor. The creditors may decide on the special audit of the debtor’s books and operations, if the books or some other circumstance so warrant. In many cases the activities of the debtor will not be investigated because the estate has not the sufficient assets for the investigation. This is the case especially when the bankruptcy proceedings lapse because of insufficient assets. When the estate has no means or will to investigate the fitness of the pre-bankruptcy activities of the debtor despite the fact that an investigation would appear to be well-grounded, the Ombudsman can take action to audit the accounts and activities of the debtor.

Public Receivership. The Ombudsman is responsible for the public receivership which is a method of scrutinizing the pre-bankruptcy activities of the debtor. At the request of the Ombudsman the court may order that the bankruptcy is to continue under public receivership if this is to be deemed justified owing to the insufficient means of the bankruptcy estate or the need for the debtor or the estate to be scrutinized or for some other special reason. Public receivership is an alternative to the lapse (total discontinuation) of the bankruptcy. As soon as the court has given the order for public receivership, the Ombudsman appoints a public receiver. The term of office of the administrator and the authority of the creditors cease. The public receiver has the same duties as the administrator and must meet the same qualifications (usually the administrator continues as the public receiver). The costs of the public receivership are covered from public funds whenever the assets of the bankruptcy estate run out. Combating insolvency-related financial crime is a central objective of the public receivership.

The Giving of Advice and Instructions. The Ombudsman has also the general duty to give advice and instructions relating to the administering of bankruptcy estates. Courts, administrators of bankruptcy estates, creditors, debtors, officials and other parties involved in bankruptcies can turn to the Ombudsman in order to get his stand on an issue concerning bankruptcy proceedings or administering bankruptcy estate.

The Ombudsman has also the duty to supervise the reorganization proceedings of companies but only "to a necessary extent".

Published 2.9.2013