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FCA discovers the staying power of insolvency proceedings

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Re Carillion Plc (in liquidation) [2020] EWHC 2146 (Ch) 

In January 2018 Carillion entered into compulsory liquidation – the largest ever trading liquidation in the UK. Under s130(2) Insolvency Act 1986, Carillion benefited from a liquidation stay which prevents any ‘action or proceeding’ being continued or commenced against the company or its property except with permission from the court.

A recent High Court decision considered for the first time whether the liquidation stay would prevent the Financial Conduct Authority (“FCA”) from issuing companies in liquidation with sanction notices for breaching the Listing Rules and market abuse without first obtaining leave from the court. 

The FCA has a broad regulatory role, including the  enforcement of breaches of the Listing Rules and protecting against market abuse in the UK financial markets and exchanges. Its powers include imposing restrictions and large financial penalties via the issuing of notices. When the FCA proposes to take action against an organisation, the Regulatory Decisions Committee (“RDC”) decides whether to issue a Warning Notice setting out the penalty intended and later a Decision Notice if it proceeds with that action.

Re Carillion plc (in liquidation) [2020]

The FCA considered issuing Carillion with a Warning Notice for unknown alleged breaches of the Listing Rules after the liquidation stay began in January 2018. The Official Receiver (as liquidator of Carillion) informed the FCA that it would require permission to issue the notice on the basis that it would constitute an ‘action or proceeding’ under s130(2) IA 1986. The FCA therefore sought a declaration from the court to clarify whether a Notice in this context would fall within the ambit of s130(2) IA 1986 and permission to issue the Notice if leave was required.

The court held that Parliament had intended that FCA Warning Notices should fall within the term ‘action or proceeding’ under s130(2) IA 1986, on the basis that the liquidator will need time to investigate before responding to a Warning Notice or to permit the company to continue to make representations to the FCA. It was also held that the liquidator would need to consider the relevance of the Notice to the company’s creditors, as any penalty imposed by the FCA would have an impact on the position of those creditors.

However, leave was subsequently granted for the FCA to proceed with the Notice with conditions attached, including that there would be no execution of any penalty sought by the FCA without further permission from the Court, as this was held to be in the public interest.


This decision is not necessarily surprising. The courts have typically adopted a broad approach to insolvency stays, as was the case in Re Frankice (Golders Green) Ltd (In Administration) where it was held that the Gambling Commission’s regulatory processes were also caught by the comparable stay on administration, under paragraph 43(6) of Schedule B1, IA 1986.

This decision illustrates the possible conflict between the regulatory regime and the insolvency framework and the balance the court must strike between the two. In reaching its decision in this case, the court considered the public interest in permitting the FCA to pursue its regulatory powers while ensuring that the liquidation could be carried out effectively.

However, the decision has a wide impact on the future exercise of the FCA’s powers.  It applies not just to FCA’s role as UK Listing Authority, but also its broader powers under Financial Services and Markets Act 2000 as the conduct and (for the vast majority of financial services firms) prudential regulator. As the FCA itself noted, it had already applied the sanction process historically in a significant number of cases, and listed some two hundred other possibilities when it could apply.  It is now clear that seeking leave to proceed where there is a liquidation or administration stay will have to become part of FCA’s processes in the future.