Carillion: High Court clarifies scope of the statutory stay in compulsory liquidation

Carillion: High Court clarifies scope of the statutory stay in compulsory liquidation

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In FCA v Carillion [2021] EWCH 2871 (Ch), the High Court has confirmed that Financial Conduct Authority (FCA) enforcement action against Carillion Plc (in Liquidation) (Carillion) pursuant to certain provisions of the Financial Services and Markets Act 2000 (FSMA) does not constitute an “action or proceeding” and therefore falls outside of the scope of the statutory stay imposed by section 130(2) of the Insolvency Act 1986 (the Act). 

Section 130(2) of the Act

Section 130(2) of the Act provides that when a winding up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be continued or commenced against the company or its property, except with leave of the court and subject to such terms as the court may impose. 


Following its well-documented collapse into liquidation in 2018, the FCA issued statutory enforcement notices (Notices) against Carillion and certain of its directors relating to alleged market abuse and breaches of the Listing Rules, pursuant to sections 91 and 123 of FSMA. In this case, the High Court considered an appeal against an earlier decision that the court’s permission was required under section 130(2) of the Act before the FCA could issue the Notices. 

The Notices related to a proposed public censure by the FCA, rather than a financial penalty, with both parties accepting that the court’s permission would be required pursuant to section 130(2) in circumstances where the FCA proposed taking action against Carillion to recover any penalty imposed.

While in its earlier decision, the court had granted permission for the FCA to issue the Notices (which had been served upon Carillion in September 2020), the High Court was asked to consider whether, as a point of statutory construction, it was correct that the court’s permission was in fact required by the FCA when taking this type of regulatory action. The FCA viewed this issue as critical, given the significant legal and practical implications upon the manner and timing of any future enforcement action it may wish to take.

The FCA considered that the moratorium under section 130(2) of the Act was limited to court actions or proceedings or analogous proceedings (such as arbitration) and it argued that Parliament could not have intended that regulatory action – such as that taken by the FCA under FSMA – should be included within the scope of this statutory provision. The FCA noted that Parliament could not have intended for the insolvency courts to be the “gatekeeper” to the exercise of the FCA’s statutory powers. 

The FCA considered that its decision-making processes, including those related to issuing the Notices, were not analogous to court proceedings and were purely internal regulatory processes, conducted in relation to its statutory functions under FSMA. 


The High Court held that permission was not required to issue the Notices and that the earlier judge had been wrong to conclude that the exercise of the specific powers under FSMA by the FCA constituted a “proceeding” for the purposes of section 130(2). In reaching this decision, it found that the judge had adopted too broad an interpretation of this provision, and that the regulatory action taken by the FCA in respect of the Notices fell outside of the correct interpretation in any event.

However, the High Court strongly emphasised that the decision related only to the specific provisions of FSMA under consideration in this case (namely, sections 91 and 123). While the FCA sought to broaden the application of the decision to all regulatory action that it may seek to take, the High Court declined to adopt this approach. In doing so, it noted that there were differences in the decision-making processes employed by the FCA in respect of different provisions of FSMA. Consequently, questions relating to whether other regulatory action fell within the scope of section 130(2) would need to be determined separately by the court, as and when they arose in other liquidations.

A copy of the full judgment can be seen here.


David Steinberg, co-head of the Restructuring and Insolvency department at Stevens & Bolton comments:

While this decision provides some useful clarity on the scope of the stay imposed under section 130(2) of the Act, the High Court was clear that this should in no way be interpreted as a “blanket” decision applicable to all regulatory action taken by the FCA pursuant to FSMA. It therefore seems inevitable that this issue will fall to be considered once again by the courts, albeit within the context of regulatory action taken in respect of different statutory provisions.

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