The Financial Conduct Authority v Carillion Plc

The statutory stay on proceedings against a company in compulsory liquidation extends beyond ordinary court claims. It includes quasi-judicial proceedings where the process has a defined beginning, recognisable procedure and ascertainable outcome, and determines the company’s individual responsibility or liability. The court must also consider whether the process falls within the purpose of the stay: protecting the insolvent estate for creditors and preventing disruption to the liquidation.

Regulatory proceedings are not excluded merely because the regulator has wider public-interest functions, or because the process is administrative and permits a fresh determination by a tribunal. FCA sanction proceedings under Financial Services and Markets Act 2000 sections 91 and 123 therefore require leave under section 130(2) of the Insolvency Act 1986. Leave may be granted on conditions protecting the estate.

The FCA sought a declaration concerning whether the automatic stay arising on Carillion’s compulsory liquidation applied to its proposed regulatory sanction process for alleged breaches of the Listing Rules and the EU Market Abuse Regulation. The process would begin with a Warning Notice and could proceed through a Decision Notice, referral to the Upper Tribunal and a Final Notice.

The parties disputed whether this process was an “action or proceeding” within section 130(2) of the Insolvency Act 1986. The FCA argued that its internal regulatory decision-making was administrative and distinct from legal proceedings. The liquidator argued that the formal procedure, representations, reasoned decisions and possible tribunal referral made it quasi-judicial and subject to the stay. The court also had to decide whether leave should be granted and on what terms.

1. Construction of section 130(2). The words “action or proceeding” must be construed in their statutory context and by reference to the underlying purpose of the moratorium. They include legal proceedings and quasi-legal proceedings, including proceedings before tribunals, arbitrators and statutory adjudicators. A process is not outside the provision merely because it is conducted by an administrative regulator.
2. Relevant inquiry. The court must consider the nature of the decision, the procedure used and whether Parliament intended the process to be subject to the supervision of the insolvency court. Relevant features include a defined commencement, a recognisable procedure, an ascertainable final outcome, a reasoned decision and determination of individual rights, responsibility or liability. A right of appeal or referral is relevant but not decisive.
3. Purpose of the stay. The stay protects the insolvent estate for creditors, prevents individual priority and avoids unnecessary litigation or diversion of the office-holder’s resources. The distinction between liquidation and administration affects the exercise of the discretion to grant leave, but does not materially alter the construction of “proceeding”.
4. Application to the FCA process. The FCA’s proposed proceedings concerned whether Carillion had breached statutory obligations or rules and whether sanctions should be imposed upon it. The Warning Notice, representations process, possible Decision Notice, tribunal referral and Final Notice formed a formal process determining individual responsibility and liability. The process was therefore a “proceeding” within section 130(2), notwithstanding the FCA’s wider strategic and integrity objectives.
5. Leave. Leave was required before the FCA could issue a Warning Notice. Leave was granted to commence and proceed with the statutory sanctions process under sections 91 and 123 of Financial Services and Markets Act 2000. Any financial penalty imposed could not be enforced against the company’s assets without further permission of the court. Carillion could restore the application to seek a determination that leave should not extend to the imposition of a financial penalty.

First-instance decision. No appellate history was stated in the judgment.