Sanction – general points and applying for sanction
The Act provides the authority for the powers of the official receiver when acting as liquidator or trustee [note 1] [note 2]. Some of these powers to act are limited in as much as they require that the official receiver seeks sanction (permission) for the act to be carried out. Largely, these are the acts that have the risk of resulting in some negative financial impact on the company or bankruptcy estate. The sanction requirements in the Act exist to protect the insolvent’s estate.
In cases where an insolvency practitioner is appointed as liquidator or trustee, the creditors may form a liquidation committee or creditors’ committee, respectively, which will, amongst other duties, provide sanction (see paragraph 29.2), where appropriate.
The role of Secretary of State, so far as the giving of sanction to insolvency practitioner liquidators and trustees (where there is no liquidation or creditors’ committee) is concerned, is carried out by Insolvency Practitioner Unit (IPU) (http://intranet/BSD/IPUnit/IPUnitHome.htm) (see paragraph 29.5).
In cases where the official receiver is liquidator or trustee, the Act provides that there shall be no liquidation or creditors’ committee (see paragraph 29.3) [note 5] [note 6]. In such a case the functions (include the giving of sanction) of the liquidation or creditors’ committee are vested in the Secretary of State [note 7] [note 8].
For the purpose of giving sanction to the official receiver, the role of the Secretary of State is carried out by Technical Section (see paragraph 29.5). Except in the rare circumstance of no member of Technical Section being available to consider a sanction application, and the matter being urgent (but see paragraph 29.12), IPU (see paragraph 29.3) has no role to play in official receivers’ cases.
Guidance on making an application is covered in paragraph 29.6.
The principle under which functions of a secretary of state (a minister) can be carried out by officials (civil servants) (see paragraphs 29.3 and 29.4) is known as the ‘Carltona principle’. This principle arose as a result of a court case during the Second World War [note 9]. At that time, the Ministry of Works had the power to requisition factories for war work and the legislation provided that the order of requisition be signed by the minister personally. One company whose factory had been requisitioned challenged the requisition on the basis that the order had been signed by an official of the ministry, rather than the minister himself. The court held that, in modern government, it is impossible for the minister to personally attend to all those matters required of him/her in the legislation and such duties may be carried out by officials with suitable knowledge and experience. Therefore in this matter, when the Secretary of State is required to act, senior officials within The Insolvency Service may act, usually Band C and Band D officers within Technical Section.
Unless the sanction requirement relates to an antecedent recovery (in which case, see paragraph 29.7), it would assist Technical Section if sanction is applied for by completing the form attached at Annex 1 to this chapter. The form should be completed electronically and e-mailed to the Technical Section in-box (Technical.Section@insolvency.gsi.gov.uk). All relevant questions in the form should be answered as fully as possible to allow the application to be considered and dealt with as quickly as possible.
The Service has entered into an agreement with Moon Beever, solicitors, for that firm to take on all qualifying antecedent recoveries (see paragraph 31.4A.7) on behalf of official receivers. Paragraphs 31.4A.6 to 31.A4.16 give an overview of the Service Level Agreement and procedures relating to that arrangement. This contract runs until 7 September 2011. Annex I of the Service Level Agreement covers the arrangements in relation to antecedent recoveries.
Where sanction to pursue an antecedent recovery is required in a qualifying recovery (see paragraphs 29.28 and 29.39), such sanction will be applied for by Moon Beever on a case-by-case basis on the appropriate application form. The form will be completed by Moon Beever and e-mailed to the official receiver or RTLU for onward transmission to Technical Section. The form should be e-mailed to the Technical Section in box (Technical.Section@insolvency.gsi.gov.uk) and should be headed “Moon Beever agreement – application for sanction” (see Chapter 31.4A, paragraph 31.4A.16).
Assuming that Technical Section is satisfied that sanction should be given, it will be given in writing, in the format attached to this chapter as Annex 2, and e-mailed to the person making the application.
In the extremely unlikely event that there is insufficient time to make a written application for sanction (see paragraph 29.6), it is possible to contact Technical Section by telephone (020 7291 6776/8/9) to obtain a sanction ‘in principle’. Callers should be prepared to give information of the type required by the written application and such written application should follow without undue delay (see paragraph 29.12).
This chapter covers the seeking and granting of sanctions as required under the Act. Although both procedures are controlled by Technical Section, the process of seeking sanction (which is a statutory procedure) should not be confused with the seeking of the permission of Technical Section to carry out some act (which is an internal, operational requirement).
Examples of where permission (rather than sanction) is required would be as follows:
Where it is permission, rather than sanction, that is required, there is no need to complete the full application attached at Annex 1 (see paragraph 29.6) and, instead, the request can be made in a standard e-mail, giving all relevant details.
The consequence of failing to obtain sanction where it is needed is that the official receiver will not be able to recover from the estate his/her costs in carrying out the action.
Any act carried out by the official receiver, as liquidator or trustee, without having obtained sanction (where required) is still valid [note 10].
An application for sanction (see paragraph 29.6) should be made before the act for which it is required is carried out, unless there is a matter of urgency – in which case the court or Secretary of State (Technical Section – see paragraph 29.4) may ratify the act after the event, so long as the ratification is sought without undue delay [note 11] [note 12].
So far as Technical Section are concerned, the application for sanction (see paragraph 29.6) should be made prior to the act for which sanction is required and, certainly, no later than the time at which the action requiring sanction is carried out – and only then in circumstances where staff in Technical Section cannot be contacted by telephone (020 7291 6776/8/9) to agree sanction ‘in principle’ (see paragraph 29.8).
It is not possible for the Secretary of State to give a general sanction. Instead, sanction may only be given when the details of the act for which sanction is required are known and not, for example, in anticipation that such sanction may be required although this should not prevent the official receiver, as liquidator or trustee, seeing the views of Technical Section on a proposed action which would, or might, require a sanction.