Appropriate circumstances for making an immediate winding-up order and appointment of special managers

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The directors of British Steel sought an immediate winding-up order on the basis that the company was unable to pay its debts, due to circumstances including declining demand as a result of Brexit; European competition; the automotive industry; lower revenues from French rail; an increase in commodity prices and the suspension of the free allocation of carbon credits under the EU Emissions Trading Scheme.

The evidence showed that:

  • The main site at Scunthorpe is very large – around 3.5 miles across.
  • There were risks of explosions if the gas pipe network is not maintained at positive pressure.
  • The site is prone to flooding if the water table is not constantly managed.
  • The presence of significant amounts of hazardous materials, including effluent lagoons and asbestos.

As a consequence of the above risks, no insolvency practitioners were prepared to accept an appointment as administrators. The judge therefore concluded that given the inevitability and desirability of an insolvency process there was no purpose to be served in delaying the commencement of the process or requiring notice of the petition to be given to creditors and so made an immediate winding up order.

Under Section 177(1) Insolvency Act 1986 where a company is in liquidation (or provisional liquidation) the court can appoint a special manager. The Official Receiver supported that application because the Official Receiver does not have the expertise or manpower to cover the tasks to be completed from the outset of the liquidation, so three partners from Ernst & Young were appointed special managers.

In the matter of British Steel Limited [2019] EWHC 1304 (Ch)

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