A secured creditor exercised its power of sale pursuant to a debenture to sell a debtor’s property. However, at the time of sale, the debtor company was in the process of being wound up.
After the purchaser raised concerns about the validity of the transaction, because section 130(2) of the Insolvency Act 1986 provides that the court’s permission is required to take action or proceedings against a company (or its property) following the making of a winding up order, the secured creditor applied for relief. The secured creditor argued that the sale of the property pursuant to its power of sale was neither an action, nor a proceeding, that had required the court’s permission.
The court agreed with the secured creditor, and made a declaration that section 130(2) did not apply. The reference in it to “action or proceeding” was to legal proceedings or quasi-legal proceedings and, moreover, the exercise of the power of sale didn't undermine the purpose of the provision (that is, to ensure that unsecured creditors are treated equally in a winding up).
While the decision is arguably unsurprising, it's welcome confirmation for secured creditors that they can exercise their power of sale, notwithstanding the stay on action or proceedings against a company in winding up.
Waypark Commercial Mortgage 1 Limited v Vanguard Number 1 Limited (In Liquidation) [2025] EWHC 1786 (Ch)
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