Powers of special managers in a company winding-up

Cheeswrights are often asked to notarially certify documents for use overseas involving companies registered in England and Wales which are in administration or liquidation, such documents often relate to the disposal of assets which are situated in overseas jurisdictions or the closing of branch offices. In such circumstances, the company can still execute documents, but they are usually signed not by a director, but by the administrator or liquidator. In rare cases, however, the company may instead by represented by a ‘special manager’. What exactly is a special manager?

When a winding-up order is made but no liquidator has been appointed or is able to act, the Official Receiver (the “OR”) automatically becomes the liquidator, by virtue of s136 of the Insolvency Act 1986. However, the circumstances of the case may make it inappropriate for the OR actually to conduct the winding-up of the company. This might perhaps because of a a lack of in-house specialist expertise or manpower at the Insolvency Service; for example, during the winding-up of British Steel in May 2019, the OR was concerned, among other things, to ensure there was no interruption to the safety management of the Scunthorpe Steelworks, where many dangerous chemicals were used or stored, requiring sensitive and specialist scientific oversight to protect the public. The Insolvency Service simply did not have the resources or know-how to take on that responsibility.

In such circumstances, the court has, under s177 of the Insolvency Act, power, on the application of the Official Receiver, to appoint ‘special managers’ to assist in managing the business and assets of the company being wound up. (A similar power under s370 applies in the case of personal bankruptcy.) Typically, the managers will be experienced senior insolvency practitioners, although this is not a requirement. Indeed, there are no rules at all about who may be appointed; when a company called Mawson Ltd. was liquidated in 1961, its former directors ended up as the special managers!

Unfortunately, it is not possible to say much that is definitive about the powers of special managers in general. The Insolvency Act simply provides that “the special manager has such powers as may be entrusted to him by the court” (s177(3)), and also gives the court power to apply any of the provisions of the Act relating to liquidators to the special managers (s177(4)). As such, it is necessary to inspect the court order appointing them to ascertain their powers. It is fair to say, however, that the powers are typically very broad.

For example, the Order appointing special managers on the liquidation of Carillion plc in January 2018 provided that “the Special Managers shall act as the agents of the Company and shall have all such powers as are necessary for the orderly operation and/or shut down of the Company’s business”, followed by a long and very broad list of functions. The judge went on to order “that any provisions of the Insolvency Act 1986 relating to the Official Receiver and liquidator are to have like effect in relation to the Special Managers for the purpose of the carrying out by them of any functions of the Official Receiver”. The appointment of special managers to British Steel was in similar terms.

Where such provisions are included in the Order, the effect is that the special manager has the same powers as a liquidator; for example, the power to execute deeds on behalf of the company, and to use its seal (Sch. 4 para. 7 of the Act). Where more than one special manager is appointed and the Order does not specify that they may act severally, it may be assumed that they must act jointly.

For further assistance please contact any of our notaries at notary@cheeswrights.com.

February 2020