In a short, but helpful judgment the court considered whether the stay imposed by s130(2) of the IA 1986 on actions or proceedings against a company in liquidation applied to a secured creditor exercising its power of sale.  In confirming that it did not, the court outlined the purpose behind that provision and considered what is or might constitute an “action” or “proceeding” that would be caught under that provision.

S130(2) of the IA 1986 provides:

“When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose”

In this case (Waypark Commercial Mortgage 1 Ltd v Vanguard Number 1 Ltd (in liquidation) [2025] EWHC 1786 (Ch)) the secured creditor had a debenture that included a legal charge over a property known as Oak House.  Following demand for payment the creditor exercised its power of sale, and a sale had been agreed and was progressing but before that sale had completed the company was wound up on a petition presented by another creditor.  The purchasers of Oak House were concerned that s130(2) might invalidate the sale of the property to their clients, and therefore the application was brought to obtain (a) a declaration that s130(2) did not apply or (b) permission for the sale to proceed.

What is the purpose of s130(2) IA 1986?

The case usefully reminds practitioners (referring to an earlier Court of Appeal decision) that s130(2) aims to firstly prevent any creditor from obtaining priority and thereby undermining the pari passu principles and secondly to prevent unnecessary and potentially expensive litigation given that the insolvency legislation contains provisions for the adjudication of claims.  The same applies to the stay imposed on bankruptcy.

Given that secured property, and the proceeds of its sale, do not form part of the general pot available for pari passu distribution the judge in this case concluded that there was no basis on which s130(2) could prevent a sale  – unless the security was impugned (which it wasn’t).

What is an “action” or “proceeding”?

In deciding whether the stay on liquidation will apply it is necessary to decide whether the particular action or proceeding is something that will be caught by s130(2) but neither term is defined in the insolvency legislation.  There are however some pointers from previous case law (which are referenced in this case) which give a bit of guidance:

  • The scope of the word ‘proceeding’ is limited to ‘legal proceedings or quasi-legal proceedings such as arbitration.’ Therefore, any court proceedings, including criminal proceedings, are included.
  • Non-court proceedings will only be within section 130(2) if they are similar to court proceedings having regard to the statutory purposes of section 130(2) (as explained above but which is set out in Mortgage Debenture Ltd v] Chapman [2016] 1 WLR 3048)
  • “Proceeding” has been interpreted to include execution and distress (because those remedies are likely to give an individual creditor an advantage and offend the pari passu principle)

Taking the above into account, and the statutory purpose of s130(2) it should be relatively straightforward for a creditor to determine whether an action or proceedings which they are or intend to take will be caught by the stay (and therefore require court consent to proceed). 

However, there will always be some grey areas – are the proceedings quasi-legal proceedings, for example? – where it might be appropriate to ask the court to confirm whether the stay applies.

Concluding comments

For secured creditors dealing with fixed charge assets that do not form part of the insolvent liquidation estate, and for those purchasing such assets, the decision is a helpful reminder (and comfort) that they can be sold without the need to obtain consent of the court because they would not be caught by the stay imposed by s130(2) IA 1986.