One common term added to insolvency legislation in the past few years is ‘as soon as reasonably practicable’. This arises in several case types now and one example is the requirement for an administrator to issue his proposals ‘as soon as reasonably practicable, but in any event in no more than 8 weeks’.
It is common on visits to find IP’s working to the eight week deadline and ignoring the first requirement. Although this has not yet been picked up by a regulator, or more importantly, by a complaining creditor, I am concerned that this is a potential risk area for practitioners. Firstly, consider the order of the requirement: it clearly says that issue should be ‘as soon as practicable’ and leaves the eight weeks (or ten weeks, or whatever) as a fallback position only. An IP’s first duty has to be, therefore, to comply as soon as he can.
This then leads to what the term actually means. It replaced the previously used term ‘forthwith’. Various learned articles had addressed this term over the years, but for me the most succinct and technically accurate was that in an ACCA newsletter produced by my former colleague Barbara Mackenzie. I won’t plagiarise Barbara’s article as you can find it by accessing the ACCA insolvency micro-site and clicking on the link to their newsletter. Barbara’s conclusion was that ‘forthwith’ meant ‘without unreasonable delay’. If the drafters of the new legislation had intended proposals to be issued, meetings held and statements of affairs returned without unreasonable delay they could, therefore, have used the previous term, forthwith. However, they instead opted for the new requirement, ‘as soon as reasonably practicable’. I cannot see that this is a more stringent requirement than forthwith, and there are various examples throughout the legislation where a specific time limit measured in days, weeks or calendar months has been used for both shorter and longer periods. The drafters did not use these, so they clearly had no rigid limit in mind, other than the fallback position mentioned above and nearly always quoted as a last resort.
I think, therefore, that somewhere between ‘forthwith’ and the last resort time limit the legislation seeks to inject a sense of urgency. Clearly, the drafters could have said ‘as soon as possible’, but they instead made a slightly less restrictive requirement, allowing time for practical considerations. What you have to do as IP’s is stand back from the requirement and decide what is ‘reasonably practicable’ in the case you are dealing with. I have seen several instances of proposals being issued only one or two days inside the time limit with no practical reason for the delay. In one case, the decision to cease trading and exit the administration via a CVL had been made within a week. It would have been far better to have issued the proposals immediately. This is not to say that there will never be a good reason for delaying issue, but you should be prepared to have to justify that decision and it would be better to record the reasons at the time in a clear file note, than to try to recall the reasons some months later for a monitor or regulator responding to a complaint.
I also think that the increased scrutiny of your remuneration since the Cabletel decision could impact on this. When justifying your time charges in the early days of an appointment, you may find that failure to deal with such matters expeditiously could be taken into account and a file note might make the difference between a reasonable delay and one that a judge could feel demonstrates a lower level of care justifying a reduction in remuneration. Maybe I am being over-cautious, but I think you should consider changing the emphasis when attempting to comply with such a requirement.
