This relatively recent wording now arises in our legislation quite frequently, and we regularly find IPs that do not realise that it communicates a significant degree of urgency.
It is common on visits to find IPs producing administration proposals to an eight week deadline and ignoring the requirement to issue them as soon as reasonably practicable. Whilst as far as we are aware this has not yet been picked up by a regulator, or more importantly by a complaining creditor, we are concerned that this is a potential risk area for IPs. First, consider the order of the requirement: it clearly says that issue should be ‘as soon as is reasonably practicable’ and leaves the eight weeks (or ten weeks for holding meetings etc) as a fallback position only. Therefore, an IP’s first duty has to be to comply as soon as he/she can.
This then leads to what the term actually means. It seems to have replaced the previously used term ‘forthwith’. 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’. This appears to be a less 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.
We think, therefore, that somewhere between ‘forthwith’ and any 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 practical considerations to be taken into account.
What you have to do as IPs is stand back from the requirement and decide what is ‘reasonably practicable’ in the case you are dealing with. We 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 some cases, the decision to cease trading and exit the administration via a CVL, or where the business has been sold, is made within days of the company entering into administration. In such cases it would have been far better to have issued the proposals immediately after cessation or sale. In other cases the only reason for not issuing proposals has been the absence of an SA. This would not normally be a good reason for delaying issuing proposals as long as you have information about the company’s financial position and a list of creditors’ names and addresses, something that is reflected in the rules.
All 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. It is better to record the reasons in a clear file note at the time, rather than try to recall the reasons some months later for a monitor or when dealing with a complaint.
