Illegal activity not a requirement for winding up by English court on a public interest basis

Quick read

The Secretary of State for Business, Energy and Industrial Strategy (SoS) presented winding up petitions against Fabcourt Developments Limited, Clarkson Murphy Partners Limited, Hall Contracting Services Limited and Sentor Solutions Commercial Ltd (the Companies).

The SoS may present a petition for a company to be wound up where it appears that it is expedient in the public interest and if the court thinks it just and equitable to do so.

Background

Two of the Companies claimed to be financial institutions and received investment monies in exchange for the promise of high returns on property development projects, which ultimately did not exist. The remaining Companies were also involved in the investment scheme. After one or two interest payments were made to investors, the Companies did not make any further payments and ceased all communications.

Decision

The Companies were wound up on the following grounds:

Trading with a lack of commercial probity and/or objectionable business activities.
Failure to cooperate with the SoS's investigation and provide adequate accounting records.
Lack of transparency.

Key takeaways

A company does not need to be involved in illegal activity to be wound up on a public interest basis.
The test is whether the company 'lacks commercial probity' or its business is 'inherently objectionable'.
A company carrying on such activities can be wound up even if it is solvent.