First decision considering UK tax authority's new power to wind up companies on grounds of public interest

Background

This is the first case to consider the new ground under section 85 of the Finance Act 2022, whereby the UK tax authority, HMRC, can petition for a company to be wound up if it determines that it is expedient in the public interest for the purposes of protecting the revenue to do so.  

Public interest defences 

The case concerned an application for a stay of the winding-up petition. The company argued that a stay should be granted on the basis that the company could not rely on public law defences to the petition in the Companies Court. 

Decision of the court 

The judge noted that:

• public law defences are available to the company in the Companies Court in the context of the section 85 petition despite there being no explicit reference to them in the statute

• there are parallels between the section 85 petitions and public interest petitions under the Insolvency Act 1986 and noted that such petitions should be treated similarly.

In refusing the application for the stay, the judge noted that in a public interest petition (unlike a creditors petition) the court will make a decision on all the evidence before it and can order both disclosure and cross examination to do so. 

Key takeaways

Winding-up petitions on the just and equitable basis have severe consequences for companies as the company's business will cease regardless of being insolvent or not. In public interest petitions the court will ensure that the respondent companies are able to defend themselves and challenge the grounds put forward by the respective government body in support of its petition, including hearing public law defences. 

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.

Commissioners for His Majesty's Revenue and Customs v Purity Ltd [2024] EWHC 2965 (Ch) (22 November 2024) 

Authored by: Huguette Craggs