England and Wales: Winding-up in the public interest

Section 124A of the Insolvency Act (1986) provides the Secretary of State for Business, Enterprise and Regulatory Reform with the power to petition the court for the winding-up of a company where this is “expedient in the public interest”. In considering the Secretary of State’s application, the court must satisfy itself that it is “just and equitable” for the company to be wound-up.

In Secretary of State for Business, Enterprise and Regulatory Reform v Amway (UK) Ltd [2008] EWHC 1054 (Ch), a Section 124A petition was presented in April 2007 by the Secretary of State with regard to a company running a direct selling business. Following the petition's presentment the company made changes to its business model which were implemented in October 2007 (and reported in the press at the time: see here). The case was heard in late 2007 and judgment was given today by Norris J. His Lordship declined to grant the petition (subject to the company providing certain undertakings) and observed:

The Court has a discretion whether or not to make a winding up order. The Court may simply dismiss the petition if satisfied that past wrongs have been remedied and the management can be trusted not to permit their recurrence (even if unconstrained by any undertakings). But the Court has power to accept undertakings as to future conduct, and a discretion as to whether to make the giving of undertakings a condition of dismissing the petition. The power will not be exercised (and undertakings will be refused) if those offering them cannot be trusted. The power to accept undertakings is likely to be exercised if that course is acceptable to the Secretary of State. If the Court considers that undertakings may be acceptable, it should nonetheless be slow to accept them if the Secretary of State is not willing to dispose of the petition in that way: but whilst the course may be unusual, the Court undoubtedly has power to do so if there are countervailing factors which outweigh the Secretary of State's opposition. In the instant case I could simply dismiss the petition: but undertakings are offered and I see no need to spurn them even if the Secretary of State shows no enthusiasm for their acceptance" (para. [62]).

With regard to Section 124A, his Lordship observed:

Parliament has charged the Department with wide ranging responsibilities in relation to the affairs of companies including (under section 124A of the Insolvency Act 1986) their investigation and the formation of the view that it would be expedient in the public interest that companies should be wound up ... The Secretary of State is not a licensor of approved business models or a business design consultant and is under no obligation to approve or to police a scheme of undertakings relating to the conduct of an individual company's business" (para. [10])

NB: Under Section 27 of the Serious Crime Act (2007), a petition to wind-up a company can be presented by the Director of Public Prosecutions, the Director of HMRC and the Director of the Serious Fraud Office, where (a) the company has been convicted of an offence under section 25 in relation to a serious crime prevention order; and (b) the relevant Director considers it would be in the public interest for the company to be wound-up.