UK: England and Wales: winding-up in the public interest

Yesterday the Court of Appeal gave judgment in Secretary of State for Business, Enterprise and Regulatory Reform v Amway (UK) Ltd [2009] EWCA Civ 32. The case concerned an application for the winding-up of a company under Section 124A of the Insolvency Act (1986) by the Secretary of State for the Department for Business, Enterprise and Regulatory Reform. Section 124A provides the Secretary of State with the power to petition for the winding-up of a company where this is "expedient in the public interest"; the court must be satisfied that it is "just and equitable" for the company to be wound-up. 

At first instance, the trial judge refused to grant the petition sought by the Secretary of State (see [2008] EWHC 1054 (Ch)). The Secretary of State appealed, submitting that the trial judge had "fundamentally misunderstood his jurisdiction" by declining to grant the winding-up where he found that the company's old business model commercially unacceptable. The company had, however, changed its business model and the trial judge also accepted undertakings about future conduct. 

The trial judge's approach was endorsed by the Court of Appeal. Rix LJ (with whom Rimer and Toulson LJJ concurred) held that previous decisions did not prevent the court from accepting undertakings. His Lordship also held that counsel for the Secretary of State had not identified any error of law or principle in the judgment at first instance. Moreover, Rix LJ concluded (para. [82]):

I would repeat that this is an unusual, indeed exceptional case. A review of the factual histories of the other authorities placed before us in the bundle shows that that is so. They also show the dangers and difficulties of trying to put into any single straightjacket the philosophy of section 124A petitions. Of course, the Secretary of State seeks to act in the public interest: and the court will continue to be conscious of the need to maintain and vindicate appropriate business standards, to deter other wrongdoers, and to express its disapproval of dishonesty and other misconduct which would make it just and equitable to wind up companies, and to do so despite late and inadequate protestations of change from unreliable and untrustworthy owners, directors and managers. However, in my judgment the judge's solution in this case has not been in breach of that jurisprudence, but in fulfilment of it. I would therefore dismiss this appeal on the merits".