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

Judgment in Secretary of State for Business, Enterprise & Regulatory Reform v Charter Financial Solutions Ltd & Ors [2009] EWHC 1118 (Ch) was given towards the end of last month. The case concerned an application by the Secretary of State for the winding-up of five companies under Section 124A of the Insolvency Act (1986) although the winding-up of only one of the companies was contested.  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.

The trial judge (Sir Edward Evans-Lombe) granted the application: the directors were found to have displayed a "serious lack of commercial probity". His decision is of interest because he commented on the scope of the courts' discretion under Section 124A following the Court of Appeal decision Secretary of State for Business, Enterprise & Regulatory Reform v Amway (UK) Ltd [2009] EWCA Civ 32. His Lordship observed (at para. [61]):

... the judge hearing such a public interest petition has a complete discretion as to whether to make a winding up order in the light of the facts, including past conduct, existing at the time the petition comes to be heard and including the fact that, at the time of the hearing, undertakings are being offered by the company to seek to ameliorate criticisms of that conduct and to indicate an intention, in the future, to change it for the better. It will be a rare case where the court declines to make a winding up order where the Secretary of State has rejected the undertakings and pressed for a winding up order. Nonetheless it is open to the court in such a rare case to do so where the facts, in the court's judgment, require it".