Served with a Public Interest Winding Up Petition?

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Welcome to Francis Wilks & Jones, the UK’s leading firm of Public Interest Winding Up Petition lawyers.

A Public Interest Winding up petition is normally served on a company by the Secretary of State under section 124A of the Insolvency Act 1986 where it is deemed to be in the public interest to wind up a company.

If you have been served with a public interest winding up petition -- you must act quickly. If you ignore it, then the Secretary of State will wind the company up and this often leads to personal claims against the former directors, both financial and for director disqualification.

It is vital to take early control. Public Interest winding up petitions can be defended. We can help you do this and also advise you how best to protect your personal position.

We have huge experience dealing with these types of cases.

Call us now on 020 730 57663 for your free consultation.

1. Winding up a Company in the Public Interest

Companies can be wound up by a number of different individuals or entities. Most commonly, a company will be wound up by a creditor of the company for non-payment of a debt or will be wound up by the company itself via its directors due to an inability to pay its debts.

However, section 124A of the Insolvency Act 1986 also gives power to the Secretary of State for Business, Energy and Industrial Strategy (“the Secretary of State”) to present a winding up petition if it appears to the Secretary of State to be in the public interest that the company is wound up.
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2. What is the Public Interest?

The Secretary of State for Business, Energy and Industrial Strategy has the power to present a winding up petition against a company if they believe that the activities of that company are against the public interest.

“Public Interest” is not defined anywhere and the term has been considered by many academics over the years.

However, broadly it could be said to be anything affecting the rights, health, welfare, wellbeing or finances of the public at large.
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3. Public Interest Winding up Petition Company investigations

Any public interest winding up petition against a company will normally be as a result of a detailed investigation into that company by the Secretary of State for Business, Energy and Industrial Strategy.

Under section 432 of the Companies Act 1985, the Secretary of State may appoint investigators from the Companies Investigations branch of the Insolvency Service to investigate limited companies, if a court declares that the affairs of the company ought to be investigated.

Furthermore, under section 447 of the Companies Act 1985, an investigator can request that the company or any other person provides documents or any other information as the investigator requests to assist with their investigation. Failure by that person to provide such information could lead to them being held in contempt of court and could lead to a fine, or prison sentence.
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4. Public Interest winding up order

In order to successfully persuade the court that a winding up petition should be ordered in the public interest, the Secretary of State must satisfy the court that the public needs to be protected from the company concerned and that, as a result, it is just and equitable for the company to be wound up.

There is no requirement for the Secretary of State to show that the company’s activities were unlawful or criminal, although if this can be proved, then the winding up petition is likely to succeed and a public interest winding up order made.

There is no obligation for the Secretary of State to prove that the company is insolvent or unable to pay its debts – it can still be wound up in the public interest.
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5. Examples of Public Interest Winding Up

Winding up petitions bought in the public interest are not particularly common, although their numbers have increased in recent years, especially as companies are finding different ways of making money, which may be contrary to the public interest.

Recent petitions which have been bought in the public interest have involved alleged scams, where investors have lost money in relation to a number of investments, including:

  • coloured diamonds;
  • overseas land investment schemes;
  • carbon credits
  • wine investments;
  • schemes to save landlords business rates on commercial properties; and
  • any other investment which may not be regulated in the UK or where an investor does not have any recourse to compensation, if the scheme fails.

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6. Can an Overseas Company be wound up in the Public Interest?

The short answer to the question “can an Overseas Company be wound up in the Public Interest” is yes.

The Secretary of State does have the power to wind up in the public interest a company which is registered overseas if it can be established that the company has a sufficient connection with the UK.
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7. Public Interest Winding Up Petition – what can a company do?

If a company is presented with a public interest winding up petition, they have one of two choices – either to accept the petition or defend it.

Public Interest winding up petitions are not issued lightly. There is a higher deposit to pay the Official Receiver for public interest winding up petitions (£5,000) as opposed to normal winding up petitions (£1,600).

Public interest winding up petitions are normally issued after months of detailed investigations by the Company Investigations team of the Insolvency Service and therefore the evidence in support of the winding up petition is normally extensive. As such, opposing any winding up petition is an complex and potentially expensive exercise for any company to undertake.
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8. Public Interest Winding Up Petition Process

The process for winding up a company in the public interest is similar to the process by which a creditor winds up a company using a creditor’s winding up petition.

The main difference is that with public interest winding up petitions will only normally be issued following several months of details investigations by the Company Investigations team of the Insolvency Service.

They need to put together a strong case to present to the Secretary of State for Business, Energy and Industrial Strategy, in order for the Secretary of State to agree to issue the public interest winding up petition in their name.
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9. Director Disqualification – Public Interest Unit

If a company is wound up in the public interest following the presentation of a public interest winding up petition by the Secretary of State, the company will pass into the hands of the Official Receiver.

However, following the winding up of the company, it is fairly usual for the Public Interest Unit of the Insolvency Service to then investigate the former directors of the company in order to see if they were responsible for the failure of the company. If they believe that there is sufficient evidence, they will then commence director disqualification proceedings against those directors.
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10. Public Interest Winding up Petition

Section 124A of the Insolvency Act 1986 is the section of the Act that gives the Secretary of State for Business, Energy and Industrial Strategy the power to seek the liquidation of a company where it is believed that there are grounds that their activities are against the public interest.

The investigation will normally be carried out by the Public Interest Unit and Companies Investigation teams that form part of the Insolvency Service who take their mandate from the Secretary of State. The winding up petitions will be prepared following months of investigation into the company with the directors being interviewed and documents being requested to assist in the investigation. The director should co-operate with this investigation because if not that can be referred to in the public interest winding up petition and could be seen as a negative for the director by the court when considering the public interest winding up petition.
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11. Defending a public interest winding up petition

What can the company do to defend the public interest winding up petition?

The evidence from the Secretary of State (via the Company Investigations unit) is likely to be very detailed and will normally consist of many pages of documents and witness evidence.

However, if the company can demonstrate, by providing evidence from the directors and company officers, that the allegations contained within the public interest winding up petitions and its supporting evidence are not enough to persuade a court that the company should be wound up, then the court will not make the winding up order.
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12. Dismissal of public interest winding up petition

It is for the Secretary of State to prove their case and to persuade the Court that on the balance of probabilities and based on the evidence, the Court should order that the company is wound up in the public interest and a public interest winding up order made.Several cases have set down guidelines as to what the Court should consider in deciding whether or not to make a winding up order in the public interest.
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13. Solicitors specialising in public interest winding up orders

At Francis Wilks & Jones, we specialise in winding up petitions.

Whether you wish to issue a winding up petition or have been served with a winding up petition, we are countrywide leading experts in this area.

Public Interest winding up petitions are issued by the Secretary of State for Business, Energy and Industrial Strategy who will seek advice form a number of panel firms before issuing winding up petitions in the public interest. The decision to issue the petition will usually be as a result of many months of investigation.

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14. The Insolvency Service Public Interest Unit

The Public Interest Unit are a specialist department of the Insolvency Service who investigate companies and directors to see whether there is sufficient evidence and whether it is in the public interest to apply to the court for a winding up order or disqualification order.

The Public Interest Unit will normally bring a claim unless there are public interest reasons not to do so.

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15. Director interviewed by Public Interest Unit

Where the Insolvency Service Companies Investigation Unit are investigating the affairs of a company, it is fairly usual for the directors of that company to be invited to be interviewed by the Companies Investigations team or Public Interest Unit of the Insolvency Service

Often the first indication a director may get that his company is being investigated is when he or she receives a letter inviting them to an interview with the Companies Investigation Team or Public Interest Unit of the Insolvency Service.

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16. Liquidation of a company even where they are subject to a public interest winding up petition?

Defending public interest winding up petitions can take a number of years before they reach trial and can be very expensive for a company to defend. As such, it is not unusual for a company to find themselves in financial difficulties during this period.

In the case of Secretary of State for Business Innovation and Skills v PLT Anti-Marketing Limited [2015] EWHC 3981 (Ch), the company, PLT, found themselves in such a position. Due to their financial difficulties, they presented their own winding up petition to the court (on the basis they were unable to pay their debts), despite the fact that they were themselves subject to a public interest winding up petition, which had been presented by the Secretary of State over two years earlier.

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17. Public Interest Winding up petition where creditors winding up petition already issued

As a general rule, if a winding up petition has already been issued against a debtor company, it is not possible to issue a second winding up petition against the same company until such time as the first petition has been heard and dismissed by the court.

However in the case of Secretary of State for Business, Innovation and Skills v Top Choice Wholesale [2012] EWHC 1262 (Ch), the court has to consider whether to allow the Secretary of State to issue a winding up petition in the public interest where an existing creditors petition had already previously been issued, but not yet heard.

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18. Public Interest Investigations Under S447

The process of bringing a petition in the public interest starts with an investigation by The Companies Investigations team at the Insolvency Service. They will carry out investigations into companies that have been the source of complaints. These complaints can come from, amongst others, the Police, Trading Standards or members of the public.

Following an initial review and if the complaint is found to have merit then a complete and detailed investigation is carried out by an investigator under powers conferred on him under Section 447 of the Companies Act 1985 (as amended)

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19. Can I Challenge A Public Interest Winding Up Petition

The issue of a winding up petition by the Secretary of State is issued because it is believed that it is in the public interest to wind the company up so that it cannot continue to trade.

Whilst there are a large number of petitions issued each year, in the region of 200, there are only a handful which are actually challenged. It is entirely open for the company, usually through its directors, to challenge the petition if they believe that the facts stated in the petition are wrong.

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20. Does service of a statutory demand stop a claim then being issued in the County Court for the same debt?

We are often asked whether the preliminary use of a statutory demand then precludes the issuing of a County Court claim if the debt remains unpaid. The quick answer is no. The real question is in what circumstances should you revert to the County Court if the statutory demand does not lead to payment.

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21. Can creditors avoid the new Pre-Action Protocol for Debt Claims by serving a statutory demand on the individual instead?

We are asked many questions by clients now that the new Pre-Action Protocol for Debt Claims has come in to force. Creditors chasing debts are concerned about the way in which the new protocol is slowing down the recovery process. Is a statutory demand the answer?

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