Public interest winding up petitions and disqualification

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What is public interest?

The term “public interest” is pervasive to many areas of the legal framework within the UK.

It extends from legislation granting rights to the general public (in the public interest), the courts judicially reviewing interpretations of the law by government (as far as it may extend to procedure or the application of the law) through to specific litigation claims issued “in the public interest”.

The whole idea is to protect the public from undue risk such as financial fraud and prejudice to specific groups of people or organisations within the UK.

A classic example is an investment company which is set up to take advantage of elderly members of the public – often investing in

• highly risky financial products,
• carbon credits,
• environment schemes,
• mining or gems
• wine
• property / land-banking schemes.

It is against this background that there is the ability to wind up companies which are not perceived to be acting in the public interest. The idea is to allow the Secretary of State to intervene at an early stage – to protect the public from any further harm.

Defending a public interest winding up petition

Where a public interest winding up petition is presented, there is no requirement to provide evidence that the company is insolvent or otherwise unable to continue trading in its present form.  The only requirement is to demonstrate that the company is trading contrary to what the Secretary of State believes is the public interest.

In a majority of circumstances a public interest winding up petition is properly presented against companies which are trading solely for the purpose of defrauding the general public. 

However, this is not always the case.

• quite commonly companies may be selling new products, or seeking investment for projects that may take years to develop (indeed a lot of research and development companies exist in an insolvent state, reliant on investment with an uncertain outcome for the product they are trying to develop)

• in such circumstances there are strong grounds to defend a public interest winding up petition

Consequences of a public interest winding up petition

If a winding up order is made by the court, whether it was defended or not the likely outcome is that almost certainly the Secretary of State will seek a director ban against the directors who ran the company.

• Whilst a disqualification order is not guaranteed, directors would be wise to seek legal advice upon receiving notice of the intention to issue a disqualification claim based on the fraudulent misconduct.
• If a director decides to cut his/her losses and offer a disqualification undertaking or is subsequently disqualified in proceedings then s/he faces the further risk of being subject to a compensation order.

Whatever your situation – speak to one of our team for help.

At Francis Wilks & Jones we have extensive experience of these matters and are able to advise and assist on circumstances where you face the threat, or are subject to, public interest winding up proceedings. Please call any member of our disqualification team for help now.

I was greatly impressed with the commercial, tactical and technical ability of the team at FWJ. They quickly got to grips with a complex set of facts and, through their hard work, had the proceedings against me dropped and a significant proportion of my legal fees repaid. I couldn’t recommend them highly enough.

A director we defended against a disqualification claim and other claims brought by a liquidator