In the Matter of Alphaclub (UK) Limited

Under section 124A of the Insolvency Act 1986, the court may order the compulsory winding up of a company where winding up is expedient in the public interest and the court considers it just and equitable. A company’s cessation of trading or entry into voluntary liquidation does not automatically defeat the petition. The court must conduct a balancing exercise, taking account of the company’s past conduct, the timing and circumstances of any voluntary liquidation, the continuing public interest in investigation and accountability, and the practical consequences of compulsory winding up. The Companies Court must not make an order merely to express moral disapproval, but public vindication of the public interest may be a legitimate consideration.

The Secretary of State petitioned under section 124A of the Insolvency Act 1986 for the compulsory winding up of Alphaclub (UK) Limited. The petition alleged breaches of Part XI of the Fair Trading Act 1973 and section 1 of the Lotteries and Amusements Act 1976, together with commercial impropriety and conduct contrary to the public interest.

After the petition had been presented and the company had filed a comprehensive answer, it entered creditors’ voluntary liquidation shortly before the hearing. The deputy judge nevertheless made a compulsory winding-up order, finding the company’s activities pernicious and inherently objectionable. The renewed application for permission to appeal raised the question whether the voluntary liquidation and cessation of trading removed the public interest in compulsory winding up.

1. Application dismissed. The proposed appeal was hopeless and the compulsory winding-up order remained in force. There was no order as to costs.
2. Section 124A of the Insolvency Act 1986 confers a discretion requiring a balancing exercise. The court must decide whether compulsory winding up is expedient in the public interest and just and equitable in the circumstances.
3. It is not the function of the Companies Court to make a winding-up order merely as a mark of disapproval. However, public and open vindication of the public interest, together with the proper consequences of liquidation, may legitimately support a compulsory order.
4. The fact that a company has ceased trading or entered voluntary liquidation is an important consideration, since the risk of future activities may have ended. It is not necessarily decisive. The court may attach substantial weight to the history of the petition, the company’s conduct, and the timing of the voluntary liquidation.
5. Here, the company’s creditors’ voluntary liquidation occurred less than a fortnight before the hearing, after the petition and the Secretary of State’s evidence had been fully deployed. The circumstances supported a strong inference that the liquidation was a last-minute attempt to avoid the consequences of the petition. It would be contrary to the public interest to allow that manoeuvre to divert the court from making the appropriate order.
6. If the deputy judge’s exercise of discretion had been defective, the Court of Appeal would have exercised the discretion afresh and reached the same conclusion.

• Chancery Division: Mr John Jarvis QC, sitting as a deputy judge, made a compulsory winding-up order on 23 April 2002.
• Court of Appeal (Civil Division): Lord Justice Robert Walker dismissed the renewed application for permission to appeal. No order as to costs.