Marches Credit Union Ltd, Re

A registered industrial and provident society may be wound up under the Insolvency Act 1986 in the same way as a registered company. The court may act under its inherent jurisdiction where a winding-up petition is procedurally defective, provided the statutory jurisdiction to wind up exists and the facts are very exceptional. An immediate order is justified where the active directors support winding up, the relevant regulators and compensation scheme support it, and the order serves the public interest by securing an orderly payment to creditors and avoiding a damaging run on the society.

The court heard an urgent petition to wind up a credit union which was plainly insolvent following suspected embezzlement by one of its six directors. Five directors had resolved to seek winding up, but the sixth director had not participated in, or received notice of, the board meeting. This raised a question whether the petition was valid, in light of the authorities on director unanimity and majority resolutions.

The central issue was whether the court could make an immediate winding-up order under its inherent jurisdiction if the petition was vitiated by the absence of the consent of a director who remained in office in law.

1. Power to wind up the society. Section 55 of the Industrial and Provident Society Act 1965 applied the company winding-up provisions of the Insolvency Act 1986 to a registered society. The court therefore had power to wind up the credit union under the 1986 Act without relying on the provisions for unregistered companies in Part 5.
2. Director authority and procedural difficulty. Section 124 of the 1986 Act permits an application by the directors. The authorities indicated that unanimity was generally required, although a properly passed majority resolution could impose an obligation on all directors to support the resolution. The apparent absence of notice to the non-participating director meant that the petition might be flawed.
3. Inherent jurisdiction. Following the reasoning in Lancefield v Lancefield, the court could act of its own motion where a matter was before it, the statutory jurisdiction under section 122(1) existed, and the facts were very exceptional. That reasoning applied equally to an industrial and provident society. The approach was also supported by Re BTR (UK) Ltd.
4. The facts were sufficiently exceptional. Five active directors had resolved on winding up and supported the petition. The PRA and FSCS also supported the application. An immediate order would enable compensation to be paid promptly, avoid an unorderly scramble by creditors, and serve the public interest.
5. Although administrators could have been appointed in the case of a registered company, Re Dairy Farmers of Britain Ltd confirmed that administration was unavailable for this society. The court therefore made an immediate winding-up order, subject to undertakings to complete minor evidential gaps. The Official Receiver became liquidator initially.