The Secretary of State for Business, Innovation and Skills v New Horizon Energy Ltd & Anor

On an application for provisional liquidators, the court must be satisfied that a winding-up petition has been presented and that a winding-up order is likely to be made. On a without-notice application, the petitioner must give full and frank disclosure and provide a fair picture of the circumstances. The court may consider the company’s response to prior investigations when assessing whether the petition grounds are seriously disputable.

Appointment is justified where necessary to secure assets, books, records and client information, investigate potentially improper dealings, prevent further harm to investors and provide an effective channel for information. These considerations may justify the appointment even where the companies have ceased trading.

The Secretary of State sought the appointment of provisional liquidators over New Horizon Energy Limited and its dissolved Illinois corporation, New Horizon Energy LLC, pending petitions for winding up on the just and equitable ground.

The companies had marketed oil and gas investments to members of the public. Investigations indicated that substantial investor funds had been paid through accounts connected with associated businesses and individuals, without adequate accounting records or a satisfactory explanation. The principal issue was whether the petitions were likely to succeed and whether immediate provisional liquidation was justified to protect assets, records and investors.

1. The application was granted and provisional liquidators were appointed over both companies. The court accepted that it had jurisdiction over the English company and sufficient connection with the dissolved Illinois corporation. Under Insolvency Act 1986, s 225, the dissolved foreign corporation could be wound up as an unregistered company because it had carried on business in Great Britain and had ceased to do so.

2. The jurisdiction under s 135 of the Insolvency Act 1986 required a presented petition and a likelihood that a winding-up order would be made. Following HMRC v Rochdale Drinks [2011] EWCA Civ 1116, likelihood was assessed by reference to the material available on the application.

3. The principles stated in HMRC v Winnington [2014] EWHC 1259 applied, with slight modification, to a petition on the just and equitable ground. The petitioner had to establish entitlement to present the petition and a sufficient ground for winding up which was not capable of serious dispute. Because the application was without notice, the court had to be satisfied that there had been full and frank disclosure and that it had a fair picture of the circumstances. The company’s failure to provide a plausible explanation during earlier investigations could properly be taken into account.

4. The evidence that investor money had been transferred through accounts not held in the companies’ names and paid to connected businesses and individuals, together with the absence of accounting records or an adequate explanation, made it likely that the petitions would succeed on the just and equitable ground.

5. Immediate appointment was justified. The companies appeared not to be trading, but there were serious concerns about management integrity and accounting. Control was needed over assets, books, records and the client list, both to investigate transactions and to prevent investors being exposed to further investment solicitations. The provisional liquidators would also provide a focal point for collecting and disseminating information to concerned investors. Alternative service was proportionate and gave each company a fair opportunity to seek discharge of the order.