The Secretary of State for Business, Energy And Industrial Strategy v Rigil Kent Acquisitions Ltd & Ors

On an application for the appointment of a provisional liquidator under Insolvency Act 1986, section 135, the court must first consider whether a winding-up order is likely to be made and then whether appointment is right in all the circumstances. The public-interest jurisdiction is wide and requires the court to balance the totality of the relevant material. A provisional liquidator is an exceptional remedy, but may be justified where a company’s practices threaten the integrity of the insolvency process, including by obstructing investigations or creating a risk that courts will be misled. Where the Secretary of State acts to enforce the public interest, a cross-undertaking in damages is not ordinarily required.

The Secretary of State applied for provisional liquidators to be appointed over nine related companies pending petitions for their winding up on the public-interest ground. The applications concerned a business model under which insolvent or near-insolvent companies were acquired, their directors resigned, and the companies’ affairs were placed behind an apparent corporate firewall.

The Secretary of State contended that the arrangements misled former directors and creditors, impeded investigations by the Insolvency Service, and risked misleading courts. The represented respondents opposed the applications, arguing, among other matters, that there was no risk of asset dissipation, insufficient evidence concerning assets at risk, no cross-undertaking in damages, and no urgency.

1. Public-interest jurisdiction. The jurisdiction to wind up a company in the public interest is wide. The court must balance all relevant interests and decide whether compulsory winding up is expedient in the public interest. The absence of asset dissipation did not answer the applications because prejudice to the insolvency process was itself material.
2. Applicable test. Appointment of a provisional liquidator under section 135 involves two stages: first, whether a winding-up order is likely at the petition hearing; and secondly, whether appointment is right in all the circumstances. The principles in HMRC v Rochdale Drinks Distributors [2013] BCC 419 and HMRC v Winnington Networks Ltd [2014] EWHC 1259 (Ch) applied, subject to the fact that the petitions were based on the public interest rather than a disputed debt.
3. The evidence showed that the respondents’ service promised a clean break which could not eliminate former directors’ potential liabilities or duties. It also created a firewall which hampered access to company records and former directors, delayed investigations, and created a risk that courts would receive misleading information. Those matters made a winding-up order likely and justified interim protection.
4. Cross-undertaking and urgency. Where the Secretary of State acts to enforce the public interest, a cross-undertaking in damages is not ordinarily required. There was sufficient urgency because the practices were continuing and the applications were made promptly once the supporting evidence had been prepared.
5. Appointment was an exceptional and extreme remedy, but this was a clear case. A blanket regime covering all respondents was appropriate because of their complex interrelationship and lack of transparency. The applications were granted, with liberty for the respondents to apply on evidence to set aside or vary the orders before the petitions.

First-instance decision. The judgment concerned interim applications for provisional liquidators pending public-interest winding-up petitions.