Secretary of State for Business Energy And Industrial Strategy v Celtic Consultancy & Enterprises Ltd & Ors

Under section 124A, the Secretary of State’s view that winding up is expedient in the public interest does not determine the application. The court must decide whether winding up is just and equitable by balancing the totality of the evidence, identifying the public interest that winding up would promote, and requiring reasons of sufficient weight.

A company’s inability to explain transactions is not, by itself, a freestanding ground for winding up. In appropriate circumstances, however, an unexplained failure may support an inference that the company’s affairs were conducted dishonestly or in an inherently objectionable manner, particularly where legitimate concerns about nefarious activity remain unanswered.

The Secretary of State presented petitions under section 124A of the Insolvency Act 1986 seeking the winding up on public-interest grounds of Haoma (UK) Ltd, Celtic Consultancy & Enterprises Ltd and Celtic PMC Ltd.

The petitions concerned alleged lack of commercial probity and transparency in the receipt and onward payment of commissions connected with pension investments. The petitions against Haoma also alleged failures to file accounts and a confirmation statement. The central issues were whether the companies’ conduct was inherently objectionable, whether unexplained transactions could justify winding up, and whether the statutory public-interest and just-and-equitable tests were satisfied separately for each company.

1. The petitions had to be determined separately for each company. The Secretary of State’s opinion that winding up was expedient in the public interest was a prerequisite to presentation of the petitions, but the court retained a discretion. It had to decide whether winding up was just and equitable, balance the competing considerations on the totality of the evidence, identify the public interest which winding up would promote, and require reasons of sufficient weight before winding up an active and solvent company. These principles were drawn from Re PAG Management Service Ltd and approved in Secretary of State for Business, Innovation and Skills v PAG Asset Preservation Ltd.

2. Specific harm to members of the public was not an indispensable requirement in every case. The court’s observation in Secretary of State for Business, Innovation and Skills v PAG Asset Preservation Ltd concerned the particular public interest relied upon in that case. Conduct causing no identified individual harm could still justify winding up if a clearly identifiable public interest would be promoted.

3. There was no freestanding obligation requiring a company to explain every transaction beyond applicable statutory, regulatory or investigative obligations. Nevertheless, in an appropriate case, an unexplained failure may be evidence that the company’s affairs were conducted illegally or in an inherently objectionable manner. If the fair inference is that monies may represent the proceeds of crime, money laundering, or other nefarious activity, and an honest and proper explanation which should have dispelled the concern is not provided, the court may rely on that failure when assessing commercial probity and the public interest.

4. The evidence did not justify winding up CCE or PMC. Mr Howells was an honest witness. His explanation that CCE had been designated to receive commissions referable to introductions made by Celtic Wealth was essentially consistent and plausible. There was no evidence of improper conduct, regulatory breach, harmful investment consequences, or inadequate accounting records, and no sufficient public interest in winding up either company.

5. The position was materially different for Haoma. Serious concerns about its ownership and control, payments to persons connected with Active Wealth, the basis of monies received from investment companies, and the apparent separation from Mr Reynolds remained unanswered. The failure to file accounts and a confirmation statement compounded the concerns. The court was entitled to infer that Haoma’s affairs had been conducted in an inherently objectionable manner and with want of probity. Haoma was ordered to be wound up; the petitions against CCE and PMC were dismissed.