Secretary of State for Business Energy and Industrial Strategy v Sentor Solutions Commercial Limited

The Secretary of State presented petitions under section 124A of the Insolvency Act 1986 following a section 447 investigation. The court applied the statutory test of whether it is "expedient in the public interest" to wind up and whether it was "just and equitable" under section 122(1)(g). The judge found that each company had traded with a lack of commercial probity by operating investment schemes without required FCA authorisation, issuing fraudulent loan notes and bonds, misrepresenting the existence and role of regulated security trustees, making false claims of government or Financial Services Compensation Scheme cover, and in some instances carrying out recovery-room/advance-fee practices and seeking DWP Kickstart grants by false representations. The companies also failed to cooperate with the investigation and to produce adequate accounting records and displayed a lack of transparency. On balance, the court concluded these matters demonstrated sufficient public interest and that it was just and equitable to wind up each respondent company.

Background and parties: The petitions were brought by the Secretary of State for Business, Energy and Industrial Strategy against four respondent companies following a Part XIV (section 447) investigation into those companies and a related company, Sampson Property Developments Limited (already in compulsory liquidation). The petitions were verified, served and advertised; the respondents did not appear or file evidence.

Nature of the application: The Secretary of State sought winding up orders in the public interest under section 124A of the Insolvency Act 1986. The legal issues focussed on whether it was expedient in the public interest to present the petitions and whether the court should exercise its discretionary power to wind up the companies as being just and equitable under section 122(1)(g).

Facts and allegations: The investigation and witness evidence established that the companies were involved in schemes offering 2–3 year convertible loan notes and other investment products, marketed as funding property developments. The court found there was no evidence that the companies owned or developed the properties claimed, that investors were misled about independent FCA-regulated security trustees, that some companies had no FCA authorisation to act as trustees and that loan notes were promoted without proper authorisation. The court found evidence of cloned marketing materials, false testimonials and photographs, dubious accounts, attempts to obtain DWP Kickstart grants by false job adverts, and recovery-room/advance-fee solicitations. The companies refused to cooperate with investigators and did not provide adequate accounting records, frustrating verification of their affairs.

Issues framed by the court: (i) whether the allegations established trading with a lack of commercial probity and objectionable business activities; (ii) whether the companies had failed to cooperate with the section 447 investigation and failed to deliver adequate accounting records; (iii) whether there was a lack of transparency; and (iv) whether, on balance, these matters made it just and equitable in the public interest to wind up the companies.

Reasoning and disposition: The court applied relevant authorities on public-interest winding up (including Secretary of State v PAG Asset Preservation Ltd and Secretary of State for Trade & Industry v Atlantic Property Ltd). The judge undertook the balance required by the authorities, identified the public interest aspects promoted by a winding up order, and concluded that the cumulative findings — fraudulent use of loan notes, lack of FCA authorisation, advance-fee conduct, false representations to investors, trading while insolvent (in one respondent), failure to produce records and pervasive lack of transparency — justified immediate winding up. The judge concluded that there were no factors of sufficient weight pointing against winding up. The operative decision, made on 16 August 2022 and recorded in this approved judgment, was that each of the respondent companies be wound up in the public interest pursuant to section 124A of the Insolvency Act 1986.

This first-instance petition was granted. The court ordered that each of the four respondent companies be wound up in the public interest pursuant to section 124A of the Insolvency Act 1986. The judge's rationale was that the companies operated collectively in an investment fraud without required FCA authorisation, engaged in conduct demonstrating a lack of commercial probity, failed to cooperate with a section 447 investigation and to produce adequate accounting records, and showed a pervasive lack of transparency; on balance these factors made it just and equitable to wind up the companies.

Following a section 447 investigation authorised in November 2021, petitions under section 124A of the Insolvency Act 1986 were presented on 20 and 22 June 2022 (verified 15 June 2022), served in July 2022 and advertised on 27 July 2022. The petitions were heard on 16 August 2022 at which the judge ordered that each of the four respondent companies be wound up in the public interest; the approved judgment was handed down on 31 October 2022. Sampson Property Developments Limited had already been placed into compulsory liquidation on 23 March 2022.