In the matter of an Unregistered Company

The court set aside an ex parte order permitting service out of the jurisdiction of a winding-up petition directed at a Luxembourg-domiciled dedicated sub-fund. Key legal principles applied were the duty of full and frank disclosure on without-notice applications (as explained in MRG and related authorities), the requirements for permission to serve out of the jurisdiction under CPR rules 6.36 and 6.37 and Practice Direction 6B, and the scope of the Insolvency Act 1986 provisions (in particular sections 220 and 221) governing winding up of "unregistered companies".

The court concluded that the Sub Fund was not a separate legal person under Luxembourg law but a compartment within an umbrella fund and therefore not an entity susceptible to winding up as a company under section 221. The petitioning creditor also lacked creditor status in respect of the Sub Fund on the evidence. Further, the respondent failed to make full and frank disclosure in the ex parte permission application by presenting the Sub Fund as if it were a separate company, failing to explain that investors held shares in the umbrella fund rather than a distinct legal person, and omitting material facts about creditor status and the unusual nature of seeking to wind up part of an overseas company. For those reasons the Permission was set aside.

The applicant was a Luxembourg public limited investment company operating as an umbrella fund with compartmentalised dedicated sub-funds. The respondent had invested in one such Sub Fund and later presented a petition in England to wind up the Sub Fund as an "unregistered company", obtaining ex parte permission to serve the petition out of the jurisdiction at an address in Luxembourg.

The applicant applied to set aside that permission on two principal grounds: (i) the respondent had failed to make full and frank disclosure in the ex parte application; and (ii) the winding-up petition lacked a reasonable prospect of success because the Sub Fund was not an entity the English court could wind up and because the respondent was not a creditor of the Sub Fund.

The court framed the issues as: whether there was a good arguable case that the English court had jurisdiction to wind up the Sub Fund under section 221 of the Insolvency Act 1986; whether there was a serious issue to be tried (or reasonable prospect of success) to justify exercising that jurisdiction; and whether the respondent had breached the duty of disclosure in the ex parte permission application.

The court received and considered expert evidence on Luxembourg law. The experts agreed that a dedicated sub-fund lacks separate legal personality, that investors are shareholders of the umbrella fund (not a separate legal entity), that a sub-fund may be liquidated by the fund's board or in limited judicial circumstances under Luxembourg law, and that bankruptcy procedures do not apply to compartments. Applying those findings the court held that the Sub Fund was not an entity the English insolvency regime could be asked to wind up as a company under section 221. The court also concluded on the evidence that the respondent had not established creditor status in relation to the Sub Fund (no evidence of redemption requests or other circumstances converting investor status into creditor status).

Finally, the court found material non-disclosure in the ex parte application: the petition and evidence misleadingly described the Sub Fund as "the Company" with a registered office and separate directors, and omitted to explain the key legal realities identified by the experts. Those omissions were of such weight that they misled the judge who granted permission. The result was that the permission order for service out of the jurisdiction was set aside.

The court set aside the order granting permission to serve the winding-up petition out of the jurisdiction. Rationale: the petition did not have a realistic prospect of success because the Sub Fund was not a separate legal entity susceptible to winding up under section 221 of the Insolvency Act 1986 and the petitioner lacked creditor standing; additionally, the respondent failed to make full and frank disclosure on its ex parte application, materially misleading the court.