East Riding of Yorkshire Council as adminisitrating authority of the East Riding Pension Fund v KMG SICAV-SIF-SA

The court dismissed the petition for the compulsory winding-up of the KMG SICAV-GB Strategic Land Fund (the Sub-Fund). The primary legal question was whether the Sub-Fund fell within the definition of an "unregistered company" in section 220(1) of the Insolvency Act 1986. The judge held that section 220(1) is not an open-ended or non-exhaustive definition and that it extends to unregistered companies and associations in their ordinary meaning. On that construction the Sub-Fund, being a compartment of a Luxembourg umbrella specialised investment fund without separate legal personality, did not fall within section 220(1).

Even if section 220(1) were non-exhaustive, the court concluded the Sub-Fund was not an entity Parliament could reasonably have intended to be subject to the Part V winding-up regime. The Sub-Fund lacked essential features common to bodies within section 220(1): it had no contributories, could not hold legal rights or incur obligations in its own name, did not own assets or liabilities separate from the Company, and had no management body whose powers would be displaced upon compulsory winding-up.

The petitioner also failed to establish standing as a contingent creditor under Luxembourg law. The judge concluded the petitioner had not shown, on the balance of probabilities, the existence of claims likely to produce a surplus and so could not be treated as a contingent creditor of the Sub-Fund. For these reasons the petition was dismissed.

This was a first instance petition presented by East Riding of Yorkshire Council (as Administrating Authority of the East Riding Pension Fund) for the compulsory winding-up of KMG SICAV-GB Strategic Land Fund (the Sub-Fund), a Dedicated Fund within the Luxembourg investment company KMG SICAV-SIF-SA, under sections 220 and 221 of the Insolvency Act 1986.

Background and parties:

• The Petitioner invested £20 million and received shares whose rights were limited to the assets of the Sub-Fund.
• The Company is a Luxembourg SICAV-SIF umbrella fund governed by the Law of 2007 and the Law of 1915; each Dedicated Fund is a segregated compartment without separate legal personality according to the Offering Document and Luxembourg expert evidence.
• The Sub-Fund had its net asset value suspended in 2016, its value fell significantly and the board commenced a liquidation process; by December 2020 the liquidation net asset value was reported as zero and creditors had been repaid in full.

Procedural posture:

• The Petitioner applied in England for a winding-up order because Luxembourg law does not permit a similar order against the Sub-Fund. Permission to serve out of jurisdiction was granted by ICC Judge Prentis in May 2021, set aside by ICC Judge Burton in February 2023, and the Petitioner successfully appealed to Mr Justice Green in July 2023.

Relief sought: A compulsory winding-up order in respect of the Sub-Fund as an unregistered company under sections 220 and 221 IA 1986.

Issues framed by the court:

1. Whether the Sub-Fund is an "unregistered company" within section 220(1) IA 1986;
2. Whether the Petitioner is a contingent creditor with standing under section 221(1); and
3. Whether one or more of the circumstances in section 221(5) existed (dissolved/ceased business/just and equitable etc.).

Court’s reasoning:

• Construction of section 220(1): the judge held the statutory phrase "includes any association and any company" enlarges the natural meaning of "unregistered company" only to those categories and is not a free-standing open-ended category permitting any loosely constituted body to be treated as an unregistered company. The long legislative history and authorities (including St James's Club, International Tin Council, Witney Town Football and Social Club and others) were applied to construe the provision.
• Application to the Sub-Fund: Luxembourg expert evidence agreed the Sub-Fund is a segregated compartment without separate legal personality and that claims against a Dedicated Fund are pursued against the umbrella legal entity. The Sub-Fund lacked essential features such as contributories, capacity to enter legal relations in its own name, ownership of assets in its own legal person and a management body displaced on winding-up; practical and legal difficulties of applying the UK winding-up regime were identified.
• Contingent creditor standing: the petitioner did not establish, on the balance of probabilities and under Luxembourg law, that it was a contingent creditor. The experts agreed shareholders can become creditors in limited circumstances (for example a declared dividend or redemption entitlement or an anticipated liquidation surplus), but there was no evidence here that claims likely to produce a surplus existed or were highly probable. The petitioner’s contention that inadequate liquidation investigation alone elevated it to contingent creditor status was rejected.

Subsidiary findings and context: the judgment records the relevance of the Risk Transformation Regulations 2017 and their bespoke modifications to enable winding-up of protected cells, which the court treated as supporting the conclusion that compartments/cells do not fall naturally within section 220(1) absent express statutory modification. The court also noted continuing unexplained losses but found this insufficient to establish contingent creditor standing on the evidence before it.

The Petition is dismissed. The court held that section 220(1) IA 1986 is not a non-exhaustive provision allowing the inclusion of entities other than unregistered companies and associations; the Sub-Fund, being a compartment without separate legal personality, does not fall within section 220(1). Even if section 220(1) were non-exhaustive, the Sub-Fund was not an entity Parliament could reasonably have intended to be subject to Part V winding-up; and the petitioner failed to establish contingent creditor standing under Luxembourg law.

Permission to serve out of the jurisdiction was granted by ICC Judge Prentis on 18 May 2021. The Company applied to set aside that order; ICC Judge Burton set aside the permission on 2 February 2023. The Petitioner successfully appealed that decision and Mr Justice Green allowed the appeal and set aside ICC Judge Burton's order on 24 July 2023. This judgment is a first instance determination of the petition dated 10 May 2024.