Winding up – s 221 Insolvency Act 1986, jurisdiction to wind up companies registered abroad as unregistered companies – principles for the exercise of the jurisdiction
The judge considered whether the court should exercise its jurisdiction under s.221 of the Insolvency Act 1986 to wind up St Vincent and Grenadine (‘SVG’) based resort companies Buccament Bay and Harlequin Property.
The creditors’ debts were largely undisputed. Reviewing the authorities, the Judge noted that the court exercised its discretion to wind up companies incorporated in other jurisdictions with considerable caution. The three core requirements for the exercise of the court’s discretion were: (1) a sufficient connection with England and Wales – usually, but not always, as a result of there being assets in the jurisdiction; (2) a reasonable possibility, if the winding up order was made, of benefit to those applying for it; and (3) one or more persons interested in the distribution of assets of the company must be persons over whom the court could exercise a jurisdiction. Citing Lloyd J’s view that ‘the courts of this country should hesitate long before subjecting foreign companies with no assets here to the winding-up procedures of this country’ (Re Latreefers [1999] 1 BCLC 271 at 277) and applying the principle that the English court should not assume jurisdiction over matters which properly lie within the competence of the courts of other countries, the judge concluded that there was no justification for winding up either company.
The assets were not in England but in SVG, the companies’ business was based in SVG and the contracts pursuant to which the petitioners claimed were subject to SVG law. The evidence was that an English liquidator would be likely to face considerable, if not insuperable, difficulties in gaining control of the companies’ assets. Although there was a reasonably substantial connection with England (in that the companies’ sole director was UK resident and the petitioners’ funds had been routed through an English company) and there were persons in England over whom the court had jurisdiction, there was no likelihood of the petitioners deriving any benefit from an English winding up. SVG had a perfectly satisfactory winding up process available to the petitioners. Both principle and practicality demanded any winding up be conducted in SVG.
The scope of the Court’s jurisdiction to wind up a foreign company is limited both as a matter of principle and practicality. As a matter of principle, the English court should only wind up foreign companies with no assets in the jurisdiction under exceptional circumstances. As a matter of practicality, there will be no justification for ordering the winding up of a foreign company in England if there is little or no prospect of the English creditors deriving any benefit from it.
