Bankruptcy – Corporate insolvency – standing – petitions – section 124(2)(b) Insolvency Act 1986
The petitioners were the trustees in bankruptcy of Charles Brown. They petitioned for the winding up of C&MB Holdings Limited, in which Charles Brown was, before his bankruptcy, a 50 percent shareholder. The company was under his wife’s control, and the petitioners alleged that she had diminished the company’s assets. The petitioners sought an expedited trial of the petition in order to prevent further steps being taken to diminish the company’s assets.
Mrs Brown raised various defences including, principally, that the petitioners did not have standing to present a winding up petition because they did not satisfy the requirement in section 124(2)(b) of the Insolvency Act 1986 of having been registered as shareholders for at least 6 months during the 18 months prior to the presentation of the petition.
Rejecting Mrs Brown’s defence, Registrar Jones held that the answer lay in section 250 of the Insolvency Act. This provided that, for the purposes of the Act, a person who is not a member but to whom shares have been transferred or transmitted by operation of law is to be regarded as if they were a member of the company. Upon Mr Brown’s insolvency, the shares were transmitted to the petitioners as trustees under section 306 of the Insolvency Act 1986 and they should be regarded as members. Accordingly, the petitioners should be treated as if they had been registered shareholders for the purposes of section 124(2)(b). Such an interpretation was also not contrary to the intention behind the provision, which was to prevent an individual from purchasing shares in order to give himself standing to petition for a winding up.
The Registrar’s decision recognises a practical approach to construing the Insolvency Act 1986 is sometimes needed in order to ensure that office-holders can adequately protect a bankrupt’s estate.
