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In The Matter Of The Inertia Partnership LLP (2007)


There was a close analogy between the court's power under the Financial Services and Markets Act 2000 s.367(3)(b) to wind up a company on the just and equitable ground and the court's well-established jurisdiction to make winding-up orders on the petition of the secretary of state under the Insolvency Act 1986 s.124A.


The petitioner Financial Services Authority petitioned under the Financial Services and Markets Act 2000 s.367 for the winding-up of the respondent limited liability partnership (T). T, which since the issue of the petition had gone into creditors' voluntary liquidation, had introduced three companies to a company incorporated in the Seychelles (P), which agreed to procure subscribers for shares in the companies. In respect of two of the companies, T issued application forms, collected the relevant monies and distributed them to the companies and to P. The FSA alleged that T was aware that P was using "boiler rooms", which were generally offshore entities employing persistent and high-pressure sales techniques. They would cold-call private individuals in the United Kingdom and try to encourage them to buy shares, which tended to be significantly overpriced, in unlisted companies. The issues were (i) the meaning of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 art.25 and art.26, which covered the "activities" in play in the instant case; (ii) whether, for the purposes of s.367(1)(c) of the Act, T had breached the "general prohibition" in s.19 of the Act; (iii) if so, whether it had been insolvent at the relevant time; (iv) whether it was just and equitable for it to be wound up.


(1) The word "arrangements" in art.25 and art.26 of the 2001 Order was, depending on the context, capable of having an extremely wide meaning, embracing matters which did not give rise to legally enforceable rights. It was used in contradistinction to the word "transaction". In art.26, the word "transaction" was plainly a reference to the purchase, sale, etc. of shares contemplated by art.25. A person could make "arrangements" within art.25 even if his actions did not involve or facilitate the execution of each step necessary for entering into and completing the transaction. The availability of the exception in art.26 was essentially a question of fact. It was a question of asking whether, as a matter of causation, the arrangements had brought about the transaction. (2) In respect of one of the companies, there was no evidence to suggest that T had taken any part in arranging the sale of the company's shares beyond having introduced the company to P. That introduction was too nebulous and remote an act to fall within the concept of "making arrangements" within art.25. However, by providing administration services designed to facilitate the sale of shares in the other two companies, T had breached art.25. (3) The relevant date of insolvency appeared from the wording of s.367(3)(a) to be the date on which the court came to decide whether to make a winding-up order. There was no doubt that T was insolvent. The statement of affairs prepared by T said so. (4) As to the exercise of the court's jurisdiction to wind up on the just and equitable ground, there was a close analogy between s.367 of the Act and the court's well-established jurisdiction to make winding-up orders on the petition of the secretary of state under the Insolvency Act 1986 s.124A. Although the statutory trigger was different, in both cases petitions could be brought by public officials, and the court had a power to make a winding-up order in the public interest on the just and equitable ground. Both jurisdictions should accordingly be exercised with a view to protecting the public interest, and in doing so the court needed to balance all relevant interests against each other in order to ascertain the just and equitable result. Applying that test to the facts of the case, it was clear that a winding-up order should be made. The FSA was right to say that such an order would satisfy its statutory objectives by maintaining confidence in the financial system, promoting public awareness of the financial system, protecting consumers and reducing financial crime. There was no doubt that T had played a significant role in the relevant transactions, and it had been aware that P had been procuring offshore brokers to cold-call consumers in the UK. The instant case was an appropriate one for the court to mark its disapproval of T's activities by making a winding-up order, Walter L Jacob & Co Ltd, Re (1989) 5 BCC 244 CA (Civ Div) followed and Alpha Club (UK) Ltd, Re (2002) EWHC 884 (Ch), (2004) BCC 754 not followed.

Petition granted

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23 Feb 2007

Chancery Division
Jonathan Crow QC

‚Äč(2007) Bus LR 879 : (2007) 1 BCLC 739 

Nicholas Peacock QC