Summary

The Financial Services Authority had jurisdiction to petition for the winding up of a company that operated a landbanking scheme because that scheme constituted a collective investment scheme within the meaning of the Financial Services and Markets Act 2000 s.235, and the company had therefore been carrying on a regulated activity without authorisation contrary to s.19 of the Act. A winding-up order was made because the company was insolvent and it was just and equitable to do so.

Facts

The Financial Services Authority (FSA) petitioned under the Financial Services and Markets Act 2000 s.367 for the winding-up of the respondent company (E).

E operated a business in which it acquired land that it divided into smaller plots and sold on to investors. The issues were (i) whether the FSA had jurisdiction to petition for E's winding-up on the basis that the arrangements between E and its investors constituted a collective investment scheme under s.235 of the 2000 Act, so that E had been carrying on a regulated activity without authorisation contrary to s.19 of the 2000 Act; (ii) if so, whether E should be wound up either because it was insolvent within the meaning of the Insolvency Act 1986 s.123 or s.221, or because it was just and equitable to do so.

The FSA submitted that the arrangements between E and its investors constituted a collective investment scheme within the meaning of s.235 of the 2000 Act.

Held

(1) The court was satisfied that E had carried on a regulated activity by establishing a "landbanking scheme" which constituted a collective investment scheme within the meaning of s.235 of the 2000 Act. "Arrangements" under s.235 had been interpreted widely, Financial Services Authority v Fradley (t/a Top Bet Placement Services) [2005] EWCA Civ 1183, [2006] 2 B.C.L.C. 616 considered. In the instant case, it was clear that the purpose of the arrangements between E and the investors was that described in s.235(1), namely to enable the investors to receive profits or income arising from the acquisition and subsequent disposal of the plots of land. Since the arrangements constituted a collective investment scheme under s.235, it followed that E had been carrying out a regulated activity without authorisation contrary to the general prohibition in s.19, and therefore the FSA had jurisdiction to petition for E's winding-up under s.367. (2) The evidence demonstrated that investors had transferred around £639,000 to E, which fell to be repaid under s.26 of the 2000 Act, and that E had total assets worth around £433,000. Therefore it appeared that E was insolvent. It was clear that it was just and equitable to wind up E. Its sole business had been to operate in contravention of s.19 of the 2000 Act, and there was evidence that it had made many false representations to investors and had duped them out of considerable sums.

Petition granted